Complaint for unpaid car loan filed outside of statute of limitations

Because a company seeking to recover unpaid installments on a car loan filed its complaint outside of the four-year statute of limitations, the Indiana Court of Appeals affirmed the small claims judgment in favor of the car buyer.

Chris Romine bought a 1996 Pontiac Firebird from Royal Motors Sept. 30, 2005, and financed the transaction. His biweekly payments began Oct. 15, 2005, but due to a severe back injury, he became unemployed and couldn’t keep up with his car payments.  

Heritage Acceptance Corp. as assignee of Royal Motors sued Romine in small claims court April 17, 2013, seeking the jurisdictional limit of $6,000 plus court costs. The trial court ruled in favor of Romine, citing the four-year statute of limitations applicable to “transactions in goods.” Romine also got to keep the car.

Heritage argued in Heritage Acceptance Corporation v. Chris L. Romine, 71A03-1307-SC-283, that the six-year statue of limitations for actions upon promissory notes, bills of exchanges or other written contracts for the payment of money applied. The company conceded that the contract, captioned “Retail Installment Contract and Security Agreement” resulted in “a sale of goods.”

“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,” Senior Judge John Sharpnack wrote.

The judges also rejected Heritage’s claim that it still timely filed its complaint based on the acceleration clause, in which Heritage demanded that Romine pay everything owed in one lump sum.

“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,” Sharpnack wrote. “We conclude … 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.”