United States v. Cardinal, Civ. A. No. 76-240.

CourtUnited States District Courts. 2nd Circuit. District of Vermont
Citation452 F. Supp. 542
Docket NumberCiv. A. No. 76-240.
PartiesUNITED STATES of America, v. Romeo H. CARDINAL.
Decision Date23 June 1978

Jerome J. Niedermeier, Asst. U. S. Atty., Rutland, Vt., for Government.

Joel D. Cook, Vermont Legal Aid, Inc., Burlington, Vt., for defendant.

COFFRIN, District Judge.

The Government brings this action to recover on a promissory note executed by the defendant and one Joyce Cardinal, now deceased. Defendant filed original and amended answers with counterclaims and affirmative defenses, one of which alleged that the Government's action is time barred. The Government responded with a motion to dismiss and to strike portions of defendant's answer. On November 10, 1977 a hearing was held on plaintiff's motions at which both parties were represented by counsel. During the hearing it became evident that neither party was certain of the date of default on the note. Subsequently the court ordered the Government to determine the date of default and requested counsel to file a stipulation as to when any demand for payment of the promissory note was made, by whom and for what amount. This has been done.

After considering the memoranda and facts before the court, as well as the arguments of counsel, we hold that the Government's cause of action is not barred by 28 U.S.C. § 2415(a). Plaintiff's motions to dismiss counterclaims, for a more definite statement, and to strike affirmative defenses will be disposed of later.


On June 30, 1969 defendant and Joyce Cardinal executed and delivered a promissory note to Tilo Company, Inc. for improvements made on defendant's mobile home which apparently was located somewhere in Vermont. The note provided for repayment in monthly installments and contained an optional acceleration clause whereby "in case of failure of the undersigned to pay any installment on its due date, this note shall, at the option of the holder, become immediately due and payable for the unpaid balance thereof . . .." The note also contained a waiver of demand stating: "The makers and any endorsers severally waive demand, notice and protest . . .." The note was assigned to the City Savings Bank of Pittsfield, Massachusetts, on June 30, 1969. Defendant failed to pay the August 24, 1970 installment and apparently has paid nothing on the note since that time. The City Savings Bank wrote defendant on March 11, 1971, stating in toto:

The option to accelerate maturity of your note is exercised at this time, by reason of the fact that periodic payments have not been made in accordance with its terms. The entire balance of $3,090.24 is now due and payable.

On April 1, 1971 the note was assigned to the Federal Housing Authority (FHA) which filed this action on November 17, 1976. Thus, the action was brought within six years of when the option to accelerate the outstanding balance of the note was exercised and within six years of when the Government acquired the note, but not within six years of defendant's last payment.


Section 2415(a) of 28 U.S.C. provides that

every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues . . ..1

Thus the question before us is when the cause of action accrued. This is a federal question. Cf. Tessier v. United States, 269 F.2d 305 (1st Cir. 1959) (interpretation of statute of limitations for tort actions brought against the United States, 28 U.S.C. § 2401(b)). The defendant argues that the cause of action accrued when defendant defaulted on the note; the Government argues that it accrued when the Government acquired the note. We find both arguments to be inapposite and hold that the cause of action on the balance of the note accrued on the date demand was made by virtue of the acceleration clause for payment in full. First we will discuss the Government's argument which appears to be a question of first impression in this and other federal districts.

The Government contends that because it had no legal interest in the note prior to the date of assignment, and because it must have acquired a cause of action before 28 U.S.C. § 2415 is applicable, time does not begin to run under that section until the date of assignment. Obviously the Government's conclusion is not compelled by the propositions it advances. Even assuming both propositions to be true,2 § 2415 by its own terms could, and we believe does, give the Government no more time than remains of six years from the date when the holder of the note first could have sued on the note.

We have been unable to find any cases interpreting the pertinent language in § 2415, and the Government has pointed to none construing "accrues" in that or any other statute. Similarly 1A Moore's Federal Practice ¶ 0.321, at 3710 (2d ed. 1977), discussing suits brought by and against the federal government, does not expand on the term "accrues."

