Mundaca Inv. Corp. v. Rivizzigno

• Decision Date: 04 February 1998
• Citation: 668 N.Y.S.2d 854,247 A.D.2d 904
• Parties: , 36 UCC Rep.Serv.2d 763, 1998 N.Y. Slip Op. 847 MUNDACA INVESTMENT CORP., Appellant, v. Anthony P. RIVIZZIGNO, Judith P. Rivizzigno and Frank D'Agostino, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 854

668 N.Y.S.2d 854

247 A.D.2d 904, 36 UCC Rep.Serv.2d 763,

1998 N.Y. Slip Op. 847

MUNDACA INVESTMENT CORP., Appellant, v. Anthony P. RIVIZZIGNO, Judith P. Rivizzigno and Frank D'Agostino, Respondents.

Supreme Court, Appellate Division Fourth Department.

Feb. 4, 1998.

Carus & Pudalov, P.C. by Edward Rugino, Syosset, for Plaintiff-Appellant.

Ali, Pappas & Cox by C. Andrew Pappas, Syracuse, for Defendants-Respondents.

Before PINE, J.P., and LAWTON, WISNER, CALLAHAN and BOEHM, JJ.

MEMORANDUM:

In November 1986 defendants, Anthony P. Rivizzigno, Judith P. Rivizzigno and Frank D'Agostino, executed a note payable to Jefferson National Bank in the amount of $75,000 (Note). As security for repayment of the Note, Judith Rivizzigno gave Jefferson National Bank a mortgage on real property she owned. The Note provides for monthly payments to be made on the first of each month, beginning on January 1, 1987 and continuing through December 1, 2001. The Note is on a standard printed form that provides for monthly payments to be made at a variable interest rate. An "X" is checked in a box in front of printed language in the Note stating: "PAYABLE IN FULL * * * ON DEMAND, IF THE LENDER DEMANDS PAYMENT". Added to the text of the Note there is typewritten: "Notwithstanding the maturity date [of December 1, 2001], the bank may demand the entire amount of unpaid principal and accumulated interest be paid at any time after December 1, 1991". Defendants failed to make the monthly payment due October 1, 1993, or any payments thereafter. In 1993 the Federal Deposit Insurance Corporation, as receiver for Jefferson National Bank, assigned the Note and mortgage to plaintiff.

On February 15, 1996, plaintiff commenced this action seeking payment on the Note, plus costs and attorney's fees. In their answer, the Rivizzignos raise four affirmative defenses, including the Statute of Limitations. Plaintiff moved for summary judgment on the unpaid balance of the Note, and for an order striking, inter alia, the first affirmative defense of the Statute of Limitations. Supreme Court denied plaintiff's motion and dismissed the complaint, determining that the Note is a demand note and the applicable Statute of Limitations is six years from the date of its execution, i.e., November 1987. The court therefore held that plaintiff's action is barred by the Statute of Limitations. Having made that determination, the court did not reach the merits of plaintiff's motion for summary judgment.

Demand notes are notes "payable at sight or on presentation and * * * in which no time for payment is stated" (UCC 3-108). Notes payable where the due date of the note "can be determined from the face of the instrument" (UCC 3-109[2], Official Comment 2, at 44) are non-demand notes. Whether notes are considered payable on demand is dependent upon whether "the notes, as written, were subject to call at plaintiff's pleasure" (National Westminster Bank USA v. Vannier Group, 160 A.D.2d 348, 350, 554 N.Y.S.2d 482).

The apparent inconsistency between the typewritten clause and the "X" in the box beside the printed language stating that the loan is payable "ON DEMAND, IF THE LENDER DEMANDS PAYMENT" can be reconciled. The typewritten clause is in the nature of an acceleration clause, i.e., it provides that, notwithstanding the stated maturity date of December 1, 2001, the holder may call the loan "at any time" after December 1, 1991. If the Note were a true demand note, there would be no need to provide that it could not be called before December 1, 1991. The "very nature" of demand instruments "permits call at any time with or without reason" (UCC 1-208, Official Comment, at 66). Because the acceleration clause is not callable at the holder's "pleasure" before December 1, 1991, it limits the right of the holder to call the Note and therefore the court erred in determining that the Note is a demand note.

What appear to be conflicting provisions should be reconciled where there is a reasonable possibility of doing so (see, 80 N.Y. Jur 2d, Negotiable Instruments and Other Commercial Paper, § 151; G & B Photography v. Greenberg, 209 A.D.2d 579, 581, 619 N.Y.S.2d 294; Robshaw v. Health Mgt., 98 A.D.2d 986, 470 N.Y.S.2d 226),...