There have been several recent cases which impact Default Litigation in Indiana, Ohio and Michigan over the past couple months.
The Court of Appeals in Indiana held in Collins Asset Group v. Alialy 115 N.E. 3d 1275 (2018) that a creditor waited too long to accelerate the loan and that the statute of limitations barred the plaintiff’s complaint. Specifically, the Court held that plaintiff’s attempt to exercise the acceleration clause did not prevent the six-year statute of limitation from taking effect and expiring.
The court cautioned that while an installment contract which contains an optional acceleration clause, by which the creditor may declare all installments of the loan due and payable after default, the statute of limitations to collect the debt does not begin to run immediately upon the debtor’s default; the statute generally begins to run only when the creditor exercises the optional acceleration clause. However, waiting until after the statute of limitations has passed following the default before making the demand for full and immediate payment is per se an unreasonable amount of time to invoke the optional acceleration clause.
The 9th District of Ohio in Wells Fargo Bank, NA v. Russell 2019-Ohio-776, stated that contrary to other Appellate Districts in Ohio, the 9th District has NOT adopted the “adoptive business records doctrine”. There remains a split amongst the Ohio Appellate courts on this doctrine as an exception to Hearsay. The Supreme Court of Ohio has had multiple opportunities to resolve this conflict. However, it has elected not to do so.
Adoptive Business Records Doctrine is an exception to Hearsay and thus allows adopted business records to be admitted into evidence under Evid.R. 803(6). Such records need not be actually prepared by the business offering them if they are received, maintained, and relied upon in the ordinary course of business and incorporated into the business records of the testifying entity.
Affidavits submitted in support of or in opposition to motions for summary judgment shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit. In addition, sworn or certified copies of all papers or parts of papers referred to in an affidavit shall be attached to or served with the affidavit.
The 9th District held that the affidavit in that particular case, “failed to demonstrate familiarity with the circumstances of the preparation, maintenance, and retrieval of the record, in order to reasonably testify on the basis of this knowledge that the record is what it purports to be and was made in the ordinary course of business. Thus, Wells Fargo had failed to provide conclusive evidence of both the default and the amount due on the note.
This decision held that a party who merely receives and retains records produced by another business does not necessarily have a working knowledge of the specific record keeping system that produced the document. Further and in a footnote, the decision distinguished this decision from a prior decision by stated that the “basis for allowing authentication of business records in Barth [prior case in the same Appellate District] was personal knowledge, not merely the fact they [the records] were received, maintained and relied upon the ordinary course of business and incorporated into the business records of the testifying entity”.
Therefore, until the Supreme Court of Ohio resolves this issue, there will continue to be a split amongst the Appellate Districts in Ohio on whether or not the Adoptive Business Records Doctrine applies as an exception to Hearsay.
The United States Bankruptcy Court in In re Shrum 19-41957, held that a Michigan State Court erred in determining whether or not the automatic stay applied. In addition, the Bankruptcy Court held that a landlord willfully violated the stay when he proceeded with an eviction within the first 30 days after a consumer filed a Chapter 13 Bankruptcy Petition.
At issue in this case is application of the automatic stay to a judgment of possession which was obtained prior to the filing of the petition. The landlord knowingly proceeded with a state court eviction case after the Bankruptcy Petition was filed because the Landlord believed the Automatic Stay was not in effect.
The Bankruptcy Court held that the exception to the Automatic Stay under § 362(b)(22) did not apply during the first 30 days of the Bankruptcy case (thus the Automatic Stay was in place) because Debtor had timely filed Official Form 101A to temporarily delay the application of the § 362(b)(22) exception for the first 30 days of a bankruptcy case in accordance with § 362(l)(1)(A) and (B). However, the§ 362(b)(22) exception did apply after the first 30 days of the Bankruptcy case (thus the Automatic Stay was not in place). This distinction, combined with the actions of the landlord who proceeded with an eviction within the first 30 days of the bankruptcy case, resulted in a finding that even though the state court held that the Automatic Stay did not apply, the landlord willfully violated the Automatic Stay and thus was subject to damages, including punitive damages.
Issues involving the Statute of Limitations, Default Litigation and the application of the automatic stay are all matters which creditors continuously face when in the Default Litigation Arena. If you have any questions or would like to discuss this or other default related matters in Ohio, Indiana, Kentucky or Michigan. Please feel free to reach out to me at email@example.com.