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AZAPP Blog Your resource for news and analysis of cases in Arizona's appellate courts.

Mertola, LLC v. Santos - 7/27/2018

Arizona Supreme Court holds that, under a credit card contract with an option to accelerate the entire debt upon default, the statute of limitations runs from the date of the first uncured missed payment.


A consumer acquired a credit card from a bank.  The account agreement stated that if the consumer failed to pay the amount due on any given month, the bank could declare the account balance immediately payable and due, without any notice of the acceleration.  Beginning in February, 2008, the consumer stopped making his minimum monthly payments and defaulted.  In August of 2008, the consumer made a partial payment that was less than the minimum due and did not cure the default.  At some point, a company acquired the debt from the bank, and in July, 2014 sued to collect the outstanding balance.  The Superior Court granted summary judgment on the grounds that the statute of limitations on the entire debt ran from when the bank first had the right to collect the entire debt in February, 2008.  The Court of Appeals reversed, and the Supreme Court granted review. 

The Supreme Court held that the statute of limitations barred the action.  A credit card contract with an acceleration clause envisions an open ended debt, with no fixed time where the entire debt will become due.  Thus, the cause of action accrues when the first default occurs and the creditor first has the ability to collect the entire payment.  Were a creditor allowed to extend the statute of limitations until it explicitly accelerated the debt, the creditor would functionally be able to extend the statute of limitations in perpetuity and allow interest to accumulate long after it was clear no payments would be made.  The Supreme Court distinguished credit card debts from installment debts, where the amount of the debt and schedule of payments are fixed, and each missed payment triggers its own statute of limitations.  Further, while curing the default would allow a new default to trigger a new statute of limitations, a partial repayment that does not cure the default does not.  The Supreme Court left open the question of whether the rule in this case would apply to other types of debts. 

Justice Brutinel delivered the unanimous opinion of the court.

Posted by: Emma J. Cone-Roddy

Posted On: 8/7/2018