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Diversified Fin v. Schanhals

Michigan Court of Appeals
Feb 8, 1994
203 Mich. App. 589 (Mich. Ct. App. 1994)

Summary

providing that the limitations period began to run when the guarantors failed to tender the amount owed after promisor defaulted on its promissory note and a demand for payment was made

Summary of this case from Arcelormittal Plate LLC v. Lapeer Indus.

Opinion

Docket No. 148183.

Submitted November 9, 1993, at Grand Rapids.

Decided February 8, 1994, at 9:50 A.M.

Freeman McKenzie (by Larry E. Powe and James T. Hogan), for the plaintiff.

Parmenter O'Toole (by Foster D. Potter), for Richard and Nan Schanhals.

Vander Ploeg, Ruck, Luyendyk Wells (by Allan E. Vander Ploeg), for Raymond and Jean Scroggins, and Joan Nedeau.

Running, Wise, Wilson, Ford Phillips (by Richard Ford), for Suzanne Putney.

Before: McDONALD, P.J., and MURPHY and TAYLOR, JJ.


Plaintiff appeals as of right from a December 19, 1991, judgment granting defendants' motion for summary disposition pursuant to MCR 2.116(C)(7). We affirm.

Plaintiff sued defendants in their capacity as guarantors of a promissory note executed by a partnership known as Cherries Jubilee in favor of the National Bank and Trust Company of Traverse City. The note, executed by Jubilee on February 5, 1979, was to be paid over a six-year period with the final payment due in September 1985. Jubilee failed to make the first installment payment on the note in 1980 and the bank brought suit against Jubilee and its general partners and their spouses as guarantors. Shortly thereafter, Jubilee filed for chapter eleven bankruptcy and the bank's suit was dismissed without prejudice. The bank began experiencing financial difficulties and plaintiff ultimately purchased the note from the Federal Deposit Insurance Corporation after the bank closed.

Plaintiff then filed the instant suit. Defendants moved for summary disposition pursuant to MCR 2.116(C)(7), claiming the suit was barred by the six-year statute of limitations of MCL 600.5807(8); MSA 27A.5807(8), because the bank had accelerated the balance due on the note in 1980 when it filed suit. Defendants also claimed that plaintiff could not sue for a deficiency judgment because the bank had repossessed and sold defendants' collateral without giving them notice as required under the Uniform Commercial Code. The trial court granted defendants' motion on both grounds. Plaintiff now appeals.

We find no error in the court's grant of summary disposition in favor of defendants. When reviewing a motion for summary disposition granted pursuant to MCR 2.116(C)(7), we must accept the plaintiff's well-pleaded allegations as true and construe them in a light most favorable to the plaintiff. Grazia v Sanchez, 199 Mich. App. 582; 502 N.W.2d 751 (1993). Here, the record supports the trial court's finding that the six-year period of limitation began running with regard to the note in 1980 when the bank filed suit seeking to enforce the acceleration clause contained in the note executed by defendants and to enforce the guaranty contracts. Because acceleration of the underlying note gave rise to a claim for the entire balance due, the period of limitation began to run with regard to the note at that time. Sparta State Bank v Covell, 197 Mich. App. 584; 495 N.W.2d 817 (1992).

We also find acceleration of the note triggered the running of the period of limitation with regard to the guaranty contracts. See Aiton v Slater, 298 Mich. 469; 299 N.W. 149 (1941). Defendants were in breach of the guaranty contracts when they failed to tender the $50,000 owed under the contracts after Jubilee defaulted on its promissory note and the bank brought suit to enforce acceleration of the note and to enforce the guaranty contracts. Typically in contract actions, the period of limitation begins to run on the date of the breach of contract. Harris v Allen Park, 193 Mich. App. 103; 483 N.W.2d 434 (1992).

Plaintiff's objection to the court's granting summary disposition based upon the bank's failure to give defendants reasonable notice of the sale of the collateral lacks merit. Plaintiff attempts to apply a holder in due course analysis to the guaranty contracts. Contracts of guaranty are not negotiable instruments, Aiton, supra, to which the Uniform Commercial Code's holder in due course analysis applies.

Plaintiff's final claim is also without merit. Plaintiff's argument is based on a grant of summary disposition pursuant to MCR 2.116(C)(10). Here, the trial court granted summary disposition pursuant to defendants' motion under MCR 2.116(C)(7).

Affirmed.


Summaries of

Diversified Fin v. Schanhals

Michigan Court of Appeals
Feb 8, 1994
203 Mich. App. 589 (Mich. Ct. App. 1994)

providing that the limitations period began to run when the guarantors failed to tender the amount owed after promisor defaulted on its promissory note and a demand for payment was made

Summary of this case from Arcelormittal Plate LLC v. Lapeer Indus.

applying six-year period of limitations in MCL 600.5807 to "guarantors of a promissory note" and indicating that "[c]ontracts of guaranty are not negotiable instruments"

Summary of this case from Devries v. JDB Prop. Dev., LLC (In re Van Slooten Revocable Living Tr.)
Case details for

Diversified Fin v. Schanhals

Case Details

Full title:DIVERSIFIED FINANCIAL SYSTEMS, INC v SCHANHALS

Court:Michigan Court of Appeals

Date published: Feb 8, 1994

Citations

203 Mich. App. 589 (Mich. Ct. App. 1994)
513 N.W.2d 210

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