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Besaw v. Giroux

Supreme Court of Vermont

December 21, 2018

Annette M. Besaw, Trustee of the Revocable Living Trust of Ernest P. Giroux
Bryan Giroux

          On Appeal from Superior Court, Chittenden Unit, Civil Division Robert A. Mello, J.

          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.

          ROBINSON, J.

         ¶ 1. Trustee appeals from the superior court's ruling on summary judgment that her suit to recover collateral under a security agreement is time-barred. The central issue in this case is when the trustee's right to sue accrued, starting the statute-of-limitations clock. We conclude that trustee's right to sue under the security agreement accrued in 2013 when the borrower failed to pay the balance due on the note within forty-five days of trustee's notice of default and borrower's right to cure. Accordingly, we hold that her suit is not time-barred and reverse and remand.

         ¶ 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 grandfather a security interest in the fifty shares of Marina stock to secure payment on the note.

         ¶ 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. In 2015, the superior court entered judgment in favor of trustee, ordering father to pay the trust $540, 453.

         ¶ 9. Soon afterward, trustee sent a letter to grandson, citing the court's judgment against father on the note and demanding that grandson give the trust the share certificate that had secured the indebtedness. Grandson did not deliver the share certificate. In May of 2016, trustee filed this lawsuit against grandson, seeking an order compelling ...

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