Hassler v. Account Brokers of Larimer Cnty., Inc., 09SC519.

• Citation: 274 P.3d 547,2012 CO 24
• Decision Date: 16 April 2012
• Docket Number: No. 09SC519.,09SC519.
• Parties: Daniel Shane HASSLER, Petitioner v. ACCOUNT BROKERS OF LARIMER COUNTY, INC., Respondent.
• Court: Supreme Court of Colorado

2012 CO 24

274 P.3d 547

Daniel Shane HASSLER, Petitioner

v.ACCOUNT BROKERS OF LARIMER COUNTY, INC., Respondent.

No. 09SC519.

Supreme Court of Colorado, En Banc.

April 16, 2012.

Larry Dean Valente, Westminster, Colorado, Attorney for Petitioner.

Adam L. Plotkin, P.C., Adam L. Plotkin, Steven J. Wienczkowski, Denver, Colorado, Attorneys for Respondent.

Silverman/Borenstein, PLLC, Stephen S. Allen, First American Title Insurance Co., Bryan W. Thomas, Englewood, Colorado, Attorneys for Amici Curiae Colorado Creditors Bar Association and ACA International.Chief Justice BENDER delivered the Opinion of the Court.

I. Introduction

¶ 1 In this appeal, we review the order of the Jefferson County District Court upholding the county court's determination that the six-year statute of limitations contained in section 13–80–103.5(1)(a), C.R.S. (2011), did not bar respondent Account Brokers of Larimer County, Inc.'s claim against petitioner Daniel Shane Hassler. Account Brokers v. Hassler, No. 2009CV444 (Jefferson Cnty. Dist. Court May 19, 2009).

¶ 2 Hassler financed the purchase of a vehicle by entering into a security agreement with Account Brokers' predecessor-in-interest, Norlarco Credit Union, in which the vehicle served as collateral. The security agreement provided that the balance of the loan plus the attendant interest would be repaid in monthly installments. When Hassler later defaulted on his loan, Norlarco first repossessed the vehicle and then later sold it at auction. Norlarco applied the proceeds of the auction to the balance of the loan. The proceeds, however, were insufficient to cover the balance, and thus Hassler remained indebted for the deficiency. Norlarco eventually transferred this debt to Account Brokers, who initiated the present suit. Account Brokers sued Hassler to recover the deficiency less than six years after the vehicle was sold at auction but more than six years after Hassler defaulted on the loan and the vehicle was repossessed. Ruling in favor of Account Brokers, both the county court and district court on appeal determined that the statute of limitations did not bar Account Brokers' claim because the amount of the deficiency was not “liquidated or determinable” until Norlarco sold the vehicle at auction.

¶ 3 We reverse. The relevant legal inquiry under the statute of limitations is the date that the debt was made liquidated or determinable but rather the date that the debt accrued, which section 13–80–108, C.R.S. (2011), entitled “When a cause of action accrues,” defines as the date that the debt became due. § 13–80–108(4). We hold that under Colorado law and the express terms of the parties' security agreement, the present debt became due when it was accelerated following Norlarco's repossession of the vehicle and demand for full payment on the debt, which occurred more than six years before the initiation of the present suit. Accordingly, the action is barred by the statute of limitations.

¶ 4 Construing sections 13–80–103.5(1)(a) and 13–80–108(4), we conclude that the six-year statute of limitations for an action based upon the rights set forth in a security agreement begins to run on the date that the cause of action accrues, which is the date that the debt first becomes due. For a security agreement that is to be repaid in installments, the debt for each installment becomes due on the date that each installment is missed. Once an installment security agreement is validly accelerated, however, the entirety of the remaining balance becomes due and therefore the cause of action to collect the entire debt accrues.¹

¶ 5 In this case, Norlarco invoked the security agreement's optional acceleration clause by repossessing Hassler's vehicle on October 30, 2001, and sending him a letter shortly thereafter demanding that he repay the entirety of his debt. Because Account Brokers, Norlarco's successor-in-interest, filed its claim to collect the remainder of the debt on May 7, 2008, which was more than six years later, we hold that the present claim is barred by the statute of limitations. Thus, we remand the case to the district court to be returned to the county court for proceedings consistent with this opinion.

II. Facts and Procedural History

¶ 6 In October 2000, Hassler financed the purchase of a vehicle for $28,565.25 through Norlarco Credit Union. A security agreement, entitled “Open–End Voucher and Security Agreement,” set forth the terms of the parties' agreement. The security agreement obligated Hassler to pay monthly installments of $523.00 beginning on November 19, 2000, and gave Norlarco a security interest in the vehicle Hassler purchased.

