FOR PUBLICATION
ATTORNEYS FOR APPELLANT:
Mar 20 2014, 9:15 am
JAMIE C. WOODS
PHILLIP A. GARRETT
Thorne & Grodnik, LLP
Mishawaka, Indiana
IN THE
COURT OF APPEALS OF INDIANA
HERITAGE ACCEPTANCE CORPORATION, )
)
Appellant-Plaintiff, )
)
vs. ) No. 71A03-1307-SC-283
)
CHRIS L. ROMINE, )
)
Appellee-Defendant. )
APPEAL FROM THE ST. JOSEPH SUPERIOR COURT
The Honorable Richard L. McCormick, Magistrate Judge
Cause No. 71D01-1304-SC-3127
March 20, 2014
OPINION - FOR PUBLICATION
SHARPNACK, Senior Judge
STATEMENT OF THE CASE
Heritage Acceptance Corporation (“Heritage”) appeals a small claims court
judgment in favor of Chris L. Romine. We affirm.
ISSUES
Heritage raises two issues, which we restate as:
I. Whether a four-year or six-year statute of limitations applies to Heritage’s
complaint.
II. Whether the statute of limitations bars Heritage’s complaint.
FACTS AND PROCEDURAL HISTORY
On September 30, 2005, Romine bought a 1996 Pontiac Firebird from Royal
Motors. Romine and Royal Motors executed a “Retail Installment Contract and Security
Agreement.” Plaintiff’s Ex. 1. The contract provides, “You [Romine] agree to purchase
from us [Royal Motors], on a time basis, subject to the terms and conditions of this
contract and security agreement (Contract), the Motor Vehicle (Vehicle) and services
described below.” Id.
Romine agreed to pay a total of $11,097.32 for the car, including finance charges.
He further agreed to pay in seventy-eight installments of $133.94, beginning on October
15, 2005, and payable on a biweekly basis. The contract stated that Heritage would be
Royal Motors’s assignee.
The contract further provided that if Romine defaulted on his payments, Royal
Motors or its assignee had the following option:
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A. We may require you to immediately pay us, subject to any refund
required by law, the remaining unpaid balance of the amount financed,
finance charges and all other agreed charges.
****
By choosing any one or more of these remedies, we do not waive our right
to later use another remedy. By deciding not to use any remedy, we do not
give up our right to consider the event a default if it happens again.
Plaintiff’s Ex. 1.
Romine paid the required amount to Heritage on a biweekly basis until June 2006.
Beginning in that month, Romine continued to make payments, but in amounts far less
than the required $133.94. He sometimes paid as little as $10.00 because he had suffered
a severe back injury and was unable to maintain employment. Romine’s last payment
was in May 2007. He stopped making payments because a Heritage employee told him
“they weren’t going to accept” $10 or $20 anymore. Tr. p. 9. Heritage never tried to
repossess the car, but it retained the certificate of title.
In early April 2013, a representative of Heritage contacted Romine and demanded
payment of the entire amount owed. Romine said he could not pay that amount all at
once.
On April 17, 2013, Heritage sued Romine in small claims court, seeking $6,000.00
(the court’s jurisdictional limit) plus court costs. After an evidentiary hearing, the court
entered judgment for Romine. The final judgment states, “Statute of limitations – action
not commenced within 4 yrs after cause of action accrued.” Appellant’s App. p. 5. The
court further granted Romine ownership of the Pontiac. This appeal followed.
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DISCUSSION AND DECISION
A small claims court’s judgment “shall be subject to review as prescribed by
relevant Indiana rules and statutes.” Ind. Small Claims Rule 11(A). Where the issue on
appeal is a pure question of law, we review the matter de novo. Siwinski v. Town of
Ogden Dunes, 949 N.E.2d 825, 828 (Ind. 2011). The determination of when a cause of
action accrues is generally a question of law. Warrick Cnty. v. Hill, 973 N.E.2d 1138,
1143 (Ind. Ct. App. 2012), trans. denied.
We observe that Romine did not file an appellee’s brief. Under such a
circumstance, we do not develop arguments on his behalf, and we reverse if Heritage
demonstrates prima facie error in the small claims court’s judgment. Heartland Crossing
Found., Inc. v. Dotlich, 976 N.E.2d 760, 762 (Ind. Ct. App. 2012). Prima facie error
means at first sight, on first appearance, or on the face of it. Id.
I. WHICH STATUTE OF LIMITATIONS APPLIES?
The small claims court determined that the contract was subject to a four-year
statute of limitations pursuant to Indiana Code section 26-1-2-725 (1986). That statute
provides, “An action for breach of any contract for sale must be commenced within four
(4) years after the cause of action has accrued.” Id. This four-year statute of limitations
applies to “transactions in goods.” Ind. Code § 26-1-2-102 (1991). “It does not apply to
any transaction which although in the form of an unconditional contract to sell or present
sale is intended to operate only as a security transaction.” Id.
