Case Title: Blair v. EMC Mortgage, LLC

Citation: 

Docket Number: 19S-MF-530

State: indiana

Court: Indiana Supreme Court

Date: 2020-02-17T00:00:00Z

Document:
Indiana Supreme Court | Case No. 19S-MF-530 | February 17, 2020 
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I N  T H E  
Indiana Supreme Court 
Supreme Court Case No. 19S-MF-530 
Dean Blair and Paula Blair, 
Appellants/Cross-Appellees (Defendants) 
–v– 
EMC Mortgage, LLC, 
Appellee/Cross-Appellant (Plaintiff) 
Argued: November 7, 2019 | Decided: February 17, 2020 
Appeal from the Vanderburgh Superior Court, No. 82D07-1207-MF-3333 
The Honorable Richard G. D’Amour, Judge 
On Petition to Transfer from the Indiana Court of Appeals, 
No. 18A-MF-808 
Opinion by Chief Justice Rush 
Justices David, Massa, Slaughter, and Goff concur. 
 
 
 
FILED
C L E R K
Indiana Supreme Court
Court of Appeals
and Tax Court
Feb 17 2020, 11:46 am
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Rush, Chief Justice. 
A closed installment contract, such as a mortgage or promissory note, is 
one in which a borrower agrees to make a series of payments to a lender 
on specific dates. Suits to enforce obligations under these contracts are 
subject to multiple statutes of limitations.  
Here, borrowers ask us to impose an additional rule of reasonableness, 
insisting that their lender waited too long to sue them for amounts owed 
under a mortgage and promissory note. The lender urges us to affirm the 
trial court’s order, which granted it partial relief. 
We find that imposing additional, judicially created time constraints 
upon a lender’s ability to bring a claim on a closed installment contract is 
neither necessary nor wise. Applicable statutes of limitations already keep 
a lender from waiting indefinitely to sue for a borrower’s default. And 
these statutes are triggered at multiple points in time, leaving the lender 
empty-handed if it delays too long. Imposing a further rule of 
reasonableness could spur lenders to sue borrowers prematurely, 
depriving them of the opportunity to first negotiate repayment. 
Finding that the lender filed suit within the applicable statutes of 
limitations, we affirm. 
Facts and Procedural History 
On December 21, 1992, Dean and Paula Blair executed a note and 
mortgage to be paid in monthly installments over fifteen years, beginning 
in February 1993. The note gave the holder the option to accelerate the 
debt after a default and require immediate payment on the full amount 
due. 
In June 1995, the Blairs made their last payment on the note. The 
original lender filed for bankruptcy; and the note and mortgage were 
eventually assigned to EMC Mortgage, LLC, in July 2000. Although the 
note matured on January 1, 2008, EMC didn’t sue the Blairs to recover on 
the note and foreclose the mortgage until July 3, 2012.  
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After a bench trial, the trial court issued an order foreclosing the 
mortgage. But it held, in part, that EMC was entitled to recover only 
payments and interest that accrued after July 3, 2006—due to Indiana’s 
six-year statute of limitations to bring an action on the note underlying a 
mortgage.  
The Court of Appeals reversed, finding that “a party is not at liberty to 
stave off operation of the statute [of limitations] inordinately by failing to 
make demand.” Blair v. EMC Mortgage, LLC, 127 N.E.3d 1187, 1195, 1198 
(Ind. Ct. App. 2019) (alteration in original) (quoting Smither v. Asset 
Acceptance, LLC, 919 N.E.2d 1153, 1161 (Ind. Ct. App. 2010)). And because 
EMC did not accelerate the note within six years of the Blairs’ initial 
default, the panel held that EMC waited “an unreasonable amount of 
time” and could not recover. Id. at 1197–98. 
We granted transfer, vacating the Court of Appeals opinion. Ind. 
Appellate Rule 58(A).1 
Standard of Review 
We will set aside the trial court’s findings and judgment only if they are 
clearly erroneous. Fraley v. Minger, 829 N.E.2d 476, 482 (Ind. 2005). But 
here, we focus on the trial court’s conclusion on whether EMC’s claim was 
time-barred—and determining when a cause of action accrues under a 
particular statute of limitations is a question of law reviewed de novo. 
Cooper Indus., LLC v. City of South Bend, 899 N.E.2d 1274, 1280 (Ind. 2009); 
Imbody v. Fifth Third Bank, 12 N.E.3d 943, 945 (Ind. Ct. App. 2014). 
 
