Indiana Business Law Blog
A couple of years ago the Indiana Business Law Blog posted an article about two different Indiana statutes of limitations for breach of contract:
- A six-year statute of limitations at Ind. Code § 34‑11‑2‑9, which applies to “promissory notes, bills of exchange, or other written contracts for the payment of money”
- A ten-year statute of limitations at Ind. Code § 34‑11‑2‑11, which applies to “contracts in writing other than those for the payment of money”
More specifically, we considered whether a contract that for the payment of money that also includes other types of obligations is subject to the six-year or the ten-year statute of limitations. An old Indiana Supreme Court case, Yarlott v. Brown, 192 Ind. 648, 138 N.E. 17 (Ind. 1923), held that a mortgage which also included the obligation to repay the underlying loan was subject to the statute of limitations for contracts “other than those for the payment of money” because, unlike notes and bills of exchange, a mortgage includes provisions in addition to an obligation to pay money. However, a more recent Indiana Court of Appeals case, Aigner v. Cass School Tp. of Porter County, 577 N.E.2d 983 (Ind. Ct. App. 1991) held that a teacher’s contract was subject to the six-year statute of limitations, even though a teacher’s contract also contains provisions other than an obligation to pay money.
Since we posted that article, there have been at least two other cases addressing the same issue.
Folkening v. Van Petten
In Folkening v. Van Petten, 22 N.E.3d 818 (Ind. Ct. App. 2014), the court was presented the question of which statute of limitation applied to a settlement agreement that required Folkening to pay Van Petter $175,000 in exchange for stock in a company and to either satisfy the mortgage on a certain piece of real estate or to convey the property to Van Petten. Folkening failed to pay the $175,000 and neither satisfied the mortgage nor conveyed the property. The court held that the settlement agreement was a contract other than for the payment of money and, accordingly, that the applicable statute of limitations was ten years, not six. The court held that,
[Contracts subject to the six-year statute of limitations] are strictly agreements to pay money to another party; they are not agreements to pay money in exchange for something else, such as goods, services, real property, or stock shares such as those at issue here.
Even so, one might argue that Van Petten’s two claims were subject to different statutes of limitations, that the breach of the obligation to pay $175,000 was subject to the six-year statute and the breach of the obligation to convey the property was subject to the ten-year. However, the Court of Appeals answered held that both claims were subject to the ten-year statute of limitations. In doing so, the court explained that the substance of the contract, not the nature of the claim, controls the selection of the applicable statute of limitations. Even so, one should not overlook the fact that Folkening was a 2:1 decision, with Judge Riley, who would have applied the six-year statute of limitations, dissenting.
Pecan Shoppe of Whitestown v. SJC, Inc.
Just last week, in Pecan Shoppe of Whitestown v. SJC, Inc., No. 06A05-1504-PL-177, 2016 Ind. App. Unpub. LEXIS 24 (Ct. App. Jan. 14, 2016) the court of appeals decided a case dealing with an asset purchase agreement for, among other things, certain real estate. The agreement contained a provision that required the buyer to make additional payments, above and beyond the original purchase price, if certain conditions were satisfied after the sale closed. The conditions were satisfied, but the buyer failed to make the additional payment, and the seller sued. The litigants were at odds regarding the date on which the statute of limitations began to run. Under the seller’s theory, the lawsuit was filed within the six-year statute of limitations, and under the buyer’s theory it was not. However, even under the buyer’s theory the lawsuit was filed within the ten-year statute of limitations. Apparently, however, the question of the applicable statute of limitation was not presented to the court of appeals because the court simply held that the lawsuit was barred because it was not filed within the six-year statute of limitations. The court did not even mention the possibility that the applicable statute of limitations might be ten years, not six.
So what is the answer?
So what is the correct statute of limitations for breach of a written contract to pay money that also includes other substantive provisions, such as service contracts and purchase agreements? Yarlott answers the question for mortgages, but what about other types of agreements? [1] We now have at least three relatively recent opinions from the Court of Appeals, Aigner, Folkening, and Pecan Shoppe, addressing breaches of contract that, as far as we can tell, are indistinguishable for the purpose of selecting the applicable statute of limitations. One of them – Folkening – applies the ten-year statute of limitations; the other two apply the six-year statute. However Pecan Shoppe can be disregarded for two reasons: First, the Court of Appeals did not actually decide the question, and, second, it is an unpublished decision that cannot be cited as precedent. At the moment, it appears to us that Folkening and Aigner cannot be reconciled and that only one of them can be correct. Which one? That remains to be seen.
MS
[1]There is at least one older Court of Appeals case, Lewis v. Davis, 114 Ind. App. 715, 55 N.E.2d 119 (1944), that is consistent with Yarlott, but, like Yarlott, it deals with a mortgage that contains an obligation to pay and sheds no new light on other types of contracts, such as purchase agreements and service contracts.