Annette M. Besaw, Trustee of the Revocable Living Trust of Ernest P. Giroux v. Bryan GirouxAnnette M. Besaw, Trustee of the Revocable Living Trust of Ernest P. Giroux v. Bryan Giroux
NOTICE: This opinion is subject to motions for reargument under
Kevin E. Brown of Langrock Sperry & Wool, LLP, Middlebury, and Joseph D. Fallon, Hinesburg, for Plaintiff-Appellant.
James W. Runcie of Ouimette & Runcie, Vergennes, for Defendant-Appellee.
PRESENT: Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.
¶ 2. The relevant facts are not in dispute. Trustee Annette Besaw is the holder of a security interest in fifty shares of stock of the Champlain Bridge Marina, Inc. She acquired the interest previously held by Ernest Giroux upon his death, in her capacity as trustee of his living trust. Champlain Bridge Marina is a family business in Addison, Vermont. Ernest (defendant Bryan Giroux‘s grandfather) and Raymond Giroux (defendant‘s father) started it in 1987. In the beginning, grandfather and father each owned fifty of the Marina‘s 100 shares. On December 30, 1998, grandfather sold his fifty shares to father in exchange for the promissory note in which father promised to pay grandfather $272,000 plus interest. The associated January 1, 1999 security agreement gave
¶ 3. The promissory note required father to make monthly payments for thirty years until a maturity date of January 1, 2028, at which point any remaining indebtedness was to become due. It provided generally that “failure to make monthly payments in accordance with the amortization schedule . . . shall not be considered an event of default, and shall not cause any penalty to accrue.” However, if at the end of any year father owed more under the note than was due under the amortization schedule, that overdue balance triggered a penalty. If the overdue balance and penalty were not repaid before the end of the following year, the agreement provided that the nonpayment would constitute a default under the note.
¶ 4. The note further provided that “[i]n the event default is declared by the Noteholder, Noteholder shall provide written notice to Borrower of the facts and circumstances constituting any such default and shall permit Borrower to cure any such default within forty-five (45) days after Borrower‘s receipt of said notice of default.” It then provided that if the borrower failed to cure, the “Noteholder may, in his sole discretion, declare the amounts due under this Secured Promissory Note immediately due and payable without any further notice or demand, and Noteholder shall then have . . . the rights and remedies of a secured party under the common law and the Uniform Commercial Code of Vermont.” The security agreement defined default, triggering the noteholder‘s right to accelerate the debt on the note and to pursue the collateral, to include “[f]ailure to pay the Note in accordance with its terms.”
¶ 5. Father never made any payments on his debt under the promissory note. In 2005, father transferred to his son (Ernest‘s grandson), defendant Bryan Giroux, the fifty shares he had bought from grandfather—the collateral for father‘s debt to grandfather. The stock certificate issued to grandson states that it is “subject to a chattel mortgage” to grandfather. Grandfather died in 2007, after which trustee held the promissory note and associated security agreement in her capacity as trustee for grandfather‘s revocable living trust.
¶ 6. On September 11, 2008, trustee sent father a letter stating that no payments had been made under the note, and $207,440 was due. In the letter the trustee offered to restructure the indebtedness, and concluded by saying it was trustee‘s “hope and expectation to be able to work with [father] with respect to the repayment of the indebtedness” but that “if something cannot be worked out, [trustee would] resort to the remedies provided in the Secured Promissory Note.” Father made no payments.
¶ 7. On August 20, 2013, trustee sent father a second letter. This letter recounted that “[b]y letter dated September 11, 2008 . . . you were notified of interest and penalties due and owing under your Secured Promissory Note to your father‘s trust dated December 30, 1998.” It went on to say that “you are now in default under the terms of such Promissory Note. Demand is hereby made that all sums due and owing as set forth in the September 11, 2008 letter be paid in full within forty-five (45) days of your receipt of this notice of default.” It concluded that if father failed to cure in that time, trustee would declare all amounts due under the note “immediately due and payable without further notice or demand.”
¶ 8. Shortly after the forty-five-day cure period expired without any payments by father, trustee brought suit against father for the entire indebtedness under the note.
