Virginia Contracts: Statute of Limitation – a Lawyer’s Installment
In Virginia, the statute of limitation for a breach of written contract is five years and of oral contract is three years. But when exactly the statute starts to run depends on whether there are multiple breaches.
Over half a century ago, the Supreme Court of Virginia declared, “It is well settled that in the absence of [an acceleration] provision [obligations payable in installments] are payable as they are written, and the time of payment is not accelerated by the happening of other events not specifically agreed upon.” Holcomb v. Webley, 185 Va. 150, 156 (1946). Correspondingly, the applicable statute of limitation runs from the time each individual installment payment matures and falls due according to its terms. Id. at 158. Hence, the Virginia Supreme Court in Holcomb overruled a plea of the statute of limitations as to each individual installment payment falling due within the pertinent limitation period preceding the filing of suit, reversing and remanding the trial court’s decision to the contrary. Id. at 159.
Prior Virginia Supreme Court decisions and subsequent Virginia Circuit Court decisions embody Holcomb. “Courts generally have agreed that for [breach of contract] claims based on an installment contract, a cause of action accrues, and the statute of limitations begins to run, when each installment becomes due. See, 15 Richard A. Lord & Samuel Williston, Williston on Contracts §45:20 (4th Ed. 2000).” Gilliam v. Gilliam, 2003 Va. Cir. LEXIS 173, * 3 (Fairfax Aug. 14, 2003).
“Virginia follows this general rule. See, Ten Braak v. Waffle Shops, Inc., 542 F.2d 919, 924 n.6 (4th Cir. 1976)(‘We note that Virginia does follow the majority rule recognizing contracts for installment payments are divisible, thereby permitting separate actions to be maintained to recover installment as they fall due.’ (citation omitted)); Jones v. Morris Plan Bank of Portsmouth, 168 Va. 284, 191 S.E. 608 (1937)(stating that Virginia does follow the majority rule recognizing that contracts for installment payments are divisible, thereby permitting separate actions to maintain to recover installment payments as they fall due); Williams v. Matthews, 103 Va. 180, 48 S.E. 861 (1904)(holding that the statute of limitations on claim to recover five unpaid installments of stock subscription land from dates on which unpaid installments were due).” Gilliam, 2003 Va. Cir. LEXIS 173, * 3-4.
Thus, in the Virginia domestic law case of Gilliam, where one spouse promised to pay the other monthly installment payments over twenty years, it was “a divisible installment contract, and the statute of limitations for each payment due under the Note began to run when each installment became due.” Id. at * 4. “As a result,” concluded Gilliam, “the statute of limitations has not yet run for any installments or other payments due from [five years prior to suit filing] to the present date, which include any unpaid principal and interest”. Id.
Credit Acceptance Corp. v. Coates, 75 Va. Cir. 267, 271-272 (Fairfax Jun. 20, 2008) and Lamont v. Seabury, 64 Va. Cir. 243, 248 (Fairfax Mar. 18, 2004) are to the same effect. “The limitations period for non-payment of an installment contract begins to run at the time each installment comes due.” Lamont. “The breach for the non-payment of an installment of a payment plan occurs at the time the installment becomes due. Therefore, the Court concludes the statute of limitations for non-payment of an installment of a payment plan begins to run at the time each installment becomes due.” Credit Acceptance. “Under the rules set forth in Williams [v. Matthews, 103 Va. 180, (1904)], a cause of action for each missed payment arose each time [defendant] failed to make a payment and the statute of limitations for each cause of action began to run the date the payment was due.” Id. at 272.
Federal courts sitting in diversity uniformly have divined and followed Virginia law the same. E.g., American Inn, L.P. v. Suntrust Banks, Inc., 28 Fed. Appx. 316, 321 (4th Cir. 2002)(Virginia law)(citing “Cromer v. Molden Real Estate Corp., 24 Va. Cir. 474, 1991 WL 835194 (Va. Cir. Ct. 1991)(holding that the statute of limitations commenced when plaintiff made first access installment payment, not when defendant wrongfully raised interest rate on loan); LaFratta v. Fid. Bankers Life Ins. Co., 1980 WL 143116 (Va. Cir. Ct. 1980)(stating that ‘the statute of limitations runs against each installment from the time it becomes due, that is, from the time when an action might be brought to recover it’)”). Thus, in American Inn, “the relevant breach triggering the statute of limitations is Suntrust’s alleged overcharge on each installment, and the statute of limitations commenced as to each installment as of the date it became due. Accordingly, American Inn stated a cause of action with respect to any installment that became due within the relevant five-year limitations.” 28 Fed. Appx. at 321.
“It is settled that upon the failure to make an installment payment, a cause of action for that installment accrues immediately and the statute of limitations begins to run. This has long been the rule in Virginia and elsewhere.” Bizmark Inc. v. Inds. Gas & Supply Co., 358 F.Supp. 2d 518, 521 (W.D. Va. 2005)(citation omitted). “It is well-settled law in Virginia and elsewhere that a cause of action accrues immediately upon the failure to make an installment payment and the statute of limitations begins to run as of the delinquent date.” Bizmark Inc v. Air Prods., Inc., 427 F.Supp. 2d 680, 693 (W.D. Va. 2006).
