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Osprey Portfolio, LLC v. Izett

Supreme Court of Pennsylvania

May 28, 2013


ARGUED: November 28, 2012

Appeal from the Order of the Superior Court entered on 11/21/11 at No. 513 EDA 2011 which affirmed the order of the Chester County Court of Common Pleas, Civil Division entered on 1/10/11 at No. 2010-07295-JD




Appeal was allowed to determine the limitation period that applies to an action on a guaranty executed under seal.

Appellant, in his capacity as vice-president of Izett Manufacturing, Inc., executed a guaranty in connection with a loan agreement entered into by the company. The loan agreement entitled Izett Manufacturing to borrow up to $50, 000 and was secured by a promissory note. The note and the guaranty both were dated September 9, 1999, and, pursuant to the latter, Appellant personally guarantied the payment of all liabilities under the note, including attorney fees and other costs of collection. The guaranty included a confession of judgment clause and stated that it was "executed under seal, " with the designation "(SEAL)" as part of the signature line. By 2001, the company had borrowed $50, 000 under the agreement. At that time, Appellee Osprey Portfolio, LLC ("Osprey") purchased the loan and was assigned the note and guaranty. In late 2005, Osprey sent a letter to Izett Manufacturing, declaring the loan to be in default and demanding payment in full. The company failed to remit payment.

More than four years later, on June 15, 2010, Osprey filed a Complaint in Confession of Judgment against Appellant as the guarantor of the loan. The court entered judgment the same day in the amount of $85, 473.42, plus interest from March 31, 2010.[1] Thereafter, Appellant filed a Petition to Strike and/or Open Judgment, claiming, in relevant part, that Osprey's action was precluded by Section 5525(a)(8) of the Judicial Code, which establishes a four-year limitation period for

[a]n action upon a contract, obligation or liability founded upon a writing not specified in paragraph [(a)](7), under seal or otherwise, except an action subject to another limitation specified in this subchapter.

42 Pa.C.S. §5525(a)(8).[2]

In arguing that no other limitation period controlled, Appellant anticipated that Osprey would rely upon Section 5529(b), which provides as follows:

(1)Notwithstanding section 5525[(a)](7) (relating to four year limitation), an action upon an instrument in writing under seal must be commenced within 20 years.
(2)This subsection shall expire June 27, 2018.

Id. §5529(b). Appellant conceded that the guaranty was a writing under seal but maintained that it did not qualify as an instrument for purposes of Section 5529(b)(1). He asserted that the court should apply the definition of instrument found in Article 3 of the Uniform Commercial Code ("UCC"), which defines an instrument as "a negotiable instrument, " i.e., "an unconditional promise or order to pay a fixed amount of money." 13 Pa.C.S. §3104(a), (b). The guaranty does not fall within this definition, Appellant contended, because the company's default is a precondition of Appellant's obligation, and the amount of money involved is not "fixed, " as the note authorizes a loan of up to $50, 000. In support of his position, Appellant cited Cadle Co. v. Allshouse, No. 2006-2023, slip op. (C.P. Westmoreland May 16, 2007), aff'd, 959 A.2d 455 (Pa. Super. 2008) (table), in which the common pleas court, utilizing the UCC criteria, determined that an agreement for a line of credit did not qualify as an instrument under Section 5529(b)(1), because it was not for a fixed sum. Instead, the Cadle court applied the four-year period of Section 5525(a)(8), holding that the agreement was "a contract, obligation, or liability founded upon a written document." Cadle, No. 2006-2023, slip op. at 5 (citing 42 Pa.C.S. §5525(a)(8)).

The common pleas court denied Appellant's petition, explaining that, "[r]ead together, §5525(a)(7), (8) and §5529(b)(1) of the Judicial Code provide that certain instruments in writing which might otherwise be subject to a four-year statute of limitations are subject to a twenty-year statute of limitations if signed under seal." Osprey Portfolio, LLC v. Izett, No. 2010-07295, slip op. at 3 (C.P. Chester Mar. 1, 2011). Centrally, the court rejected Appellant's position predicated upon the UCC, observing that UCC Article 3 is specifically addressed to negotiable instruments, see 13 Pa.C.S. §§3101-3805; see also id. §3102(a) ("This division applies to negotiable instruments."), and, further, that the Article 3 definition of instrument is limited to that division only, see id. §3103(b) (including "instrument" in a list of "definitions applying to this division and the sections in which they appear"). The court distinguished Cadle, moreover, reasoning that that ...

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