818 S.E.2d 779
Va.2018Background
- In 2009 Kerns took a mortgage loan secured by a promissory note and deed of trust containing a 30-day pre-acceleration cure notice provision. The note was later assigned to Wells Fargo.
- Wells Fargo sent a pre-acceleration notice dated June 20, 2010; Kerns alleges the letter was mailed June 21 (based on USPS tracking), making it a 29-day notice and thus a breach.
- Wells Fargo allegedly accelerated the loan before foreclosing; the trustee conducted a foreclosure sale on August 23, 2011, and Kerns was later evicted after unlawful detainer proceedings.
- Kerns filed a breach-of-contract suit on August 23, 2016—five years after the foreclosure sale—claiming breach based on the defective pre-acceleration notice and resulting wrongful acceleration.
- The circuit court sustained Wells Fargo’s plea in bar, holding Kerns’s breach claims were barred by the five-year statute of limitations because the claims accrued when Wells Fargo accelerated the debt.
- The Supreme Court of Virginia affirmed, holding accrual occurred at acceleration and Kerns’s suit was time-barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did breach-of-contract claims accrue for statute-of-limitations purposes? | Accrual should be measured at foreclosure (or when damages realized), so suit filed five years after foreclosure was timely. | Accrual occurred when Wells Fargo actually accelerated the debt; statute began to run at acceleration. | Accrual occurred at acceleration; Kerns’s suit was filed after the five-year period and is time-barred. |
| Does a defective pre-acceleration notice (29 days vs 30 days) create a viable breach that triggers accrual? | The defective notice breached the contract and therefore was the actionable wrong. | Even if defective, acceleration (which occurred) is the operative act that caused legally cognizable harm and starts accrual. | The court treated acceleration as the breach event that produced a right of action; accrual began at acceleration. |
| Must plaintiff allege he could have cured the default (causation) to state a breach? | Kerns argued the notice defect itself breached the contract; causation not pleaded. | Wells Fargo argued Kerns failed to plead causation (i.e., he did not allege he could have cured). | Court did not reach causation because it concluded claims were time-barred. |
| Can a wrongful acceleration (one undertaken without proper notice) nonetheless start the statute-of-limitations clock? | A wrongful acceleration is not a legally effective acceleration and so should not trigger accrual. | Acceleration, even if later invalidated, unilaterally changed legal relations and creates a right of action when taken. | Court rejected Kerns’s inversion; wrongful acceleration can still trigger accrual and start the limitations period. |
Key Cases Cited
- Cherrie v. Virginia Health Servs., 292 Va. 309 (Va. 2016) (distinguishes right of action vs. cause of action; definitions and significance for accrual)
- Van Dam v. Gay, 280 Va. 457 (Va. 2010) (accrual occurs when injury sustained; difficulty of ascertaining damages does not delay accrual)
- Caudill v. Wise Rambler, Inc., 210 Va. 11 (Va. 1969) (a right of action cannot accrue until there is a cause of action)
- Hensel Phelps Constr. Co. v. Thompson Masonry Contractor, Inc., 292 Va. 695 (Va. 2016) (reiterates that contract claims accrue at the time of breach rather than discovery)