Hemar Ins. Corp. of America v. Ryerson, ED 80903.

• Citation: 108 S.W.3d 90
• Decision Date: 03 June 2003
• Docket Number: No. ED 80903.,ED 80903.
• Parties: HEMAR INSURANCE CORPORATION OF AMERICA, Plaintiff/Appellant, v. Joy B. RYERSON, Defendant/Respondent.
• Court: Court of Appeal of Missouri (US)

108 S.W.3d 90

HEMAR INSURANCE CORPORATION OF AMERICA, Plaintiff/Appellant, v. Joy B. RYERSON, Defendant/Respondent.

No. ED 80903.

Missouri Court of Appeals, Eastern District, Division Three.

June 3, 2003.

Cynthia Sciuto, Jovita M. Walker, St. Louis, MO, for appellant.

Charles M.M. Shepard, Clayton, MO, for respondent.

LAWRENCE G. CRAHAN, Judge.

Hemar Insurance Corporation of America ("Assignee") appeals the judgment dismissing its petition to enforce a promissory note on the ground that the statute of limitations had run. We reverse and remand.

On review of the trial court's judgment dismissing a petition, all facts alleged in the petition are deemed true and the plaintiff is given the benefit of every reasonable intendment. Magee v. Blue Ridge Professional Building Co. Inc., 821 S.W.2d 839, 842 (Mo. banc 1991). When an affirmative defense such as the statute of limitations is asserted in support of a motion to dismiss, the petition may not be dismissed unless it clearly establishes on its face and without exception that it is barred. Sheehan v. Sheehan, 901 S.W.2d 57, 59 (Mo. banc 1995).

The petition filed on August 14, 2001, alleges that Assignee is the owner and holder of a promissory note executed and delivered on April 25, 1990, by Patricia Ryerson as borrower and Defendant Joy B. Ryerson ("Defendant") as cosigner in the original principal sum of five thousand dollars ($5,000.00), with an annual percentage rate of prime plus 3½%. A copy of the promissory note is attached to the petition and incorporated therein by reference. Defendant's cosigning the promissory note was a precondition to Norwest Bank of South Dakota ("Lender") agreeing to make the loan. Assignee insured the loan.

Under the terms of the promissory note, in the event Assignee was required to repay the loan to Lender, Assignee would become the owner and holder of the promissory note with all of the rights of Lender to enforce the note against Defendant. Both Defendant and Patricia Ryerson failed and refused to pay the promissory note. Due to Defendant's default, Assignee was required to repay the loan. On March 5, 1996, Lender executed an assignment of the promissory note to Assignee, a copy of which is attached to the petition and incorporated by reference.

By letter dated July 23, 2001, Assignee demanded payment from Defendant of all amounts due and owing under the note. A copy of the demand letter is attached to the petition and incorporated by reference. Notwithstanding the demand, Defendant has failed to pay Assignee the amounts due under the promissory note. As of August 10, 2001, the total indebtedness due on the promissory note was $10,011.41.

The note itself provides that it is a "Bar Study Loan Promissory Note." It provides for an "Interim Period" and a "Repayment Period." No payments are required during the "Interim Period" but interest accrues during the "Interim Period" and is added to principal. The "Interim Period" began when the loan was disbursed and was to end on the earlier of nine months after Patricia Ryerson graduated from law school at Hamline University or nine months after she ceased to be enrolled in at least half time study at the law school. The "Repayment Period" began on the day after the "Interim Period" and lasted 180 months. Payment was to be made each month. The note contains an acceleration clause in the event any monthly payment was not paid when due. The note further provides that it is governed by the laws of South Dakota.

