- Time and Location of Credit Breach Influences Ohio Statute of Limitations
- May 24, 2017 | Author: Jack W. Hinneberg
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cleveland Office
For many creditors, including electric companies, gas companies, and credit card companies, before filing a lawsuit against a debtor to recover monies owed, it is important to determine when the cause of action on an account accrued.
When the cause of action on an account accrued determines when the statute of limitations begins - and whether a lawsuit can still be filed to recover overdue monies on the account. Running accounts in Ohio are governed by a relatively short six-year statute of limitations.1 This is consistent with Ohio's statute of limitations for contracts not in writing, under which "an action upon a contract not in writing, express or implied, or upon a liability created by statute other than a forfeiture or penalty, shall be brought within six years after the cause thereof accrued."2
Ohio courts have relied upon the common-law definition of an "open account" in determining that the statute of limitations begins to run after the last activity on the account.3 The common-law definition of an "open account" is as follows:
"An 'open account' is an account with a balance which has not been ascertained and is kept open in anticipation of future transactions. An open account results where the parties intend that the individual transactions in the account be considered as a connected series, rather than as independent of each other, subject to a shifting balance as additional debits and credits are made, until one of the parties wishes to settle and close the account, and where there is but one single and indivisible liability arising from such series of related and reciprocal debits and credits. This single liability is fixed at the time of settlement, or following the last entry in the account, and such liability must be mutually agreed upon between the parties, or impliedly imposed upon them by law. Thus an open account is similar to a line of credit.
Observation: Openness of an account, for purposes of an action on an open account, is indicated when further dealings between the parties are contemplated and when some term or terms of the contract are left open and undetermined.
The continuity of an account is broken where there has been a change in the relationship between the parties, or where the account has been allowed to become dormant."4
Since the statute of limitations begins to run after the last activity on the account, the last entry in the account must be identified. This indicates exactly when the cause of action on an account accrued, and when the statute of limitations began to run.
A recent Ohio Supreme Court decision makes this determination a little more complicated. Ohio has a borrowing statute, which is an exception to the six-year statute of limitations rule, and it directs a court to "borrow" the limitation period of another state if the cause of action on an account accrued in the other state and that state's limitation period is shorter than Ohio's.5 According to the case, "where the cause of action accrued is the key element of the borrowing statute. Thus, we must determine where the underlying collection claims accrued..."6
For example, Delaware has a three-year statute of limitations for actions to collect on an account. If a debtor lives in Ohio, but the breach accrued four years ago in Delaware, by filing a lawsuit in Ohio, a creditor would be in violation of the federal Fair Debt Collection Practices Act and the Ohio Consumers Sales Practices Act. Even though the filing of the lawsuit four years after the last activity is within Ohio's six-year statute of limitations for an action on an account, it violates Delaware's statute of limitations, which because of Ohio's borrowing statute, applies to the case.
Not only is it important to determine when the cause of action on an account accrues, but it is also important to determine what state the cause of action on an account accrued in.
1 Rudolph Bros. v. Husat, 25 Ohio Op. 2d 376, 187 N.E.2d 190 (Ohio Ct. App., Mahoning County 1961).
2 R.C. 2305.07
3 Taylor v. First Resolution Investment Corp., 2012-Ohio-5653, 983 N.E.2d 380, 2012 Ohio App. LEXIS 4904
4 Id., quoting 1 American Jurisprudence 2d, Accounts and Accounting, Section 4 (2005)
5 http://www.courtnewsohio.gov/cases/2016/SCO/0616/130118.asp#.WO5dOY0zV&under;s - Court Resolves How Federal Debt Collection and State Consumer Sales Laws Impact Debt-Buyers and Collection Lawyers, by Dan Trevas (6/16/2016)
6 Taylor v. First Resolution Invest. Corp., Slip Opinion No. 2016-Ohio-3444.