Complaint for repayment on promissory note time-barred, COA says

The Indiana Court of Appeals on Friday reversed in part a judgment in favor of man who filed for repayment on a defaulted promissory note, finding his complaint against the purchaser was filed after the statute of limitations passed.

In April 2003, Thomas Stone executed a deed to Heartland Homestead LLC, conveying a 22-acre mobile home park and a noncontiguous 20 acres of unimproved farmland in Dearborn County. Stone received cash at closing and a promissory note for $100,000 signed in part by James Shroud, co-partner of Heartland Homestead.

The promissory note required installment payments of $833.33 per month beginning June 1, 2003 until the amount was paid in full, with a maturity date of July 1, 2013. Stone received payments on the note through May 2008, totaling $50,000. But after that, the payments stopped when Heartland Homestead became unable to pay its mortgage on the property.

Stone filed a lawsuit seeking repayment from Shroud in February 2016, but Stroud asserted an affirmative defense of the statute of limitations, arguing that the cause of action on the note accrued in June 2008, when the note fell into default.

Stone countered that the statute of limitations ran from the note’s maturity date, and a trial court entered judgment in Stone’s favor in the amount of $113,246.77 in principle, late fees and interest, $15,000 in attorney’s fees, and $1,226 in costs, mediation fees, costs of depositions and appraisals. It further awarded him $25,000 in earnest money as a result of a failed contract to purchase land.

But the Indiana Court of Appeals reversed in part and remanded that decision when it agreed with Shroud’s contention that the trial court erred by granting judgment on the promissory note, noting that the statute of limitations for Stone to recover on the note had passed before he filed his complaint.

Specifically pointing out that Stone did not demand payment on the defaulted promissory note until nearly eight years after the last payment was made, the appellate court concluded that the complaint was time-barred, following Smither v. Asset Acceptance, LLC, 919 N.E.2d 1153 (Ind. Ct. App. 2010) and Collins Asset Group, LLC v. Alialy, 115 N.E.3d 1275 (Ind. Ct. App. 2018).

“Pursuant to Smither and Alialy, Stone’s complaint is time-barred because he waited until after the six-year statute of limitations had run before making a demand for payment of the debt. That is a per se unreasonable amount of time to wait before invoking an optional acceleration clause,” Judge Margret Robb wrote. “Therefore, the trial court erred in entering judgment for Stone on the promissory note and ordering Stroud to pay over $100,000 as satisfaction of the indebtedness.”

It further found that because the judgment entered on the promissory note was in error, the remaining judgment should be settled solely against the Heartland Trust. The appellate court therefore reversed in part and remanded for the trial court to issue a corrected judgment in James R. Stroud, Heartland Homestead, LLC, and Heartland Land Trust v. Thomas J. Stone, 18A-CC-1722.