shape
shape
shape
shape
shape
shape
11 January 2021 / Nicholas K. Rohner

Supreme Court of Indiana Harmonizes Statutes of Limitations for Closed Installment Contracts


In February 2020, the Supreme Court of Indiana issued its decision in Blair v. EMC Mortgage, which harmonizes the Statutes of Limitations (SOLs) for closed installment contracts. 

There are two SOLs governing closed installment contracts.  I.C. 34-11-2-9 is the general SOL for “actions upon promissory notes…or other written contracts for the payment of money.”  This statute requires that an action must be brought within six (6) years after the cause of action accrues.  

Indiana has also adopted the relevant Uniform Commercial Code (UCC) SOL, I.C. 26-1-3.1-118(a), which governs “an action to enforce the obligation of a party to pay a note payable at a definite time.”  This statute requires that an action to enforce a note must be commenced within six (6) years after the due date (maturity date) or within six (6) years after acceleration, whichever is earlier.

In the Blair opinion, the Supreme Court first distinguished closed installment contracts from open accounts.  Closed installment contracts, such as promissory notes and other installment loans, contemplate payment of a certain sum over a fixed period of time.  Credit cards and other open accounts have fluctuating balances and these accounts are kept open indefinitely in anticipation of future transactions.  While prior appellate decisions had focused on the date of default as the proper triggering event for an SOL on both an open account and a closed installment contract, the Blair Court changed the course for closed installment contracts.

The Supreme Court concluded that Indiana’s two applicable SOLs recognize three events triggering the accrual of a cause of action for payment upon a closed installment contract containing an optional acceleration clause:

(1) A lender can sue for a missed payment within six years of a borrower’s default;
(2) A lender can exercise its option to accelerate and must then bring a cause of action within six years of that acceleration date; or
(3) A lender can opt not to accelerate and can then sue for the entire amount owed within six years of the contract’s maturity date.

Blair is a well-written, well-reasoned decision that provides clarity for debtors and creditors on this issue.  Please note that Blair and the subject SOLs do not apply to all debt contracts.  For example, a retail installment contract, which is commonly used in auto financing, is still governed by the four-year limitations period set forth in I.C. 26-1-2-725(1).  Thus, it is important to seek advice from your counsel before making any final determination on the appropriate SOL for a debt instrument in Indiana.  

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

Related News

Alerts / 12 April 2021

Landlord Considerations Regarding Lease Provisions

Lease terms are often subject to interpretation against the party drafting them. Given this, it is imperative that landlords are cautious in lease provisions to guard against defenses raised by tenants when obligations are not met.
Read More
Alerts / 8 April 2021

COVID-19 Bankruptcy Relief Extension Act Extends CARES Act Provisions

President Biden signed the COVID-19 Bankruptcy Relief Extension Act into law on March 27, 2021, previously passed overwhelmingly by Congress. The Act extends provisions of the Coronavirus Economic Stabilization Act of 2020 (CARES Act) through March 27, 2022.
Read More
Insights / 7 April 2021

A Look Back Analyzing 2020 Consumer Complaints and Litigation Statistics

As we enter the second quarter of 2021, let us look back at some of the consumer litigation trends of this past year and begin to analyze some of the data. These trends continue to affirm some long-standing trends found in cases involving the consumer litigation filings for the FDCPA, TCPA, and FCRA.
Read More

Join Our Email List

Get the latest articles and news delivered to your email inbox!
Subscribe

Contact the Author

Nicholas K. Rohner

Attorney
Contact

Join Our Email List