Dunn v. General Equities of Iowa, Ltd.

W.A. and Lola Dunn (plaintiffs) were payees on two separate promissory notes executed by General Equities of Iowa, Ltd. (General) (defendant) on March 31, 1974. Each note was for payment of $121,170 with 7-percent annual interest. The notes were both payable over 10 years, with annual installments due on or before March 31 of each year. The notes’ acceleration clauses provided that if General defaulted in paying any interest or installments of principal due under the notes, the Dunns had the option to declare the whole unpaid amount due and payable immediately. In 1975, General did not pay the annual installments due under the notes until April 1. In 1976, General paid the annual installments in two payments on April 13 and June 16. In 1977, General paid the annual installment on April 11. The Dunns never invoked the notes’ acceleration clauses for any of these late payments, nor did they demand that future installments be paid on time. In 1978, General paid the annual installments when due on March 31. However, in 1979, General did not pay the annual installments until April 10. The Dunns returned General’s payment and invoked the acceleration clauses, demanding payment of the entire unpaid balance of the notes, plus interest. General refused to pay, and the Dunns sued General in Iowa state court. General asserted that the Dunns had waived their right to invoke the acceleration clause by accepting General’s late payments in the past. The trial court agreed and entered judgment in General’s favor. The Dunns appealed.