1 The Court of Appeals also determined that, even though the Blairs did not file a timely 
response to EMC’s summary judgment motion, “EMC was not entitled to summary judgment 
because it failed to make a prima-facie showing that summary judgment was proper.” Blair, 
127 N.E.3d at 1194. Although the time limits of Indiana Trial Rule 56 are strictly enforced, see 
Borsuk v. Town of St. John, 820 N.E.2d 118, 123 n.5 (Ind. 2005), EMC did not raise this argument 
on transfer; and given our disposition today, this issue is moot. 
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Discussion and Decision 
A promissory note is a negotiable instrument that accompanies a 
mortgage. It is an installment contract that contains a maturity date—
usually fifteen or thirty years past its date of execution—when the full 
balance owed becomes due. Such a note may also include a provision, 
known as an acceleration clause, that gives the lender the option to 
immediately demand payment on the full loan amount if the borrower 
fails to pay one or more installments. 
The Blairs argue that the applicable statute of limitations requires an 
acceleration option to be exercised within six years following a borrower’s 
first default. And because EMC failed to do so, the Blairs contend that it 
waited an unreasonable amount of time to sue for payment under the note 
and thus its suit is time-barred. 
EMC counters that there are three possible points in time when the 
statute of limitations could have been triggered: (1) as each installment 
payment became due; (2) upon an exercise of the optional acceleration 
clause, had it chosen to accelerate; or (3) upon loan maturity. And EMC 
argues that its claim was timely because it was asserted within six years of 
many of the Blairs’ missed installment payments and within six years of 
the note’s maturity date. Yet, EMC refrains from asking for full relief, 
rather urging us to affirm the trial court’s order that it is entitled to 
recover only some of the amount due. 
We grant EMC’s request for two reasons. 
First, there is no need to impose a rule of reasonableness when a lender 
sues to enforce installment obligations on a closed installment contract, 
such as a mortgage or a promissory note. Unlike credit cards or other 
open accounts, a closed installment contract contemplates payment of a 
certain sum over a fixed period of time, which means a lender cannot wait 
indefinitely to sue for missed installments.  
Second, under either of the applicable statutes of limitations, a cause of 
action for payment upon a promissory note with an optional acceleration 
clause can accrue on multiple dates—including when the note matures. 
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See Ind. Code § 34-11-2-9 (2019); Ind. Code § 26-1-3.1-118(a) (2019). Thus, 
EMC would be entitled to full relief under either statute. 
However, EMC not only expressly disclaimed any argument for full 
relief; but it also urged us to affirm the trial court’s order that it was 
entitled to partial relief. Under these particular circumstances, we affirm 
the trial court’s order. 
I. There is no need to judicially create additional 
time constraints on a lender’s ability to bring an 
action upon a closed installment contract. 
The Blairs claim that, when a lender such as EMC has the option to 
accelerate payments but is not required to do so, some reasonableness 
limitation is necessary to ensure that “the creditor is not at liberty to stave 
off operation of the limitations period inordinately by failing to make 
demand.” The Blairs direct us to three cases in support of their argument: 
Smither v. Asset Acceptance, LLC, 919 N.E.2d 1153 (Ind. Ct. App. 2010); 
Heritage Acceptance Corp. v. Romine, 6 N.E.3d 460 (Ind. Ct. App. 2014), 
trans. denied; and Stroud v. Stone, 122 N.E.3d 825 (Ind. Ct. App. 2019). 
In Smither, the Court of Appeals determined that a creditor’s claim 
against a borrower for “any portion” of the borrower’s credit card debt 
was time-barred. 919 N.E.2d at 1162. The panel treated the credit card 
agreement as an open account—“an account with a balance which has not 
been ascertained and is kept open in anticipation of future transactions.” 
Id. at 1159 (quoting 1 Am. Jur. 2d Accounts and Accounting § 4 (2005)). The 
panel also observed that the statute of limitations for the entire balance 
began to run either at the time of the borrower’s first default or the next 
payment due date thereafter. Id. at 1160–62. And because the statute of 
limitations had already run, the creditor could not have invoked the credit 
card agreement’s optional acceleration clause within a reasonable amount 
of time. Id. at 1161–62.  
