Trigg v. Arnott

California Court of Appeal Aug 28, 1937 No. Civ. 2015Published

Before: Jennings

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Holding. The court held that a promissory note containing both installment payment terms and an optional acceleration clause is not a simple demand note, and the statute of limitations does not begin to run on the entire debt upon a default unless the holder exercises the option to accelerate. Consequently, the statute of limitations bars recovery only for those specific installments of principal and interest that became due more than four years prior to the filing of the action.

Issues

Whether a promissory note containing both demand language and installment payment terms should be construed as a simple demand note.
Whether an optional acceleration clause in a promissory note is self-operative for the purpose of triggering the statute of limitations upon a default.
Whether the statute of limitations bars recovery for the entire debt or only for individual installments that matured more than four years before the action was filed.

Disposition. reversed

Quotations verified verbatim against the opinion

“Taking the note in its entirety it is clear that the instrument is one which is payable in specified monthly instalments and that only in ease of a default in such payments shall it be considered a demand note.”

“The very language of this provision indicates that it was not the intention of the parties to the instrument that the acceleration clause should be self-operative”

“Without some affirmative action on the part of the holder of a note containing an optional acceleration clause the statute of limitations is not set in motion”

JENNINGS, J.

On November 16, 1935, plaintiff instituted this action against the defendants to recover the sum of $1857.29 'principal and interest and $125 attorney’s fee upon a promissory note. The answer of the defendant, M. C. Mac-Donnell, set up the defense that the cause of action alleged in the complaint was barred as to her by the statute of limitations—subdivision 1 of section 337 of the Code of Civil Procedure. Trial of the action resulted in the entry of a judgment in favor of the above-mentioned defendant. The basis of the judgment is a finding made by the trial court sustaining the defense of the statute of limitations. From this judgment plaintiff appeals.

The complaint alleged that the note was executed by John G. MacDonnell, who died on May 25, 1935, and whose estate is being administered by the defendant Bessie Rowntree Arnott. The instrument was admitted in evidence during the trial and is in the following language:

“Waialua, March 5, 1931

“On demand after date, for value received, I promise to pay to The Bank of Hawaii, Ltd., or order, at its office in the above place, Eighteen Hundred & 00/100 Dollars ($1800.00) with interest thereon from date until fully paid, at 8% per annum net above taxes payable monthly.

“It is also conditioned that monthly installments shall be paid in sums of not less than $100.00 each, on the 5th day of April, 1931, and on the same date in each and every month thereafter, to be applied on principal.

“Principal and interest payable in U. S. Gold Coin or equivalent. In case of default in any payment of interest or principal the entire debt shall immediately become due and payable at the option of the holder hereof. Should any suit

[457]

for collection be instituted the undersigned shall also pay the costs of collection including a reasonable attorney’s fee.

“ (Signed) John G. MacDonnell.

“The undersigned as endorsers jointly and severally hereby agree to all the terms of all obligations entered into by the maker hereof in this instrument, hereby waiving presentment, demand of payment, protest, notice of nonpayment and of substitution or change of securities, and consent to the extension hereof without notice.

Trigg v. Arnott

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JENNINGS, J.

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