Tuesday, June 06, 2006

Action on an Equipment Lease Time Barred after Four Years

Frontier Leasing Corp. v. James River Country Store, 05-0953 (Iowa Ct. App. May 24, 1006)

Frontier's predecessor in interest, Liberty, leased an ATM machine to James River in 1999. Part of the lease stated certain conditions which constituted a default on the lease, among which was if one of the guarantors died. Roberts, a guarantor, died early in 2000 and James River stopped making its lease payments in April 2000.

Credit Card Center, the supplier under the lease, made four further payments on behalf of James River, two in June 2000, one in August 2000 and one last payment in December 2000. Liberty considered the lease to be in default as of January 2001.

Frontier sued James River on the lease on September 30, 2004. and the district court entered an order of dismissal on the defendant's motion, finding the suit was time barred under the 4 year limit of Iowa Code Ch. 554.13506.

The district court found that the first default triggered the time limit of the statute of limitations, although there were other defaults that followed.

The Court of Appeals affirmed the trial court.

Two points of information should be significant to farmers and agriculturalists who lease equipment.

First, it was of no significance that the original lessor did not consider the lease to be in default until January 2001.

Second, the statute of limitations begins to run when the first default according to the terms of the lease occurs.


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