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C.A.: Each Time Payment Was Missed Under Loan Agreement, Limitations Period Started
By a MetNews Staff Writer
Each time a monthly payment on a loan was missed, a separate limitations period was triggered, the Court of Appeal for this district has held.
Div. Two, in an opinion by Justice Brian M. Hoffstadt, on Thursday reversed a judgment dismissing an action by Piedmont Capital, L.L.C. against a borrower, West Hollywood personal injury attorney Raymond McElfish. Los Angeles Superior Court Judge Maureen Duffy-Lewis erred, Hoffstadt said, in sustaining a demurrer without leave to amend based on her notion that an action to collect on the debt, brought in 2020, was time-barred because the first payment had been missed in 2011.
There’s a four-year statute of limitation, the justice noted, declaring that the action was timely as to all payments that were skipped within the four years preceding the filing of the lawsuit.
Terms of Agreement
McElfish had obtained a home equity line of credit (“HELOC”) from National City Bank in 2006. The agreement provided for monthly payments and, if any payment were missed, National could, in its discretion, accelerate the 2036 due-date to the present.
The lawyer did not make a monthly payment that was due on April 1, 2011, or make any payment after that. A parcel of real property he had put up for security was foreclosed upon, but not enough was realized at the sale to extinguish the debt.
Piedmont Capital in 2019 purchased the debt and sent McElfish a notice of acceleration. It brought suit on April 13, 2020.
McElfish contended in his brief on appeal:
“Statutes of limitations exist to provide finality. In California, a party who chooses not to file suit until nine years after a contract is breached should not be surprised the claim is time barred. The trial court properly sustained a demurrer for failure to comply with the four-year statute of limitations….”
Divisible Duty
Rejecting Duffy-Lewis’s view that the limitations period expired four years after April 1, 2011, Hoffstadt wrote:
“It is undisputed that the HELOC agreement in this case obligated McElfish to make monthly payments, and thus to perform his contractual duties on several occasions….But was McElfish’s duty to make those monthly payments divisible from his duty to pay the full amount of the loan? We conclude that the answer is ‘yes.’ ” He explained:
“That is because the plain terms of the HELOC agreement obligated McElfish to pay the full, outstanding balance on the line of credit in 2036 while simultaneously granting the lender—now, Piedmont—the choice whether to accelerate that maturity date when McElfish missed a monthly payment or at ‘anytime thereafter.’ By granting the lender that choice, and by explicitly reserving the lender’s ability to ‘delay exercising’ this right ‘without losing [it],’ the HELOC agreement necessarily contemplates that a breach of McElfish’s duty to make monthly payments was divisible from his duty to pay the full amount….Thus, each breach of duty to make a monthly payment gives rise to its own breach-of-contract claim with its own limitations period.”
The case is Piedmont Capital, L.L.C. v. McElfish, 2023 S.O.S. 3172.
Jonathan D. Fink of the Newport Beach firm of Wright Finlay & Zak LLP represented Piedmont and McElfish was in pro per.
Other Reversal
Duffy-Lewis was also reversed in an unpublished decision on Friday. The judge had denied a motion to compel arbitration filed by Santa Monica Seafood (“SMS”), defendant in a wrongful termination/retaliation lawsuit.
She ruled that an arbitration agreement signed in 2009 by plaintiff Brad Theobald was no longer in effect because a new employee handbook was issued in 2011 and, although some employees signed a new agreement, Theobald hadn’t.
Presiding Justice Elwood Lui of this district’s Div. Two wrote: “Theobald signed the Agreement in 2009, expressly consenting to arbitration. He does not claim the Agreement was invalid at inception, unconscionable, or too narrow to encompass his claims against SMS. Instead, he asserts that the Handbook “cancelled” the Agreement. We disagree.
“By its terms, the Handbook ‘supersedes’ prior ‘policies, procedures, rules, regulations, commitments and practices of the Company.’ It does not supersede signed, mutual agreements or support Theobald’s claim that it ‘expressly stated that all previous agreements between Appellant and Responded [sic] were superseded and a nullity.’ The Agreement is not nullified by the Handbook.”
Express, Implied Assent
Lui added:
“His assent to arbitration was express (under the Agreement) and implied when he continued to work at SMS for over a decade after the Handbook was modified.”
The case is Theobald v. Santa Monica Seafood Co., B324090.
Grant P. Alexander and Shauna E. Woods of the downtown Los Angeles firm of Allen Matkins Leck Gamble Mallory & Natsis represented Santa Monica Seafood and Torrance attorney Orlando F. Cabanday acted for Theobald.
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