No Waiver of Argument if Opponent Had Notice and an Opportunity to Defend; Collins Asset Group. LLC v. Alialy

In a companion case, the Court applied its rationale in Blair to a similar fact pattern. This is not especially noteworthy. What makes this case worth noticing for our purposes is how the Court treats issues of waiver.

Alialy obtained a mortgage on his home in 2007. He defaulted in 2008, but his lender, CAG, did not accelerate the note until 2016. When Alialy didn’t pay, CAG filed suit. Alialy moved to dismiss, arguing that that the claim was barred by the six-year statute of limitations—Indiana Code section 34-11-2-9—for a cause of action upon a promissory note. The trial court granted that motion. The Court of Appeals affirmed, arguing that CAG waived its argument that the relevant Uniform Commercial Code (UCC) statute of limitations—Indiana Code section 26-1-3.1-118(a)—should also apply.

On transfer, the Court addressed the waiver issue first. In doing so, it attempted to clarify the law regarding when an argument is waived.

The rule that parties will be held to trial court theories by the appellate tribunal does not mean that no new position may be taken, or that new arguments may not be adduced; all that it means is that substantive questions independent in character and not within the issues or not presented to the trial court shall not be first made upon appeal. Questions within the issues and before the trial court are before the appellate court, and new arguments and authorities may with strict propriety be brought forward.

A “crucial factor” in determining whether a party may raise “what appears to be a new issue” on appeal is whether the other party “had unequivocal notice of the existence of the issue and, therefore, had an opportunity to defend against it.” Applying that test to this case, the Court found that CAG did not waive an argument under the correct statute of limitations by citing to the wrong statute of limitations.

In its response to Alialy’s motion to dismiss, CAG argued that the timing of the statute of limitations enabled it to recover. Specifically, CAG asserted that the six-year statute of limitations did not begin to run until it exercised its optional acceleration clause in 2016; and thus, its complaint filed in 2017 fell “well within the applicable” time period. Though CAG cited only Section 34-11-2-9 below, the issue before the trial court was whether CAG’s complaint was filed within the six-year limitations period. And, as we explained in Blair, that time period is identical under either statute. In other words, Alialy was on notice of the timing issue in the trial court and had notice and an opportunity to defend against both statutes on appeal. Accordingly, CAG’s argument that its claim was also timely filed under the relevant UCC statute is not waived.

Note that the Court did not require notice and an opportunity to defend at the trial court level. Rather, “notice of the issue” was sufficient, so long as notice and the opportunity to defend against the application of both statutes was present on appeal. This aligns with the Court’s repeated preference to resolve cases on the merits and may be a source of relief to lawyers who notice a “new” issue may help their client on appeal.

1. An argument is not waived if it is within the issues presented to the trial court.
2. A crucial factor in determining waiver is whether the opposing party had unequivocal notice of the existence of the issue.

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