Reed v. Lincoln, 98-1410.

• Citation: 731 So.2d 104
• Decision Date: 16 April 1999
• Docket Number: No. 98-1410.,98-1410.
• Parties: Suzanne Conry REED, Appellant, v. Don F. LINCOLN and Boriboon J. Lincoln, Appellee.
• Court: Florida District Court of Appeals

731 So.2d 104

Suzanne Conry REED, Appellant, v. Don F. LINCOLN and Boriboon J. Lincoln, Appellee.

No. 98-1410.

District Court of Appeal of Florida, Fifth District.

April 16, 1999.

Rehearing Denied May 18, 1999.

Barry R. Nager, Orlando, for Appellant.

Kenneth P. Hazouri and Julian Gonzalezof Drage, de Beaubien, Knight, Simmons, Romano, & Neal, Orlando, for Appellee.

ANTOON, J.

Suzanne Conry Reed sued Don and Boriboon Lincoln alleging that the Lincolns had defaulted on the terms of a promissory note by failing to pay monthly installments. In their defense, the Lincolns alleged that Ms. Reed's right to sue for collection of the entire debt was barred by the statute of limitations. The Lincolns argued that their failure to pay the installment which was due in August 1990 constituted a default which accelerated the entire debt due under the note, and that the default occurred more than five years prior to the filing of Ms. Reed's complaint. The trial court agreed and entered summary final judgment in favor of the Lincolns. Ms. Reed appeals, contending the trial court erred in so ruling because the promissory note did not contain an acceleration clause. We agree and reverse.

On May 4, 1990, the Lincolns executed a promissory note in the principal amount of $28,000 payable in 223 consecutive monthly installments of $304.85, including interest. The note was prepared on a preprinted form, but included the following handwritten language in the bottom margin: "Payments after 60 days late, note is in default." There was no language stating that, upon default, the unpaid installments would be accelerated and become immediately due. The Lincolns made only the first two payments due on the note.

On April 1, 1996, Ms. Reed sued to recover on the note. The Lincolns moved for summary judgment, arguing that the statute of limitations applied to bar the suit. The Lincolns argued to the trial court that under certain circumstances acceleration clauses are self-executing rendering future note payments automatically due upon default. See Baader v. Walker, 153 So.2d 51 (Fla. 2d DCA),

cert. denied,

156 So.2d 858 (Fla.1963). They argued further that, in such cases, acceleration occurs without the necessity of action on the part of the payee. Contending that the term "default" as contained in the instant note was synonymous with the term "acceleration," they argued default on the note by failure to make the monthly payment constituted automatic acceleration of the entire debt. No case law or statutory authority was cited to support this broad definition; yet, the trial court accepted the argument.¹ We disagree.

The terms "default" and "accelerated" are not synonymous or interchangeable. Default is defined as "a failure ... [a]n omission of that which ought to be done ... the omission or failure to perform a legal or contractual duty ... to observe a promise or discharge an obligation." BLACK'S LAW DICTIONARY 376 (6th ed.1990). For example, under the Uniform Commercial Code once a debtor is in default the secured party has the right to take possession of collateral; however, the creditor may not demand the entire sum due from a party in default. See § 679.503, Fla. Stat. (1997).

In contrast, "accelerate" means "to hasten the occurrence of." RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE 10 (2d ed.1987). An "acceleration clause" is defined as:

A provision or clause in a mortgage, note, bond, deed of trust, or other credit agreement, that requires the maker, drawer or other obligor to pay part or all of the balance sooner than the date or dates specified for payment upon the occurrence of some event or circumstance described in the contract. Such clause operates when there has been a default such as nonpayment of principal, interest, or failure to pay insurance premiums.

BLACK'S LAW DICTIONARY 12 (6th ed.1990). As noted above, no such clause was contained in the instant promissory note.