Defendant filed a motion to dismiss on the ground, inter alia, that the claim was barred by the statute of limitations of South Dakota. In South Dakota, the statute of limitations on an "action upon a contract, obligation or liability" is six years. South Dakota Codified Laws section 15-2-3 (2001). Defendant pointed out that, according to the promissory note, payments on the note were to begin nine months after the principal borrower, Patricia Ryerson, graduated from law school at Hamline University. Defendant alleged that Patricia Ryerson did graduate on May 19, 1990, and payments thus became due at the end of the quarter nine months after graduation-i.e. the end of March 1991. Defendant claimed that payment was not made in April, 1991. Because suit was filed on August 14, 2001, more than ten years after what Defendant claimed was the first default, the action was therefore barred by the statute of limitations.

In its opposition to Defendant's motion, Assignee claimed the cause of action could not have accrued until it determined the borrower and Defendant were in default because, as owner of the note it had the right to' determine when default occurs. The note specifically authorizes it to grant an extension, waiver of default, renewal or release of the loan at its discretion. According to Assignee, at the very least the cause of action could not have accrued until April 14, 1996, the date it became the owner of the promissory note.¹ Assignee further asserted that Patricia Ryerson made sporadic payments to Assignee from April of 1996 through May of 1999. The significance of these sporadic payments is not explained. In any event, if, as Assignee alleged, the cause of action accrued when it became the owner of the promissory note, suit was filed well within the six-year statute of limitations asserted by Defendants.

When the motion was heard and submitted, the trial court ordered the parties to file a supplemental memorandum or letter on the issue of South Dakota Law on statutes of limitation. In its supplemental memorandum, Assignee took issue with Defendant's claim that she was in default when the obligation to begin making payments occurred in 1991, asserting that Patricia Ryerson actually made the required payments on the promissory note until she defaulted in 1996. According to Assignee, when Patricia Ryerson defaulted, Assignee was required to repay the loan to Lender and it became the owner of the note by reason of Lender's assignment. According to Assignee, Patricia Ryerson made the required payments on the promissory note from 1991 to 1996 when Lender held her and Defendant in default. Assignee was required to pay the promissory note in full as insurer and became the owner of the promissory note by assignment. Patricia Ryerson made payments to Assignee from April of 1996 to May of 1999. Assignee then declared a default and exercised its right to accelerate payments in May of 1999. Alternatively, if the statute of limitations began to run when the original lender declared the default, then cause of action accrued in 1996. Either way, this action filed in August 2001 was timely filed.

After reviewing the supplemental submissions by the parties, the trial court issued its order and judgment. The trial court held that Assignee had stated a cause of action, had demonstrated its interest in the promissory note and had the right to bring suit on the note in Missouri. As for the statute of limitations defense, the trial court held:

A cause of action accrues against the maker of a demand instrument on the date of the instrument or the date of the instrument's issue. Centerre Bank of Kansas City, N.A. v. Distributors, Inc. 705 S.W.2d 42, 47 (Mo.App.1985). Accordingly, the cause of action in this matter accrued on either April 2, 1990 (the date in which the borrower signed the note), April 6, 1990 (the date in which the co-signer signed the note) or February 19, 1991 (the date in which the co-signer signed the note) or February 19, 1991 (the date in which the first payment was due.) Missouri borrows the statute of limitations of the state where the cause of action "originates" or "accrues". Finnegan v. Squire Publishers, Inc., 765 S.W.2d 703, 704-05 (MoApp.1989). Defendant suggests that she signed the note in the state of South Dakota. Plaintiff maintains that the only address mentioned on the note is in Missouri (purportedly the address of the co-signer).

In South Dakota, the statute of limitations on an "action upon a contract, obligation or liability ..." is six years (See S.D.C.L. 15-2-13). In Missouri, the statute of limitations on "rain action upon any writing, ... for the payment of money ..." is ten years. (See R.S.Mo. Section 516.110(1)).

At the very least, giving Plaintiff the benefit of the doubt in all respects, it could only file a claim prior to February 19, 2001. Plaintiff did not file such its petition until August 14, 2001.

(paragraph numbers omitted). Based on these findings, the trial court granted Defendant's motion to dismiss. This appeal followed.

In its sole point of appeal, Assignee claims the trial court erred in granting Defendant's motion to dismiss on the ground that the statute of limitations had run because it misapplied the applicable...