¶ 10. Grandson moved for summary judgment, arguing, among other things, that trustee‘s claim was barred by the general six-year statute of limitations under
¶ 11. The trial court denied grandson‘s motion for summary judgment in November 2017. The court concluded that the statute of limitations began to run when trustee sent father the September 2008 letter notifying him of his overdue balance and penalties due. It applied the eight-year statute of limitations for specialties to the security agreement, see
¶ 12. Grandson moved to reconsider, arguing that the court had erred in applying the eight-year statute of limitations for specialties instead of the general six-year limitations period pursuant to
¶ 14. On appeal, neither party challenges the trial court‘s ultimate application of the six-year general statute of limitations for civil actions. See
¶ 15. Trustee argues that under the terms of the promissory note and accompanying
¶ 16. Grandson argues that trustee did not properly preserve the argument that the statute did not begin to run until 2013, asserting that trustee did not make that argument until the second post-judgment motion for reconsideration. On the merits, grandson argues that the right to bring an action to collect collateral accrues when there is a default. Because, under the security agreement, a default was defined as “[f]ailure to pay the Note in accordance with its terms,” he argues father‘s default in this case—and thus grandfather‘s and later the trust‘s right to sue for the collateral—accrued as early as 1999, when father failed to begin making payments pursuant to the terms of the note. Grandson contends that the latest time the statute could have begun running was following father‘s failure to make any payments on the note after the trustee‘s September 2008 formal demand for payment. Even starting the clock at the latest possible time—one year from the September 2008 demand for payment—he argues the six-year limitations period had run before trustee filed this action in May 2016.
¶ 17. This Court reviews summary judgment decisions without deference, applying the same standard as the trial court. Lyons v. Chittenden Cent. Supervisory Union, 2018 VT 26, ¶ 12, 185 A.3d 551. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
¶ 18. We conclude that trustee‘s claim is not time-barred. The statute of limitations begins to run when a party‘s right to sue accrues—an event that is not always the same as the date of default. In assessing when trustee‘s right to sue for return of the collateral accrued in this case, we consider in tandem the plain language of the security agreement and the promissory note to which it was closely tied. We conclude that a cause of action under the security agreement for return of the collateral did not arise until the noteholder declared a default and provided notice of the forty-five-day cure period, and the borrower then failed to pay. Applying the contractual requirements to the facts in this case, the trustee‘s right to sue to enforce the security agreement accrued in 2013 when father failed to make any payments on the note after the trustee declared the default and gave father forty-five days to cure.1
¶ 20. The date the cause of action accrues is not necessarily the date of default; if the parties agree to make a default actionable only upon certain conditions, the statute of limitations will not start to run until those conditions are satisfied. See C & T Disc. Corp. v. Sawyer, 123 Vt. 238, 241–42, 185 A.2d 462, 465 (1962). In C & T Discount Corp., we considered when the statute of limitations began running on a payee‘s right to sue for nonpayment on a note. Much of the Court‘s discussion focused on when the right to sue arose under the specific language of the note in question. We explained, “[e]ven in the case of a demand note, limitations do not run if there is something in the note or in the circumstances under which it was given showing that actual demand or delay for payment was contemplated by the parties.” Id. at 240-41; 185 A.2d at 464. Accordingly, we must consider when, given the particular note and security agreement at issue in this case, trustee‘s actual cause of action to recover the collateral arose—a question that may or may not be the same as when father was in default under the terms of the note.
¶ 21. We interpret the promissory note and security agreement as we do all contracts; our goal is to effectuate the parties’ intent as expressed in their writing, according, whenever possible, to the plain meaning of the contract language. See Southwick v. City of Rutland, 2011 VT 53, ¶ 4, 190 Vt. 106, 35 A.3d 113.
¶ 22. Moreover, where parties execute multiple instruments at the same time for the same purpose, such as a promissory note and a security agreement, we read them together to discern the parties’ intent. Island Pond Nat. Bank v. Lacroix, 104 Vt. 282, 294-95, 158 A. 684, 690 (1932) (“When . . . the original note and mortgage were made at the same time, and in relation to the same subject, they are to be construed together as if they were parts of the same instrument . . . .“); see also Rounds, 2016 VT 102, ¶ 20 (“Instruments executed as part of the same transaction should be read together to discern the intent of the parties.“); O‘Brien Bros.’ P‘ship v. Plociennik, 2007 VT 105, ¶ 15, 182 Vt. 409, 940 A.2d 692 (“[T]wo instruments dealing with the same subject matter [which] are executed at the same time by the same parties . . . should be construed together.“); 11 R. Lord, Williston on Contracts § 30:26 (4th ed. 2018) (“[A]bsent anything to indicate a contrary intention, written instruments executed at the same time, by the same contracting parties, for the same
¶ 23. Reading the promissory note and security agreement together, and according to their plain language, we conclude that the right to sue for return of the collateral securing the note does not accrue until the borrower fails to pay the amounts due under the note forty-five days after trustee‘s declaration of default and notice of the right to cure. This conclusion follows from the plain terms of the promissory note, and our construction of the associated security agreement in light of the terms of the promissory note.