Here, Heritage claims that the applicable statute of limitations is six years, as set
forth in Indiana Code section 34-11-2-9 (1998). According to that statute, “An action
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upon promissory notes, bills of exchange, or other written contracts for the payment of
money . . . must be commenced within six (6) years after the cause of action accrues.”
Id.
In deciding which deadline applies, we note that when a statute is clear and
unambiguous, we need not apply any rules of construction other than to require that
words and phrases be taken in their ordinary sense. City of Carmel v. Steele, 865 N.E.2d
612, 618 (Ind. 2007). Here, the clear and unambiguous language of Indiana Code section
26-1-2-102 provides the key to determining which statute of limitations applies. We
must decide whether the contract at issue was “intended to operate only as a security
transaction.” If so, then the four-year statute of limitations set forth in Indiana Code
section 26-1-2-725 does not apply.
The contract is captioned “Retail Installment Contract and Security Agreement.”
Plaintiff’s Ex. 1. It provides, “You agree to purchase from us, on a time basis, subject to
the terms and conditions of this contract and security agreement (Contract), the Motor
Vehicle (Vehicle) and services described below.” Id. Heritage concedes that the
contract resulted “in a sale of goods.” Appellant’s Br. p. 5. Indeed, the financing aspect
of the contract is wholly dependent upon the sale of the car, because without the sale, the
financing serves no purpose.
Thus, although the transaction has aspects of a contract for payment of money, it is
not exclusively a security transaction. Under Indiana Code section 26-1-2-102, the
contract is a transaction for goods. See First Nat. Bank of Milltown v. Schrader, 176 Ind.
App. 391, 375 N.E.2d 1124, 1125 (1978) (a retail installment contract for sale of a used
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automobile was a transaction for sale of goods); Thompson Farms, Inc. v. Corno Feed
Prods., 173 Ind. App. 682, 366 N.E.2d 3, 14 (1977) (appellee sold hog houses to
appellant while also providing financing, so the parties’ contract was a transaction for
sale of goods). Thus, Heritage’s complaint was an action for a breach of contract for
sale, and the four-year statute of limitations set forth in Indiana Code section 26-1-2-725
applies.
II. DOES THE STATUTE OF LIMITATIONS BAR HERITAGE’S CLAIM?
Heritage next claims that even if the four-year statute of limitations applies, it still
timely filed its complaint. “A cause of action accrues when the breach occurs, regardless
of the aggrieved party’s lack of knowledge of the breach.” Ind. Code § 26-1-2-725(2).
However, where, as here, an installment contract contains an optional acceleration clause,
by which the creditor may declare all installments in the loan immediately due and
payable after default, the statute of limitations to collect the entire debt does not begin to
run immediately upon the debtor’s default. Smither v. Asset Acceptance, LLC, 919
N.E.2d 1153, 1160 (Ind. Ct. App. 2010). Instead, the statute generally begins to run only
when the creditor exercises the optional acceleration clause. Id.
Smither provides guidance here. Smither obtained a credit card from a bank. He
ran up a debt of $1700 and stopped making payments in February 2000. The bank
continued to send him monthly billing statements. In December 2001, Asset Acceptance,
LLC (“Asset”), purchased the loan from the bank. In May 2006, Asset requested full
payment of the debt under the contract’s optional acceleration clause and sued Smither.
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Asset ultimately prevailed on summary judgment, and Smither appealed. A panel
of this Court noted that the contract had an optional acceleration clause, and Asset did not
exercise the clause until May 2006, by which time Smither had been in default for over
six years and the statute of limitations had run. The Court stated, “Waiting until after the
statute of limitations has passed following default before making demand for full and
immediate payment of a debt is per se an ‘unreasonable’ amount of time to invoke an
optional acceleration clause and cannot be given effect.” Id. at 1161-62. The Court also
noted, “‘a party is not at liberty to stave off operation of the statute [of limitations]
inordinately by failing to make demand.’” Id. at 1161 (quoting Curry v. United States,
679 F. Supp. 966, 970 (N.D. Cal. 1987)). Thus, the Court concluded that Asset’s long-
delayed exercise of the acceleration clause did not prevent the statute of limitations from
taking effect.
Here, Heritage waited until early April 2013 to exercise its right to demand full
payment under the optional acceleration clause. Romine had tendered his last payment
almost six years earlier. Furthermore, Romine’s schedule of seventy-eight biweekly
payments would have ended in September 2008. Heritage did not demand full payment
until well over four years after that deadline. We conclude, as did the Court in Smither,
that waiting after these events have occurred to exercise an optional acceleration clause is
unreasonable. Thus, Heritage’s long-delayed attempt to exercise the acceleration clause
did not prevent the four-year statute of limitations from taking effect, and its complaint is
barred. Heritage has failed to establish prima facie error.
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CONCLUSION
For the reasons stated above, we affirm the judgment of the small claims court.
Affirmed.
FRIEDLANDER, J., and MAY, J., concur.
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