Navy Federal Credit Union v. Jones

• Decision Date: 26 December 1996
• Docket Number: No. 2,CA-CV,2
• Citation: 187 Ariz. 493,930 P.2d 1007
• Parties: , 233 Ariz. Adv. Rep. 47 NAVY FEDERAL CREDIT UNION, a Federal Credit Union, Plaintiff/Appellee, v. Susan J. JONES, formerly known as Susan J. McGlothen, Defendant/Appellant. 96-0145.
• Court: Arizona Court of Appeals

Page 1007

930 P.2d 1007

187 Ariz. 493, 233 Ariz. Adv. Rep. 47

NAVY FEDERAL CREDIT UNION, a Federal Credit Union, Plaintiff/Appellee, v. Susan J. JONES, formerly known as Susan J. McGlothen, Defendant/Appellant.

No. 2 CA-CV 96-0145.

Court of Appeals of Arizona,

Division 2, Department B.

Dec. 26, 1996.

[187 Ariz. 494] Robert Suzenski, P.C. by Robert Suzenski, Phoenix, for Plaintiff/Appellee.

McCarville, Cooper & Vasquez, P.C. by Joseph R. Georgini, Casa Grande, for Defendant/Appellant.

OPINION

DRUKE, Chief Judge.

In this appeal from summary judgment we must decide when the six-year statute of limitations in A.R.S. § 12-548 begins to run on an unmatured installment obligation that contains an optional acceleration clause. We hold that the six-year period commences on the due date of each matured but unpaid installment and, as to unmatured future installments, the period commences on the date the creditor exercises the optional acceleration clause. We state the facts in the light most favorable to appellant Susan Jones, the party against whom the trial court granted summary judgment. Hill-Shafer Partnership v. Chilson Family Trust, 165 Ariz. 469, 799 P.2d 810 (1990).

In June 1981, Jones and her husband executed a promissory note in the principal amount of $13,800, payable to appellee Navy Federal Credit Union (NFCU) over 15 years in equal monthly installments of $203.54. The note contains an acceleration clause that provides in pertinent part: "[I]f I fail to make payments as promised, the balance of this note plus interest shall become immediately payable without further notice to me, at the option of Navy Federal Credit Union." In May 1983, Jones and her husband divorced and, under the terms of their marital settlement agreement, he agreed to pay the note. In January 1989, she learned that he was terminally ill and in arrears on the note; two months later he died.

In February 1994, NFCU sent Jones written demand for full payment of the note and, when payment was not made, NFCU filed this cause of action on June 15, 1994. Jones answered, admitting that she had executed the note and that it was in default, but asserting the affirmative defenses of laches and the six-year statute of limitations in § 12-548. Based on Jones's admissions in the answer, NFCU moved for summary judgment. Jones filed a combined opposition and cross-motion for summary judgment, claiming that § 12-548 barred NFCU's action. Without comment, the trial court granted NFCU's motion and denied Jones's cross-motion. Jones moved for reconsideration, which the court denied, and this appeal followed.

Jones contends that § 12-548 bars NFCU's action because it was not filed within six years after it accrued, which she claims occurred when her now-deceased husband defaulted on the installment payments. NFCU counters that its action did not accrue until it exercised the optional acceleration clause by demanding full payment of the note. Both parties are partly correct.

Jones is partly correct because, as we observed in Cheatham v. Sahuaro Collection Serv., Inc., 118 Ariz. 452, 454, 577 P.2d 738, 740 (App.1978), "[a] cause of action accrues whenever one person may sue another." Although Cheatham involved an installment note, it did not address the precise issue raised here of when a cause of action accrues on a defaulted installment of an unmatured note. ¹ Most courts that have addressed the issue rule that the action accrues and the statute of limitations runs against each installment from the time it becomes due. See United States v. Dos Cabezas Corp., 995 F.2d 1486, 1490 (9th Cir.1993) (statute applies to each installment separately and does not begin to run until installment due); Central Home Trust Co. of Elizabeth v. Lippincott, 392 So.2d 931, 933 (Fla.App.1980) (action accrues day after each installment due); Honn v. National Computer Systems, Inc., 311 N.W.2d 1, 2 (Minn.1981) (separate action arises and limitation begins when each installment due); General Theraphysical, Inc. v. Dupuis, 118 N.H. 277, 385 A.2d 227, 228 (1978) (statute runs against each installment as it becomes due); Farmers & Merchants Bank v. Templeton, 646 S.W.2d 920, 923 (Tenn.App.1982) (action accrues and statute runs from default on each installment). Thus, Jones is partially correct in contending that each time her husband defaulted on an installment payment, NFCU could have sued for the amount of that installment any time within the six-year statute of limitations.

NFCU is also partly correct, however, because it exercised the optional acceleration clause by demanding full payment of the note before all installments became due. When this occurs, most jurisdictions rule that the statute of limitations runs as to future installments from the date the creditor exercises the acceleration clause. See Dos Cabezas Corp. (action for future installments accrues when their due date accelerated); Central Home Trust (statute commences on installments not yet due when holder exercises right to accelerate); Wall v. Citizens & Southern Bank of Houston County, 247 Ga. 216, 274 S.E.2d 486, 487 (1981) (statute runs from date of acceleration rather than date of last installment); Temple...