¶ 24. The promissory note does not confer on the noteholder a right to sue, or collect the collateral, solely on the basis of a default by the borrower. Instead, the note defines default to include failure to pay all sums due at maturity; failure to pay an overdue balance and penalty within a year from the date they are established;2 initiation of bankruptcy proceedings; and default under a security agreement. The note then expressly provides:
In the event default is declared by the Noteholder, Noteholder shall provide written notice to Borrower of the facts and circumstances constituting any such default and shall permit Borrower to cure any such default within forty-five (45) days after Borrower‘s receipt of said notice of default. In the event Borrower fails to cure any such default within the time period provided herein, Noteholder may, in his sole discretion, declare the amounts due under this Secured Promissory Note immediately due and payable without further notice or demand, and Noteholder shall then have in any jurisdiction where enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the common law and the Uniform Commercial Code of Vermont. [Emphasis added].
Accordingly, it is clear that trustee could not have sued father on the note merely on the basis of a default under the note. Before suing, trustee, as the noteholder, was first required to declare a default and to give father, as the borrower, notice of the default and the right to cure within forty-five days. Any suit before these conditions were satisfied would have been premature. This arrangement may be less common than a regime in which the cause of action for nonpayment accrues upon default, but it makes sense in the context of this intra-family deal. The parties’
arrangement provides extra protection for both parties—giving the noteholder the discretion to decide whether and when to declare a default and trigger the cure period, and giving the borrower an opportunity to cure.
¶ 25. The declaration, notice, and opportunity-to-cure conditions apply equally to a suit pursuant to the security agreement to collect the collateral that is predicated on a failure to pay sums due under the note. The security agreement identifies seven events that constitute defaults under the security agreement, and the form language provides that upon default the secured
¶ 26. First, the provision in the security agreement defining default as it relates to nonpayment on the note essentially incorporates by reference the requirements of the note itself, defining default as failure to pay the note ”in accordance with its terms.” (Emphasis added). The definition of “default” under the security agreement as it relates to a failure to pay on the note is thus informed by the terms of the note.
¶ 27. Second, the note requires the notice and opportunity to cure not only as a condition of the noteholder‘s right to sue on the note, but also as a prerequisite to exercise of “the rights and remedies of a secured party under the common law and the Uniform Commercial Code of Vermont.” The plain language of the note expressly requires the forty-five-day notice and opportunity to cure before the noteholder can pursue the security under the note. Grandson‘s reading, pursuant to which the security agreement independently affords a right to accelerate the sums due under the note and collect the collateral upon a failure to pay, without any notice and opportunity to cure, would create a square conflict between the terms of the note and the terms of the security agreement.3 In interpreting contracts, we try to “form a harmonious whole from the parts,” recognizing that “an interpretation which harmonizes all parts of the contract is preferable to an interpretation which focuses on one provision heedless of context.” In re Verderber, 173 Vt. 612, 615, 795 A.2d 1157, 1161-62 (2002) (mem.) (quotation omitted). We will not read one provision of the security agreement out of context as creating conflict with the note when we can read them as “a harmonious whole.” Id. 173 Vt. at 615, 795 A.2d at 1161.
¶ 28. Third, given the language of these instruments, where the action to collect the collateral is based on nonpayment of the note, as contrasted with, for example, an action impairing the collateral, the more reasonable interpretation is that a noteholder‘s right to sue for payment on the note and the noteholder‘s right to initiate an action to recover the collateral accrue at the same time. Otherwise, the borrower‘s right to notice and opportunity to cure would be meaningless. The noteholder could seize the collateral without giving the borrower any time to cure, and without even establishing a default as defined under the note. This scenario defies a straightforward reading of the note and security agreement.
¶ 29. Applying these considerations to the undisputed evidence here, we conclude that the statute of limitations did not begin
of limitations. Trustee‘s 2008 letter simply stated that no payment had been made under the promissory note, laid out the amounts currently due at that time, and offered to restructure the debt. It did not declare default or notify father that he had forty-five days to cure. In contrast, the 2013 letter declared “you are now in default . . . . Demand is hereby made that all sums due and owing as set forth in the September 11, 2008 letter be paid in full within forty-five (45) days of your receipt of this notice of default.” This fulfilled each of the preconditions to suit laid out in the promissory note—written notice outlining the facts underlying the default and providing a forty-five-day cure period. Under the parties’ agreement, once trustee sent her 2013 letter declaring default and providing a forty-five-day cure period, and father failed to cure, trustee gained “the rights and remedies of a secured party.”
¶ 30. As trustee filed this case in May 2016, less than three years after father‘s failure to pay the balance within forty-five days of trustee‘s 2013 letter, the action is not time-barred.
Reversed and remanded for further proceedings not inconsistent with this opinion.
FOR THE COURT:
Associate Justice