Later, in both Romine and Stroud, the Court of Appeals applied 
Smither’s rationale in the context of a closed installment contract. Romine, 6 
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N.E.3d at 463–64; Stroud, 122 N.E.3d at 831–32. But, as explained below, 
we find Smither distinguishable; and we disapprove Romine and Stroud. 
Smither noted that “credit card accounts are unlike promissory notes or 
installment loans, such as mortgages, student loans, and car loans.” 919 
N.E.2d at 1159. The court explained that with a promissory note or 
mortgage, “the total amount of indebtedness and a defined schedule of 
repayment, including precise dates for payment and the amount of each 
payment until the debt is fully repaid, typically are included in the loan 
document from the outset.” Id. On the other hand, from the outset of a 
credit card agreement, the total amount of indebtedness is unknown, 
making it appropriate to treat these agreements like open accounts—
instead of promissory notes—for purposes of the statute of limitations. Id. 
at 1160. Thus, Smither recognized critical differences between open 
accounts and closed installment contracts and how those differences 
should impact the application of statutes of limitations. 
Despite Smither emphasizing these differences, both Romine and Stroud 
applied Smither’s reasoning to a claim involving a closed installment 
contract. Romine, 6 N.E.3d at 463–64; Stroud, 122 N.E.3d at 831–32. Romine 
first applied Smither’s rule of reasonableness to find that a lender’s cause 
of action on a closed installment contract for a car loan was barred due to 
its long delay. 6 N.E.3d at 464. Then, Stroud specifically held that a 
mortgage lender could not demand payment on a promissory note more 
than six years after the borrower’s first default. 122 N.E.3d at 831. The 
panel determined that the statute of limitations for the entire amount 
owed on the promissory note began to run at that first default, and thus, 
the lender’s claim for payment nearly eight years after the default was 
unreasonable and time-barred. Id.  
Because we find that, for purposes of the statute of limitations, closed 
installment contracts should be treated differently than open accounts, we 
disapprove Romine and Stroud and decline to apply Smither’s rationale 
here. We now examine the relevant statutes of limitations that apply to 
actions upon promissory notes. 
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II. Two statutes of limitations apply to a cause of 
action upon a promissory note. 
Two statutes of limitations apply when a lender sues for payment upon 
a promissory note. These statutes “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).  
First, Indiana Code section 34-11-2-9 is the general statute of limitations 
for “action[s] upon promissory notes.” This statute states that such an 
action, when pertaining to a note executed after August 31, 1982, “must be 
commenced within six (6) years after the cause of action accrues.” I.C. § 
34-11-2-9.  
Second, Indiana has adopted the relevant Uniform Commercial Code 
(UCC) statute of limitations as Indiana Code section 26-1-3.1-118. This 
statute specifically governs “an action to enforce the obligation of a party 
to pay a note payable at a definite time.” I.C. § 26-1-3.1-118(a). It gives two 
alternative deadlines for asserting a cause of action upon such a note: 
either “within six (6) years after the due date or dates stated in the note or, 
if a due date is accelerated, within six (6) years after the accelerated due 
date.” Id. 
These statutes’ plain language shows that they are not mutually 
exclusive when applied to an action on a promissory note. Rather, Section 
34-11-2-9 addresses accrual of a cause of action in very general terms, 
while Section 26-1-3.1-118(a) addresses it more specifically. And pre-
Stroud opinions from our Court of Appeals illustrate how these two 
statutes may allow several accrual dates for causes of action upon a 
promissory note.  
Griese-Traylor Corp. v. Lemmons, 424 N.E.2d 173, 183 (Ind. Ct. App. 
1981), recognized that the statute of limitations begins to run “as each 
installment becomes due.” Id. (citing Kuhn v. Kuhn, 273 Ind. 67, 402 N.E.2d 
989 (1980)). Also, if the contract contains an acceleration clause, the cause 
of action accrues either when a mandatory clause “brings all payments 
due immediately,” or when an optional clause is exercised. Id. (cleaned 
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up); see also Imbody v. Fifth Third Bank, 12 N.E.3d 943, 945 (Ind. Ct. App. 
2014) (finding that a secured creditor exercised an optional acceleration 
