Santini v. Fritkin

• Decision Date: 01 December 1965
• Docket Number: No. 14,14
• Citation: 240 Md. 542,214 A.2d 578
• Parties: Anthony P. SANTINI, v. Benjamin FRITKIN et ux.
• Court: Maryland Court of Appeals

Page 542

240 Md. 542

214 A.2d 578

Anthony P. SANTINI, v. Benjamin FRITKIN et ux.

No. 14.

Court of Appeals of Maryland.

Dec. 1, 1965.

Jack Pinkston, Silver Spring, for appellant.

Louis H. Cohen, Silver Spring, for appellees.

Before PRESCOTT, C. J., and HAMMOND, HORNEY, OPPENHEIMER and McWILLIAMS, JJ.

HORNEY, Judge.

This appeal presents a question as to what effect the foreclosure of a chattel deed of trust given to secure the payments of a promissory note containing an optional acceleration clause had on the running of the statute of limitations in an action brought to recover the balance due on the note.

The cause of action arose out of the sale of a grocery business to Benjamin and Rose Fritkin (defendants-appellees) by Anthony Santini (plaintiff-appellant) and his wife in October of 1958. Since only a part of the consideration was paid in cash, the Fritkins executed their promissory note to the Santinis on October 6, 1958, for the balance of $4500 with interest at six per cent. The note provided that the principal and interest would be payable in monthly installments of $200 until paid in full with the first payment due on December 6, 1958, and subsequent payments due on the 6th day of each succeeding month. It further provided that if the payment of any installment was in default, the unpaid balance of the principal and accrued interest should, at the option of the holder thereof, at once become due and payable.

The promissory note, as above stated, was secured by a chattel deed of trust, covering the stock in trade, equipment and fixtures, which provided that should default be made by the Fritkins in the payment of any installment, or should the security thereby provided become endangered for any of the reasons stated in the deed of trust, the trustees were authorized to take immediate possession of the goods and chattels and personal property, and to sell the same at public auction, upon such terms and after such public notice as the trustees should deem advantageous and proper; and out of the proceeds pay: first, all costs, charges and expenses, including the trustees' commissions; second, 'whatever may then remain unpaid of said note, whether the same be due or not'; and last, any surplus to whomsoever was entitled to the same.

The Fritkins paid the first three installments in full but defaulted in the payment due on March 6, 1959, in that it was not the full amount ($150 was paid instead of $200) and was not made until April 2, 1959. Thereafter no voluntary payments were made on the note by the Fritkins and on May 15, 1959, the trustees took possession of the property covered by the deed of trust and sold it. On May 25, 1960, the entire net proceeds of sale were credited to the note. No part of the balance due on the note having been paid by the Fritkins, Anthony Santini, who had become the only holder of the note, filed suit on October 19, 1962, to collect the balance due of $1754.92 with interest.

At the lower court hearing on the motion of Santini for a summary judgment, the Fritkins, asserting that the cause of action accrued as of the time the deed of trust was foreclosed, claimed that collection of the note was barred by limitations. The lower court found 'that the creditor [Santini] exercised his prerogative under the deed of trust and [that] the tolling of the statute then began.' This appeal followed.

With regard to a promissory note which contains a provision accelerating its maturity at the option of the holder upon the nonpayment of interest or principal or other default, the applicable rule of law is that the holder must take some affirmative action which indicates an election to take advantage of the acceleration provision and until such action has been taken the note does not become due and payable in advance of the time or times specified in the note. When, however, the holder takes positive action indicating that he has elected to exercise the option, then the full amount of the unpaid balance of principal and accrued interest becomes immediately due and payable and the statute of limitations begins to run from that time. ...