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Statute of Limitations – Acceleration Clause

By: WISCONSIN LAW JOURNAL STAFF//October 31, 2022//

Statute of Limitations – Acceleration Clause

By: WISCONSIN LAW JOURNAL STAFF//October 31, 2022//

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7th Circuit Court of Appeals

Case Name: Eric Hovde v. ISLA Development LLC

Case No.: 21-2894

Officials: Rovner, Wood, and St. Eve, Circuit Judges.

Focus: Statute of Limitations – Acceleration Clause

Jeffrey Riegel seeking to build a condominium development in Isla Mujeres, formed ISLA Development LLC (“ISLA”) and secured a loan of millions of dollars from Steve and Eric Hovde. That project, however, ultimately failed, and more than ten years later, the Hovdes filed suit seeking to recover their funds from ISLA and Riegel.

The district court granted the defendants summary judgment on the claim based on the Mortgage Note, citing the 10-year limitations period, and later holding that the limitations defense could be asserted against Riegel as the guarantor.

An acceleration clause provided that if a Default occurred, the outstanding unpaid principal and interest would automatically become immediately due, triggering the 10-year limitations period. One such “Default” was an “Act of Bankruptcy,” defined to include admitting in writing the inability to pay debts as they mature. Two emails sent by Riegel to the Hovdes constituted an admission in writing of inability to pay debts: an August 7, 2008 email, asking for an advance to pay a tax bill, and a subsequent email indicating that all construction workers had been suspended. Because the statute of limitations defense does not operate to absolve a person in a contract from the obligation but merely renders that obligation unenforceable in court because not timely brought, the language does not preclude the assertion of that defense by its plain language. Accordingly, the district court did not err in determining that the claims were barred by the statute of limitations.

Affirmed.

Decided 10/24/22

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