National Bank of Commerce Trust & Savings Ass'n v. Ham, s. S-97-1120
| Decision Date | 09 April 1999 |
| Docket Number | Nos. S-97-1120,S-97-1121,s. S-97-1120 |
| Citation | 592 N.W.2d 477,256 Neb. 679 |
| Parties | NATIONAL BANK OF COMMERCE TRUST & SAVINGS ASSOCIATION, Appellee, v. Richard L. HAM, Appellant, and Sandra S. Ham, Appellee. National Bank of Commerce Trust & Savings Association, Appellee, v. Richard L. Ham, Appellant. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. Judgments: Appeal and Error. When reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling.
2. Contracts: Acceleration Clauses: Limitations of Actions. In the absence of a contractual provision allowing acceleration, where an obligation is payable by installments, the statute of limitations runs against each installment individually from the time it becomes due.
3. Contracts: Acceleration Clauses: Limitations of Actions: Debtors and Creditors. Where a contract contains an option to accelerate, the statute of limitations for an action on the whole indebtedness due begins to run from the time the creditor takes positive action indicating that the creditor has elected to exercise the option.
4. Bankruptcy: Limitations of Actions. The pendency of bankruptcy proceedings does not have the effect of prolonging a state statute of limitations for an equivalent length of time after the bankruptcy is dismissed.
5. Bankruptcy: Limitations of Actions. Title 11 U.S.C. § 108(c) (1994) extends a statute of limitations for 30 days after an automatic stay expires by operation of law or is lifted by an order of a bankruptcy court.
6. Bankruptcy: Limitations of Actions. Apart from extending a statute of limitations for 30 days after an automatic stay expires by operation of law or is lifted by order of a bankruptcy court, 11 U.S.C. § 108(c)(2) (1994) by itself does not provide for the tolling of any externally imposed time bars; rather, the language of § 108 merely incorporates the suspension of deadlines that are expressly provided in other federal or state statutes.
Robert B. Creager, of Anderson, Creager & Wittstruck, P.C., Lincoln, for appellant.
Stanley H. Foster, Lincoln, for appellee National Bank of Commerce.
Before: HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, McCORMACK, and MILLER-LERMAN, JJ.
These appeals present an issue of first impression as to whether the applicable statute of limitations for a breach of contract claim is tolled during the period that the plaintiff is subject to an automatic stay by the U.S. Bankruptcy Court.
When reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling. Wood v. McGrath, North, 256 Neb. 109, 589 N.W.2d 103 (1999).
On July 5, 1989, Richard L. Ham entered into a personal money reserve plan (PMRP) On July 26, 1989, Richard executed and delivered to National a security agreement and a level payment note in the total sum of $24,003. He failed to pay the installment due on March 17, 1990, and all subsequent installments. National accelerated the balance due and exercised its right to repossess the collateral set forth in the security agreement. National sold the collateral, and on August 29, notified Richard of an alleged deficiency balance owed, which Richard has not paid.
agreement with National Bank of Commerce Trust & Savings Association (National). Under the agreement, Richard was to repay in monthly installments money lent to him. Richard borrowed $1,000 under the PMRP agreement and made several payments. However, he failed to make payments in January, March, and May 1990 and thereafter. On approximately August 15, National prepared and delivered to Richard a letter informing him that National was exercising its option to demand immediate payment in the full amount of $808.08. The letter demanded payment by August 27. Richard has not paid the balance due under the PMRP agreement.
On September 26, 1989, Richard and Sandra S. Ham executed and delivered a promissory note in the amount of $55,544.79 to National. This note was due and payable on November 30. Richard and Sandra defaulted on this note.
On November 5, 1990, Richard filed a petition in the U.S. Bankruptcy Court for the District of Nebraska. Pursuant to 11 U.S.C. § 362 (1988 & Supp. V 1993), National was subject to an automatic stay enjoining it from either commencing or continuing any lawsuit in order to enforce its rights. The stay remained in effect until the bankruptcy petition was dismissed on February 13, 1992.
On February 22, 1994, Richard and Sandra filed a second petition in the bankruptcy court, and National was again subject to an automatic stay until the bankruptcy petition was dismissed on December 28. The combined period for which National was subject to the automatic stays by the bankruptcy court amounted to 774 days.
