858 N.W.2d 258
Neb. Ct. App.2014Background
- Village of Filley (Filley) loaned $236,440 to HeatSource under a promissory note payable in 120 monthly installments; Mark, Kathy, and Thomas Setzer signed guaranties.
- Note contained acceleration clauses for (1) transfer of ownership and (2) default in payments; Thomas transferred his HeatSource interest in November 2003.
- HeatSource defaulted; last payment received June 8, 2009. Filley never earlier gave notice it was accelerating the note.
- Filley sued the Setzers on November 18, 2011, demanding the balance and asserting it had elected to accelerate. District court granted partial summary judgment that the claim was not time-barred and that Filley had mitigated damages and exhausted administrative remedies.
- Parties submitted a joint stipulation of payment/draw history; court entered judgment for $116,469.67 against the guarantors, who appealed on statute-of-limitations and mitigation/exhaustion grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Filley’s claim was barred by the 5-year statute of limitations | Filley: statute began when it took positive action to accelerate (filing suit in 2011), so claim is timely | Setzers: acceleration clause for ownership transfer was self-operative in 2003, so claim expired in 2008 | Court: Acceleration clause not self-operative; statute began when creditor took positive action (2011); claim timely |
| Whether installments outside 5-year period were time-barred individually | Filley: note is installment contract with optional acceleration, so statute runs from creditor’s acceleration, not each installment | Setzers: each monthly installment is separate; older installments barred | Court: Where optional acceleration exists, statute runs from creditor’s election to accelerate; installments not individually time-barred |
| Whether Filley exhausted administrative remedies with the Department before suing | Filley: produced Department custodian affidavit saying remedies exhausted / Department had no objection to suit | Setzers: argued Filley failed to pursue Department procedures to retain program income | Court: Filley submitted competent affidavits; Setzers produced no competent contrary evidence; exhaustion found |
| Whether Filley mitigated damages (could have retained program income) | Filley: provided affidavit evidence it took required steps; no Department-required mitigation steps existed | Setzers: alleged on information/belief that Filley failed to obtain reuse approval and thus returned program income | Court: Setzers’ affidavits lacked personal knowledge and were insufficient; court found mitigation adequate |
Key Cases Cited
- National Bank of Commerce v. Ham, 256 Neb. 679 (1999) (an optional acceleration clause is not self-operative; statute of limitations runs from creditor’s positive election to accelerate)
- City of Lincoln v. Hershberger, 272 Neb. 839 (2007) (Ham principles apply equally to guarantors; statute of limitations for whole indebtedness begins when creditor elects to accelerate)
- Production Credit Assn. of the Midlands v. Schmer, 233 Neb. 749 (1989) (statute of limitations for guaranty begins when guarantor’s liability arises upon debtor default)
- Harris v. O’Connor, 287 Neb. 182 (2014) (standard for summary judgment review)