This follows-up my last post, Indiana Court of Appeals Adopts Reasonableness Test For Promissory Note Statute of Limitations, where there was cliffhanger about an alternative statute of limitations that may have altered the outcome of the lender's case, which was dismissed based upon the expiration of the six-year statute of limitations.
Statute #1. The subject of my previous post, the Alialy decision, hinged solely on the Court's application of the statute of limitations located under Title 34, which involves civil procedure. Specifically, Ind. Code 34-11-2-9 “Promissory notes, bills of exchange, or written contracts for payment of money” simply states:
An action upon promissory notes … must be commenced within six (6) years after the cause of action accrues….
As summarized in my post, the Alialy opinion arguably - depending upon one's interpretation - holds that, even if notes have optional acceleration clauses, under IC 34-11-2-9 the "cause of action accrues" within six years of the last payment or, alternatively, six years after acceleration if the lender accelerated the note within six years of the last payment. (This is my current read on the outcome, not the expressed conclusion of the Court.)
Statute #2. On appeal, the lender in Alialy asked the Court to look at the statute of limitations under Indiana's Uniform Commercial Code governing negotiable instruments, which include promissory notes. Ind. Code 26-1-3.1-118 “Statute of limitations” reads:
… an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.
The Court never entertained the merits of the lender's argument but instead determined that the theory had been waived on procedural grounds. So, we are left to wonder whether the UCC's statute of limitations may have changed the result in Alialy.
Wondering. I have not taken a deep dive into the UCC question or researched the case law interpreting Section 118. I also will not pretend to know what lender's counsel's theory was. Again, unfortunately the Court did not address the merits. My best guess is that the lender wanted to seize on the expanded language in the UCC's statute of limitations that provides "if a due date is accelerated, within six (6) years after the accelerated due date." That terminology, which seems to spell out when the cause of action accrues, does not exist in IC 34-11-2-9. Under the UCC, therefore, the lender's acceleration date, and not the date of the last payment, may control when the clock on the six years starts ticking. Because the difference between the two statutes is quite subtle, it's difficult to say whether that reasoning would have carried the day in a scenario like Alialy. We may need to wait for a future appellate opinion.
If you have any comments or insights on the issue, please submit a post below or email me. I would be curious as to others' thoughts. To confirm, the question is not whether the statute is six years. The question is - in cases of optional acceleration, when does the cause of action accrue or, in other words, when does the clock starts ticking on the six years.
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