On July 14, 1995, National sued Richard to recover amounts due under the PMRP agreement and the level payment note. On the same date, National sued Richard and Sandra to recover on the September 26, 1989, promissory note. In response, Richard and Sandra asserted the affirmative defense of the statute of limitations.
On September 16, 1997, National obtained a summary judgment against Richard and Sandra in its action on the promissory note. National also obtained a summary judgment regarding the PMRP agreement and a partial summary judgment on the level payment note. The district court concluded that the applicable statute of limitations for the actions against Richard and Sandra was tolled during the 774-day pendency of the bankruptcy stays. Richard appeals from the summary judgment orders regarding the PMRP agreement and the promissory note.
In both cases, which have been consolidated on appeal, Richard asserts that the district court erred in (1) finding that the time in which National had to commence suit was tolled while he was under the protection of the federal Bankruptcy Code, (2) finding that there were no issues of material fact in dispute as to whether National's claim was time barred, and (3) granting summary judgment.
The issue presented is whether the district court erred in concluding as a matter of law that National's claims were not barred by the statute of limitations. When reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling. Wood v. McGrath, North, 256 Neb. 109, 589 N.W.2d 103 (1999).
The statute of limitations for an action on a written contract is 5 years. Neb.Rev.Stat. § 25-205 (Reissue 1995). We first address the July 5, 1989, PMRP agreement. In the absence of a contractual provision allowing acceleration, where an obligation is payable by installments, the statute of limitations National's PMRP agreement with Richard provided that if any payment was not made when due, all sums due and owing to National "shall immediately become due and payable, without demand or notice." Under such a "self-operative" acceleration clause, authorities are split as to whether the statute of limitations begins to run automatically upon default or whether it begins to run upon affirmative election by the creditor to accelerate. See 51 Am.Jur.2d Limitation of Actions § 133 (1970). Here, if the statute of limitations began to run automatically upon default, then the statute began to run in January 1990, when Richard first missed a monthly payment. If this is the case, then National failed to bring its action within 5 years. On the other hand, if affirmative action is necessary to accelerate the whole indebtedness due, then the statute of limitations did not begin to run until August, when National prepared and delivered a written demand informing Richard it was exercising its right to demand immediate payment of the whole indebtedness due. If the latter is true, National's action was brought within the 5-year limitations period.
runs against each installment individually from the time it becomes due. See, Bauers v. City of Lincoln, 245 Neb. 632, 514 N.W.2d 625 (1994); Becker v. Lammers, 193 Neb. 839, 229 N.W.2d 557 (1975). Where a contract contains an option to accelerate, the statute of limitations for an action on the whole indebtedness due begins to run from the time the creditor takes positive action indicating that he has elected to exercise the option. See, State Security Savings Co. v. Pelster, 207 Neb. 158, 296 N.W.2d 702 (1980); Hatch v. Ely, 131 Neb. 882, 270 N.W. 480 (1936); Santini v. Fritkin, 240 Md. 542, 214 A.2d 578 (1965).
In Moorehead v. Hungerford, 110 Neb. 315, 193 N.W. 706 (1923), we stated that a provision in a mortgage given to secure a promissory note stating that the whole debt would immediately become due if any interest payment was not made was permissive only and not self-operative. See, also, McCarthy v. Benedict, 89 Neb. 293, 131 N.W. 598 (1911); Lowenstein v. Phelan, 17 Neb. 429, 22 N.W. 561 (1885).
Courts in other jurisdictions have opined that the better-reasoned authorities hold that an acceleration provision, although absolute in its terms, is not self-operative. See, e.g., Fogle v. King, 132 W.Va. 224, 51 S.E.2d 776 (1948). The rationale is that the debtor, by defaulting, should not be permitted to force the maturation of an indebtedness which was intended as an investment for a given period. In Grozier v. Post Publishing Co., 342 Mass. 97, 172 N.E.2d 266 (1961), the court stated that to hold such an acceleration provision to be self-operative would prohibit the creditor from exercising leniency toward the debtor.
We therefore conclude that National's cause of action for the unpaid balance of the PMRP agreement accrued when National gave written notice of its election to accelerate the unpaid balance due. Thus, National's action on the PMRP agreement was brought within the 5-year statute of limitations, and we affirm the district court's order granting summary judgment as to the PMRP agreement.
Richard defaulted on...
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