CONSIDERED ON BRIEFS ON MAY 21, 2018
FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE ROBERT A.
MICHAEL S. BEARDSLEY of Beardsley, Jensen & Lee, Prof.
LLC Rapid City, South Dakota Attorneys for plaintiff and
M. SMILEY of Gunderson, Palmer, Nelson & Ashmore, LLP
Rapid City, South Dakota Attorneys for defendant and
SEVERSON, RETIRED JUSTICE.
In this breach of contract case by a creditor to recover
unpaid installments under a promissory note, the debtor moved
for summary judgment. The debtor relied on an acceleration
provision in the note and asserted that the statute of
limitations had expired on the creditor's claim six years
after the debtor defaulted. The creditor resisted summary
judgment, asserting that a jury must determine whether the
debtor's conduct following default warranted a different
limitation period. After a hearing, the circuit court granted
the debtor summary judgment. We reverse and remand.
In February 2009, Cody Work entered into a stock purchase
agreement for the sale of 1, 500 shares of Premier Home
Mortgage, Inc. stock to Russell Allgier for $375, 000. Under
the parties' agreement, Allgier agreed to: (1) assume
Work's $40, 000 loan obligation to the company; (2) pay
Work $75, 000 at closing, $15, 000 on March 15, 2009, and
$15, 000 on April 1, 2009; and (3) pay the remaining balance
($230, 000) plus interest in 54 monthly installments. Allgier
executed a promissory note in favor of Work for $230, 000.
The note set forth that Allgier would pay Work $4, 977.54 per
month for 54 months beginning on May 15, 2009, and ending on
October 15, 2013. The promissory note contained an automatic
acceleration provision, rendering the entire obligation due
in full upon default in payment of any installment or default
in payment of interest due.
This appeal concerns Allgier's payments under the
promissory note. It is undisputed that Allgier made the first
payment late, which Work accepted. He also made untimely or
partial payments from November 2009 through November 2010,
which payments Work accepted. Allgier did not make a payment
for the installment due on December 15, 2010, and made no
other payments under the note. The parties treated December
15, 2010 as the date of default. It is arguable, however,
that Allgier defaulted under the note when he failed to
timely make the first payment on May 15, 2009.
Nevertheless, the parties agree that following Allgier's
failure to make the payment due in December 2010, the two
discussed alternate ways Allgier could satisfy his debt to
Work. The parties continued their discussions into 2015. The
parties dispute whether they came to a new agreement.
According to Allgier, he and Work reached a new agreement,
although they did not reduce it to writing. Allgier relied on
copies of emails as evidence of the agreement.
Ultimately, Work brought suit against Allgier for breach of
contract under the note. He commenced suit on April 4, 2017.
Allgier answered and moved for summary judgment. He argued
that the statute of limitations had expired on Work's
cause of action in December 2016 because more than six years
had elapsed from Allgier's December 2010 default under
the note. According to Allgier, Work's cause of action
accrued on December 15, 2010 based on the fact that the
automatic acceleration provision in the note rendered
Allgier's debt due in full upon default.
In response, Work asserted that his claim did not accrue
until Work elected to enforce the acceleration provision
against Allgier. Under this view, because Work did not elect
to accelerate the debt, Work claimed he is entitled to
recover for the unpaid installments that came within the
limitation period. Work alternatively claimed that the
parties' negotiations and discussions following default
created a question of fact on Allgier's right to assert
that the debt accelerated. In Work's view, it would be
unjust to allow Allgier to use the acceleration provision
against Work when Work continually exercised leniency toward
Allgier despite Allgier's late, partial, or absent
payments under the note.
After a hearing, the circuit court granted Allgier summary
judgment. The court concluded that Work's cause of action
accrued in December 2010, and therefore, the statute of
limitations had expired in December 2016. Work appeals,
asserting that the circuit court erred when it granted
Allgier summary judgment.