Opposing Statutes of Limitation Chosen in Appellate Court Case; Advanced Credit v. Linares

The Illinois Appellate Court has reversed a decision by a Cook County judge in a case involving two statutes of limitation, which were possible choices in a breach of contract case.

On Aug. 2, 2002, the plaintiff, Advanced Credit Inc. (ACI), and the defendant Samuel Linares signed a promissory note in the amount of $8,000 at an interest rate of 20%. The note required Linares to pay ACI $8,000 plus interest on demand. On Dec. 1, 2004, ACI demanded the loan’s repayment. Linares did not pay. Nothing was done at that time.

On Aug. 25, 2010, ACI filed a lawsuit in the Circuit Court of Cook County demanding enforcement of the note. ACI alleged that the amount due, including principal and interest after giving Linares credit for payments made, was $20,192. In addition, ACI demanded a per diem interest at $2.67 plus attorney fees and court costs.

Linares replied asserting an affirmative defense that the statute of limitations based on the Illinois Uniform Commercial Code, 810 ILCS 5/3-104, barred this claim because of its 3-year statute of limitations.

Linares claimed that by waiting 8 years between the demand note and the filing of the complaint, ACI had filed a suit beyond the 3-year statute of limitations. However, ACI argued that instead the 10-year statute of limitations under Illinois Code of Civil Procedure, 735 ILCS 5/13-206, was the appropriate time limitation.

The trial court followed Linares’s argument and dismissed the case with prejudice.  ACI appealed.

Under the Uniform Commercial Code, the language defines “payment on demand” to mean a promissory order, which is payable at the will of the holder and states that “unless governed by any other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had or received or like action based on conversion, (ii) for breach of warranty or (iii) to enforce an obligation, duty or right arising under this article and not governed by this section must be commenced within 3 years.”  810 ILCS 5/3-118(g).  Although this section covers a promissory note, the Code of Civil Procedure provides that “actions on bonds, promissory notes . . . or other evidence of indebtedness in writing . . . shall be commenced within 10 years next after the cause of action accrued.”  This section also states that if a demand for payment is made to the maker of the demand promissory note, an action to enforce the obligation must be commenced within 10 years after the demand.  735 ILCS 5/13-206.

Because the Code of Civil Procedure’s section on demand notes explicitly singled out promissory notes and the demands for payment of such as a subject of the legislation, that specific reference convinced the court that the 10-year statute of limitations was the proper one to apply rather than the 3-year statute found in the Uniform Commercial Code. 

Accordingly, the appellate court reversed the trial court’s order dismissing the case and remanded the case for further proceedings.

Advanced Credit, Inc. v. Samuel Linares, 2012 IL App. (1st) 121574-U.

Kreisman Law Offices has been handling business litigation matters and business transactions for individuals and businesses for more than 37 years, in and around Chicago, Cook County and its surrounding areas, including Chicago (Chinatown), Chicago (Dunning), Chicago (East Village), Chicago (McKinley Park), Aurora, Batavia, Bloomingdale, Homer Glen, Huntley, Homewood, Lindenhurst, Lockport, Lombard, Northlake, Palatine, University Park and Plainfield, Ill.

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