clause, “which triggered the statute of limitations” under Indiana Code 
section 34-11-2-9). Finally, the note’s maturity date triggers the statute of 
limitations, as acknowledged by Cowan v. Murphy, 165 Ind. App. 566, 333 
N.E.2d 802 (1975). Although that case involved a note with a mandatory 
acceleration clause, the panel commented that, “[h]ad the acceleration 
clause been merely optional,” the lender’s acceptance of late payments on 
the promissory note would have waived acceleration, so no cause of 
action would have accrued “until the whole note had become due.” 
Cowan, id. at 572, 333 N.E.2d at 805–06. 
Decisions from other jurisdictions have similarly concluded that a 
mortgage lender can choose not to exercise an optional acceleration clause 
and, instead, bring a cause of action within the statute of limitations 
following a note’s maturity date.  
The Florida District Court of Appeals, applying that state’s general five-
year statute of limitations, found that “[w]hen a note contains an optional 
acceleration clause, a lender only runs out of opportunities to foreclose, 
under the applicable statute of limitations, after five years of the latest 
default, or after five years of the date of maturity of the note.” Bank of 
America v. Graybush, 253 So. 3d 1188, 1195 (Fla. Dist. Ct. App. 2018). The 
court concluded that if a lender should bring a timely action under this 
scenario, it would be “entitled to all sums due under the note and 
mortgage—should the note and mortgage contractually provide.” Id. 
Likewise, the Ohio Court of Appeals determined, regarding a promissory 
note, that “[t]he date of acceleration or the natural maturity date of the 
instrument is the triggering event for the statute of limitations” under 
Ohio’s version of the UCC. Bank of New York Mellon v. Walker, 78 N.E.3d 
930, 934 (Ohio Ct. App. 2017). 
Finding these opinions persuasive, we conclude that Indiana’s two 
applicable statutes of limitations recognize three events triggering the 
accrual of a cause of action for payment upon a promissory note 
containing an optional acceleration clause. First, a lender can sue for a 
missed payment within six years of a borrower’s default. Second, a lender 
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can exercise its option to accelerate and fast-forward to the note’s maturity 
date, rendering the full balance immediately due. The lender must then 
bring a cause of action within six years of that acceleration date. Or, third, 
a lender can opt not to accelerate and sue for the entire amount owed 
within six years of the note’s date of maturity. 
We now apply this framework to determine whether EMC’s claim for 
payment upon the promissory note is time-barred. 
III. We affirm the trial court’s grant of partial relief to 
EMC.  
As explained above, ordinarily, lenders may recover the entire amount 
owed on a promissory note by filing suit within six years of the note’s 
maturity date, if they choose not to exercise the note’s optional 
acceleration clause. But even though EMC sued the Blairs well within six 
years of the note’s 2008 maturity date, the unique posture of this case 
compels us to affirm the trial court’s award of only partial relief. 
In its appellate brief, EMC stated that, although it did “not agree with 
the trial court’s conclusions regarding the impact of the Blairs’ statute of 
limitations defense,” it did “not appeal the same.” At oral argument, 
counsel for EMC emphasized that EMC “won at the trial court” and 
acknowledged that EMC did not appeal the trial court’s rationale since it 
didn’t have a reason to. Because EMC has expressly disclaimed any 
argument for full relief and urged us to affirm the trial court’s order, we 
decline to grant EMC relief beyond what it has sought. 
Conclusion 
Important legal differences between closed installment contracts and 
open accounts counsel against treating them identically for purposes of 
statutes of limitations. Because we find no need to impose a rule of 
reasonableness when a lender sues for payment on a closed installment 
contract, we conclude that EMC could, under the two applicable statutes 
of limitations, have recovered the full amount owed. But since EMC 
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expressly disclaimed any argument for full relief, we affirm the trial court 
and decline to grant relief beyond what EMC sought.  
David, Massa, Slaughter, and Goff, JJ., concur. 
A TT O R N E Y F O R  A PP E LLA N TS  
Robert R. Faulkner 
Faulkner Law Office 
Evansville, Indiana 
A TT O R N E YS F O R  AP P EL LE E 
David J. Jurkiewicz 
Bryan H. Babb 
Nathan T. Danielson 
Christina M. Bruno 
Bose McKinney & Evans LLP 
Indianapolis, Indiana