Robert Imbody v. Fifth Third Bank , 12 N.E.3d 943 ( 2014 )

FOR PUBLICATION Jun 27 2014, 9:27 am
APPELLANT PRO SE: ATTORNEY FOR APPELLEE:
ROBERT IMBODY FRANKLIN S. YUDKIN
Indianapolis, Indiana Franklin S. Yudkin and Associates, PSC
Louisville, Kentucky
IN THE
COURT OF APPEALS OF INDIANA
ROBERT IMBODY, )
)
Appellant-Defendant, )
)
vs. ) No. 49A05-1307-CC-322
)
FIFTH THIRD BANK, )
)
Appellee-Plaintiff. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable David J. Dreyer, Judge
Cause No. 49D10-1206-CC-22570
June 27, 2014
OPINION - FOR PUBLICATION
NAJAM, Judge
STATEMENT OF THE CASE
Robert Imbody appeals the trial court’s judgment in favor of Fifth Third Bank
(“the Bank”) on the Bank’s complaint alleging breach of a promissory note secured by a
motor vehicle. The Bank repossessed the vehicle, charged off the balance of the note,
and ultimately sold the vehicle at auction. The Bank sued Imbody for the deficiency
balance. The question presented on appeal is whether the Bank’s complaint is barred by
the applicable statute of limitations. We hold that the Bank’s repossession of the
collateral accelerated payment on the note, which triggered the six-year statute of
limitations, and that the Bank’s complaint is time-barred.
We reverse.
FACTS AND PROCEDURAL HISTORY
On July 23, 2004, Imbody obtained a loan from the Bank for the purchase of a
2004 Chevrolet Trailblazer (“the truck”). The Simple Interest Note and Security
Agreement (“the Agreement”) executed by Imbody provided in relevant part that the
purchase price for the truck was $35,906.28, and Imbody agreed to make eighty-four
monthly payments of $541.38 each beginning September 6, 2004. The Agreement also
provided that, in the event of a default, the Bank had the option “to accelerate without
notice or demand the final maturity of all of the obligations secured.” Appellant’s App.
at 21.
Imbody made scheduled payments according to the terms of the Agreement until
March 3, 2006, when his payment made on that date was returned for insufficient funds.
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On May 31, 2006, the Bank repossessed the truck and charged off1 the remaining balance
of $31,396.32. The Bank then sold the truck at auction for $16,500. The deficiency
balance was $14,896.32 plus various accrued fees, and Imbody agreed to pay the Bank
$100 per month toward the debt.2 But Imbody made only about fourteen of those
payments, and he made his final payment on the deficiency balance on February 29,
2008.
On June 5, 2012, the Bank filed its complaint against Imbody alleging breach of
contract and seeking damages of $24,940.57, pre-judgment interest, and attorney’s fees.
Following a bench trial, the trial court entered judgment in favor of the Bank in the
amount of $24,939, plus court costs. Imbody filed a motion to correct error, which the
trial court denied. This appeal ensued.
DISCUSSION AND DECISION
Imbody contends that the Bank’s complaint is time-barred. In particular, Imbody
maintains that the Bank’s cause of action accrued, and the statute of limitations began to
run, on May 31, 2006, when the Bank repossessed the truck and charged off the principal
balance. Thus, Imbody asserts, the Bank’s complaint, which was filed on June 5, 2012,
was not timely under the six-year statute of limitations applicable to written contracts for
the payment of money. See Ind. Code § 34-11-2-9. The Bank maintains that the cause of
1
A “charge off” is defined generally as “[t]o treat (an account receivable) as a loss or expense
because payment is unlikely; to treat as a bad debt.” Black’s Law Dictionary 227 (7th ed. 1999). Here, at
trial, a Bank representative testified that “the loan was charged off” on May 31, 2006, which meant that
the Bank had “repossessed the vehicle” and subsequently “sold it at auction” and the loan was “not on
[the Bank’s] books anymore.” Transcript at 23.
2
The evidence shows that the parties had an informal agreement regarding payments on the
deficiency balance. There is no evidence that the parties entered into a forbearance agreement.
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action accrued, and the statute of limitations began to run, on February 29, 2008, when
Imbody made his last payment on the deficiency balance. Thus, the Bank contends that
its complaint was timely and within the six-year statute of limitations.
Statutes of limitation seek to provide security against stale claims, which in turn
promotes judicial efficiency and advances the peace and welfare of society. Cooper
Indus., LLC v. City of South Bend, 899 N.E.2d 1274, 1279 (Ind. 2009). The party
pleading a statute of limitation bears the burden of proving the suit was commenced
beyond the statutory time allowed. Id. 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. Thus, here, our review is de novo. See Siwinski v.
Town of Ogden Dunes, 949 N.E.2d 825, 828 (Ind. 2011).
First, we determine when the statute of limitations began to run. 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. See 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 its option to accelerate. See id.
At trial, the parties did not present evidence that the Bank ever formally exercised
the optional acceleration clause in the Agreement. But under the Agreement, the Bank
could elect “to accelerate without notice or demand the final maturity of all the
obligations secured.” Appellant’s App. at 21. The Arizona Court of Appeals recently
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observed that, “[u]nder the majority view, notwithstanding a creditor’s contractual ability
to accelerate a debt without notice, it must undertake some affirmative act to make clear
to the debtor it has accelerated the obligation.” Baseline Fin. Servs. v. Madison, 278 P.3d
321, 322 (Ariz. Ct. App. 2012) (citing case law from five other jurisdictions). And the
court stated that Arizona courts “have deemed a variety of actions, including repossession
of property, sufficient to demonstrate a creditor’s exercise of an optional acceleration
clause.” Id. at 323. We agree. A secured creditor repossesses its collateral to liquidate
the underlying debt. Thus, a repossession is an affirmative act, which in its operation and
effect accelerates the final maturity of the debt when a secured note calls for periodic
payments.
Here, the evidence shows that the Bank repossessed the truck on May 31, 2006,
which triggered the statute of limitations. See id. And because the Bank waited more
than six years from the date of repossession to file the complaint, it is time-barred. See
I.C. § 34-11-2-9. The trial court erred when it concluded that the Bank’s complaint was
timely filed. We reverse the trial court’s judgment in favor of the Bank and instruct the
court to enter judgment in favor of Imbody.
Reversed.
VAIDIK, C.J., and BROWN, J., concur.
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