¶ 7 The security agreement defined default as “break[ing] any promise you make under this agreement.” Paragraph 10 of the security agreement, entitled “What Happens if You Are in Default,” specified the consequences of default to borrowers in different states. For Colorado borrowers, the security agreement authorized Norlarco to accelerate the loan and to require immediate payment of the outstanding balance at its option after the expiration of any statutory right to cure the default, stating:

When you are in default and after expiration of any right you have under applicable state law to cure your default, we can require immediate payment of your outstanding balance under the Plan without giving you advance notice.

(Emphasis added.) Paragraph 10 of the security agreement also included a repossession provision. The repossession provision authorized Norlarco to take possession of the collateral, sell the collateral, and apply the proceeds of the sale to the amount owed on the loan. The borrower would then be liable for any remaining deficiency. In pertinent part, the repossession provision stated:

You agree [Norlarco] has the right to take possession of the property without judicial process if this can be done without breach of the peace.... After we have possession of the property, we can sell it and apply the money to any amounts you owe us.... If you have agreed to pay the advance, you will also have to pay any amount that remains unpaid after the sale money has been applied to the unpaid balance of the advance and to what you owe under the agreement.

¶ 8 Hassler made his last payment on the loan on April 21, 2001. He attempted to make payments in May 2001 and June 2001, but Norlarco reversed these credits in July 2001 because Hassler had insufficient funds to cover the payments. Norlarco repossessed the vehicle on October 30, 2001. At or around the time that Norlarco repossessed the vehicle, Norlarco sent Hassler an undated letter, entitled “NOTICE OF OUR INTENT TO SELL PROPERTY,” which gave notice that it had repossessed the vehicle and that it intended to sell the vehicle sometime after November 10, 2001. The letter stated that the amount obtained from the vehicle's sale would reduce the amount Hassler owed and that Hassler would be liable for any deficiency remaining after the sale. The letter also notified Hassler that he could get his vehicle back before it was sold by paying Norlarco the full amount owed on the loan. It stated, “You can get the property back at any time before we sell it by paying us the full amount you owe (not just the past due payments), including our expenses.” (Emphasis added.) The wording used in the letter was identical to the model language set forth in the “safe-harbor” provision found in section 4–9–614, C.R.S. (2011), which requires a creditor to provide a debtor with notice of the right to redeem the repossessed collateral before disposing of it.

¶ 9 After a failed attempt to sell the vehicle through a consignment agreement with a car dealership, Norlarco sold the vehicle at auction on June 4, 2002. The vehicle sold for $17,500, and those proceeds were applied to the outstanding balance, which resulted in a deficiency of $11,637.11. In a letter dated June 4, 2002, Norlarco notified Hassler that he owed a deficiency balance in the amount of $11,637.11 and that this amount was due to Norlarco within five days, unless Hassler contacted Norlarco and agreed to a new installment plan.

¶ 10 Hassler did not pay, and in March 2008, Norlarco assigned Hassler's debt to Account Brokers for collection.² Account Brokers filed suit against Hassler in Jefferson County Court on May 7, 2008, approximately five years and eleven months after the sale of the vehicle but more than six and a half years after Norlarco's repossession. As his only defense, Hassler asserted that the six-year statute of limitations set out in section 13–80–103.5(1)(a) barred Account Brokers' claim for recovery. Before the county court, the parties stipulated to all material facts, including the amount of the deficiency balance plus interest.³ Further, the parties stipulated that the sole issue before the county court was whether the statute of limitations barred Account Brokers' claim.

¶ 11 In its December 2008 order, the county court magistrate ruled that the statute of limitations did not bar Account Brokers' action because the cause of action did not accrue until June 5, 2002, the day after the vehicle was sold, which was less than six years before Account Brokers filed its complaint. The court reasoned that the debt, which in this case was the deficiency balance, was not liquidated or determinable until the vehicle was sold or, alternatively, that Hassler made his last payment on the debt when the vehicle was sold. The court found for Account Brokers in the amount of $15,000 plus costs.

¶ 12 On appeal, the district court affirmed the county court's judgment, also concluding that the cause of action accrued the day after the vehicle was sold because, until then, the debt was not liquidated or determinable:

Although the loan did have an acceleration clause that would have made the entire loan amount due on the date of default, Appellee Account Brokers' assignor Norlarco was acting in accordance with the [UCC], C.R.S. § 4–9–601 et....