By: Nicholas Rohner, Attorney
In 2004, Robert Imbody (“Imbody”) financed the purchase of a truck through Fifth Third Bank (“Bank”). Imbody made all scheduled payments until March of 2006. On May 31, 2006, the Bank repossessed the truck. The Bank sold the truck at auction and a deficiency balance of more than $14,000 was established. On June 5, 2012, the Bank filed a complaint against Imbody for breach of the loan contract. Following a bench trial, the Indiana trial court entered judgment in favor of the Bank and Imbody appealed.
At issue on appeal was whether the Bank’s claim was barred by Indiana’s six-year statute of limitations (“SOL”). Imbody contended that the Bank’s cause of action accrued, and the SOL began to run, on May 31, 2006, when the Bank repossessed the truck.
In a short opinion, the Court of Appeals focused on the loan agreement’s optional acceleration clause. The Court emphasized that the SOL does not begin to run immediately upon a debtor’s default, but rather when a creditor exercises its option to accelerate. In the absence of a specific notice of acceleration, a creditor must undertake some affirmative act to make it clear to the debtor that it has accelerated the debt.
The Court ruled that repossession is an affirmative act that accelerates the final maturity of a debt. Thus, when the Bank repossessed the truck on May 31, 2006, it accelerated the debt and triggered the SOL. Because of this, the Bank’s complaint, filed on June 5, 2012, was time-barred. See Imbody v. Fifth Third Bank., 12 N.E.3d 943 (Ind. Ct. App. 2014).
Strangely, the Court’s decision failed to address a glaring issue–the possible restarting of the SOL due to partial payments by Imbody. After the deficiency had been established, Imbody agreed to pay the Bank $100 per month toward the debt and made fourteen payments. On appeal, the Bank asserted that the cause of action accrued, and the SOL began to run, on February 29, 2008, when Imbody made his last payment on the deficiency balance.
The law in Indiana for more than a century has been that a voluntary payment on a debt, either before or after the expiration of the SOL, has the effect of starting the running of the statute anew. See, e.g., Spencer v. McCune, 126 N.E. 30 (Ind. Ct. App. 1920). However, since the Court failed to discuss the partial payment issue, even in dicta, this writer can only conclude that the well-established law regarding voluntary partial payments renewing the SOL was not abrogated by the Imbody decision.