Illinois Appellate Court Affirms Dismissal of Claim on Demand Note on Limitations Basis

On June 14, 1988, Thomas John Heck Jr. executed a note in favor of Paul D. Heck. The note promised to pay $51,000 at 7% interest, compounded annually, with this instruction: “Borrower shall make a single payment on demand within 90 days of demand letter. If payment is not demanded or paid by Borrower, this note will renew automatically in full force of the terms until said note is paid.”

Thomas John Heck Jr. died on Nov. 7, 2016 without Paul Heck ever demanding payment on the note. Paul Heck demanded payment from the Estate of Thomas John Heck Jr. (Estate) on Dec. 8, 2017.

Paul Heck filed suit on Jan. 3, 2018 seeking $362,886.62, plus interest, attorney fees and costs.

The Estate moved to dismiss, alleging that the claim was time-barred under the ten-year limitation period for “actions on bond, promissory notes, bills of exchange, written leases, written contracts, or other evidences of indebtedness in writing” set out in Section 13.206 of the Illinois Code of Civil Procedure. The circuit court judge granted the motion that dismissed the claim. Paul Heck brought this appeal.

On appeal, Paul Heck argued that the note’s language specified that it renewed in perpetuity, and that the ten-year limitation began when the note expired because that’s when the cause of action accrued. Because the note renewed in perpetuity, Heck argued, it never expired as the ten-year limitation period had not begun to toll.

Paul Heck argued that the portion of Section 13-206 of the Code, which establishes that ”An action to enforce a demand promissory note is barred if neither principal nor interest on the demand promissory note has been paid for a continuous period of ten years and no demand for payment has been made to the maker during that period,” did not apply to the note in question, as it was added in 1997 and did not apply to a contract issued prior to that date.

The appellate court acknowledged that the section in question did not apply, but found that the relevant pre-amendment language, which held that “actions on … promissory notes … shall be commenced within ten years … after the cause of action accrued[,]” was sufficient to support a finding that the claim was time-barred.

The appeals panel found that a “perpetual 90-day note” payable on demand had an indefinite due date, and any promissory note with an indefinite due date which is payable on demand is a “demand note.”

Citing precedent, the appellate court demonstrated that, for demand notes, the cause of action against the maker of a note on the day of issue, because from that date the holder of the note has power to demand payment. Paul Heck executed the note in 1988 and that is when this cause of action accrued. He filed suit almost 30 years later, well beyond the ten-year limitation period.

Accordingly, the appellate court affirmed the decision dismissing this cause of action for failing to meet the ten-year statute of limitations requirements.

In re Estate of Thomas John Heck, Jr., 2019 IL App (1^st) 182414 (June 5, 2020).

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