In Miller v. Balcanoff, 566 So.2d 1340 (Fla. 1st DCA 1990), the court was presented with a promissory note which was very similar to the one in the instant case. Id. The note in Miller provided: "[T]his note shall not be in default if the payment is made within ten (10) days of the due date." Id. at 1342. The first district held that the note did not call for acceleration of the entire obligation upon a delinquency in payment, stating that "it is well established that a maker's obligation under an installment note may not be accelerated in the absence of an acceleration provision." Id. (citing Bardill v. Holcomb, 215 So.2d 64 (Fla. 4th DCA 1968)). Likewise, the promissory note in the instant case does not contain any language indicating the parties' intent to accelerate the amount due upon default. Instead, the drafter of the promissory note simply included a provision stating that failure to make the monthly payment within sixty days of the due date constituted a "default." Accordingly, the Lincolns' default in August 1990 did not result in the entire remaining debt becoming due immediately.

We reverse the trial court's summary final judgment and remand this matter for further proceedings including a determination as to which monthly installments are barred by the statute of limitations.

REVERSED and REMANDED for further proceedings.

PETERSON, J., concurs.

W. SHARP, J., dissenting with opinion.

W. SHARP, J., dissenting.

I would affirm the trial court's determination that all sums due under the promissory note are barred by the five year statute of limitations. § 95.11(2)(b), Fla. Stat. The facts in this case are not in dispute. The issue is the interpretation of the legally "amateur" promissory note employed by the parties in this case.

The printed form of the note provides (in part): "The maker and endorser of this note further agree to waive demand, notice of non-payment and protest...." The principal sum due is $28,000.00, payable in monthly installments of $304.85, for 223 consecutive months, including interest at 11.5%. At the bottom of the installment note appears the following hand written words: "1st payment due 6-4-90 and payments after 30 days past due date must include $25.00 late fee. Payments after 60 days, note is in default." (emphasis supplied)

The Lincolns made the first two payments timely but made no additional installment payments thereafter. No demand for payment was made by the holder or payee of the note, apparently, but the note waives demand and notice of nonpayment. The trial court construed the language of the note as meaning that the total indebtedness owed on the note was automatically accelerated and became due and payable on the 61st day after the third installment should have been paid. The result of this construction subjects the full balance of the debt owed to the bar of the five year statute of limitations,² because the full note indebtedness became due more than five years before the suit in this case was filed.³

The first issue in this case is to determine whether or not the acceleration clause was automatic, self-executing or absolute. In Baader v. Walker, 153 So.2d 51 (Fla. 2d DCA), cert. denied, 156 So.2d 858 (Fla.1963), the court construed an acceleration clause in a promissory note as being "self-executing" or "absolute." The note provided:

Upon default in the payment of principal and/or interest due on any note, secured by said mortgage, all notes so secured and remaining unpaid shall forthwith become due and payable notwithstanding their tenor.

The court noted there is a conflict in decisions outside this jurisdiction, and it adopted a view which since has been followed in this state. That is, if a promissory note contains language which accelerates the total indebtedness on the happening of a default in a installment payment due thereunder, but it does not contain language which expressly gives the holder or payee of the note the option to accelerate the total indebtedness, then, it will be treated as absolute. Absent proof of waiver by mutual assent or acquiescence, (which are not relevant to this case) the full indebtedness becomes due or "matures" when a default occurs.

The Baader court said it was necessary to give the words in an instrument their full and plain meaning, and no more. If the note does not contain language giving the holder the option to accelerate, then the court should not read optionality into it. Rather it said, a court should give effect to the express intent of the parties, citing to Fischer v. Wood, 119 S.W.2d 114 (Tex.App.1938).

Applying Baader to this case, the note has no optional acceleration provision.⁴ Thus the note matured and the full amount represented by the note went into default on October 4, 1990, based on its express terms. No demand or notice was necessary.

The second issue in this case is whether the note contains an acceleration provision. In order to accelerate the total indebtedness due on an installment note, after default on an installment, the note must contain an acceleration provision. Florida Zippo, Inc. v. Prudential Ins. Co. of America, 579 So.2d 192 (Fla. 3d DCA), rev. denied, 589 So.2d 290 (Fla.1991); 11 Am-Jur.2d Bills & Notes § 194; 10 C.J.S. Bills & Notes § 92. Whether an acceleration clause exists is governed by the law of contracts.⁵ It is the trial court's responsibility to construe the language of a...