Looking at the legislative history of § 2415, we find the following information. Public Law 89-505, 28 U.S.C. § 2415, became law on July 18, 1966. According to the accompanying Senate Report, the purpose of the bill was to establish a statute of limitations which would apply to contract and tort actions brought by the United States. S.Rep.No.1328, 89th Cong., 2d Sess., reprinted in 1966 U.S.Code Cong. & Admin.News, p. 2502 (hereinafter News). As the letter from the Attorney General of the United States appended to the Senate Report explains, the statute was proposed because prior to 1966 the general rule was that there was no limitation on when the Government could bring an action unless there was a statute specifically limiting the time. Although there were a few limiting statutes, there were "no time bars against the great majority of Government claims." News at 2513.

There is no place in the Senate Report which specifically states that the six-year period begins to run from the time a cause of action on a contract could be sued upon by some entity, whether or not that entity is the Government. However, the Report iterates and reiterates that the purpose of the law is to increase fairness to private litigants dealing with the Government.3 As the Supreme Court said in Crown Coat Front Co. v. United States, 386 U.S. 503, 521, 87 S.Ct. 1177, 1187, 18 L.Ed.2d 256 (1967), the statute is "aimed at equalizing the litigation opportunities between the Government and private parties." See also id. at 521 n. 114, 87 S.Ct. 1177.

Admittedly, the focus on fairness does not preclude the Government's interpretation of § 2415, for certainly if the Government must bring an action within six years from the time when it acquires the right to sue, the private defendant is on a more equal footing with the Government than when the Government was allowed to bring the action at any time.4 Nevertheless, there are additional factors which persuade us that the Government's interpretation is incorrect.

First, as set out in the Senate Report, the Attorney General outlined six reasons for adopting the statute of limitations for actions brought by the Government: (1) As mentioned above, to "make the position of the Government more nearly equal to that of private litigants"; (2) to "encourage, trials at a sufficiently early time so that necessary witnesses and documents are available and memories are still fresh"; (3) "to reduce the costs of keeping records and detecting and collecting on Government claims"; (4) to "encourage . . . the agencies to refer their claims promptly to the Department of Justice for collection"; (5) to "avoid . . . judicial hostility to old claims asserted by the Government"; and (6) to "minimize . . . collection problems arising with respect to debtors who have died, disappeared, or gone bankrupt." News at 2513. Each of the six purposes is furthered to a much greater extent if the Government is required to bring its claim within six years of when the claim first could be sued upon rather than within six years of when the Government acquired the claim.

There are additional reasons stated in the legislative history which we believe undermine the Government's argument. These are found in the following excerpt of the "General Discussion" in the Senate Report.

The limitation periods fixed in the bill are similar to those fixed by Federal and State law for the same types of actions e. g. contract, tort, tax. While State laws, of course, show a variety of periods, it is possible to generalize and state that many jurisdictions provide a 6-year statute of limitation as to contract action and the limitations for tort proceedings in most cases are from 2 to 3 years. It is readily apparent that the provisions of this bill were drafted in recognition of these facts. This committee further notes that it is significant that the statute of limitations applicable to actions in the Court of Claims is 6 years and similarly the period for barring civil actions against the United States governed by section 2401(a) of title 28 of the United States Code is also fixed at 6 years.

News at 2508. We find that none of the analogies to be drawn from state statutes of limitations, from § 2501 for the Court of Claims or from § 2401(a) supports the Government's argument. First, as far as this court knows, no state provides for the statute of limitations on contract claims to run from the time the plaintiff acquires the claim. According to American Jurisprudence 2d, "the true test in determining when a cause of action arises or accrues is to establish the time when the plaintiff could have first maintained the action to a successful conclusion." 51 Am.Jur.2d Limitations of Actions § 107, at 679 (1970) (emphasis added; footnote omitted); see generally id. § 126 (limitations on contract actions).

Second, the statute of limitations in 28 U.S.C. § 2501 provides in pertinent part: ...

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