Case Law Summaries

Premier Capital, Inc. v. Crimi

• Opinion Date: October 3, 2002
• Business Law
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NOTES; STATUTE OF LIMITATIONS — An automatic acceleration on default provision in a note triggers the start of the statute of limitations.

A lender filed a collection action against the maker of two promissory notes. An individual guaranteed the first note and indorsed the second note. The lower court held that the lawsuit to enforce the guaranty was barred by the six year statute of limitations. As to the second note, executed one year later, the lower court found that the statute of limitations had not yet expired. On appeal, the Appellate Division upheld the dismissal of the guaranty claim and reversed the lower court’s decision not to dismiss the second action. As to the guaranty, the Court found that, under the Uniform Commercial Code, the cause of action accrued on the date of the note. Because six years had expired since the date of the note, the statute of limitations barred any lawsuit against the guarantor. As to the second note, the Court held that the six year statute of limitations began to run on the date of a default that resulted in the automatic acceleration of the debt. Since more than six years had passed since the debt was accelerated, the statute of limitations barred the lender from suing the indorser. The lower court had refused to enforce the automatic acceleration provisions of the note, finding it to be unconscionable and against public policy since it would permit the lender to accelerate the debt, even for a minor default. The Appellate Division disagreed, finding that acceleration provisions are legitimate contractual obligations and protections that are bargained for when parties enter into a loan.

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