915 N.W.2d 859
S.D.2018Background
- In Feb 2009 Allgier bought 1,500 shares from Work and executed a $230,000 promissory note payable in 54 monthly installments beginning May 15, 2009; the note contained an automatic acceleration clause making the whole debt due on any missed installment.
- Allgier made late/partial payments through Nov 2010, then missed the Dec 15, 2010 installment and made no further payments; parties treated Dec 15, 2010 as the default date.
- Work and Allgier negotiated possible alternative arrangements after default (through 2014–2015); they dispute whether a new agreement or novation was reached.
- Work sued on April 4, 2017 to recover unpaid installments under the note; Allgier moved for summary judgment asserting the six-year statute of limitations expired in Dec 2016 because acceleration occurred at default.
- Work argued the statute did not start to run because (a) he never elected to accelerate the debt and (b) post-default conduct/negotiations created factual issues of waiver/estoppel preventing Allgier from invoking the limitations defense.
- The circuit court granted summary judgment for Allgier; the Supreme Court reversed and remanded, finding genuine issues of material fact about waiver/estoppel precluded summary judgment.
Issues
| Issue | Plaintiff's Argument (Work) | Defendant's Argument (Allgier) | Held |
|---|---|---|---|
| When did cause of action accrue for statute-of-limitations purposes? | Accrual did not occur because Work never elected to accelerate; therefore statute did not bar recovery of installments within six years before suit. | Automatic acceleration clause self-executes at default, so entire debt matured in Dec 2010 and limitations expired Dec 2016. | Court: Automatic clause matures debt at default per Green/Frick, so limitations ordinarily began at default. |
| Effect of post-default negotiations on limitations defense | Post-default discussions, payments, and alleged new agreement create fact issues of waiver/novation/estoppel that can prevent Allgier from asserting limitations. | No binding waiver by Work that prevents Allgier from raising the statute; limitations is a personal defense but can be waived/estopped by defendant conduct. | Court: Whether Allgier is estopped/waived relying on limitations is a factual question; material facts remain — summary judgment inappropriate. |
| Whether Frick should be overruled or limited | Frick should be reconsidered in favor of authorities requiring creditor election to accelerate even with absolute language. | Frick remains controlling; parties chose plain self-executing language and courts should give it effect. | Court: Declines to overrule Frick; enforces plain-language automatic acceleration rule. |
| Who bears burden to show waiver/estoppel of limitations defense | Work: Creditor’s leniency and negotiations can bar defendant from invoking acceleration-based limitations. | Allgier: Statute of limitations runs automatically; plaintiff must show facts to create estoppel/waiver. | Court: Plaintiff presented specific facts creating a genuine issue on estoppel/waiver; remand for trial. |
Key Cases Cited
- Green v. Frick, 25 S.D. 342, 126 N.W. 579 (S.D. 1910) (holding automatic acceleration clause matures entire debt at default and starts the statute of limitations)
- H.C. Clark Implement Co., Inc. v. Wiedmer, 389 N.W.2d 816 (S.D. 1986) (contrast between optional and automatic acceleration; creditor must clearly elect when clause is optional)
- Kobbeman v. Oleson, 574 N.W.2d 633 (S.D. 1998) (statute of limitations is ordinarily a personal defense but can be waived/estopped)
- Kroeger v. Farmer's Mut'l Ins. Co., 218 N.W. 17 (S.D. 1928) (defendant may be estopped from asserting the statute of limitations by conduct)