by Bianca A. Roberto, Esq.
Ever wonder how long you have to execute on a guaranty that is signed under seal in connection with a loan or other agreement? Well, the Supreme Court of Pennsylvania finally answered question in Osprey Portfolio, LLC v. Izett, 2013 Pa. Lexis 1037. In its May 28, 2013, opinion, the court held that a guaranty that states that it is “executed under seal” is an “instrument in writing under seal,” and is subject to the 20-year statute of limitation period set forth in Section 5529(b)(1) of the Judicial Code of Pennsylvania.
In Osprey Portfolio, a creditor confessed judgment against a personal guarantor on a commercial loan to recover a debt owed to it. The trial court entered judgment of more than $85,000 against the guarantor and in favor of the creditor. On appeal, the guarantor sought to open and/or strike the judgment arguing the creditor’s claim was barred by the statute of limitations because it was brought more than four years after the statute of limitations period to bring an action based upon “a negotiable or nonnegotiable bond, note or other similar instrument in writing” ended. The creditor argued that the 20-year statute of limitations period for instruments under seal applied in this instance, and not the four- year limitations period for negotiable or non-negotiable instruments. The document at issue in this case was guarantor’s personal guaranty of a commercial loan that included a confession of judgment clause, and stated that it was “‘executed under seal,’ with the designation ‘(SEAL)’ as a part of the signature line.” The appellate court agreed with the creditor and denied the guarantor’s appeal. The guarantor fared no better on appeal to the Pennsylvania Supreme Court. The Court agreed with the lower courts’ finding that the creditor has 20 years to enforce the obligation, and further, that a guaranty is an “instrument” — i.e., a “document defining a guarantor’s liability for another’s debt and a creditor’s concomitant right to recover from the guarantor if the debtor does not pay” – and that the instrument does not have to be a “fixed” obligation as defined in the Uniform Commercial Code.
So, why is this decision so important? Because it tells us that the inclusion of one short word gives creditors, or anyone writing a financial document for that matter, a quick, cost-effective and valuable way to bolster the enforceability of their contracts or other agreements, and to make their deals look more marketable later down the road when they seek to transfer those obligations to another person or entity.
For further information about enforcing commercial agreements, contact Bianca A. Roberto at Stark & Stark by e-mail at broberto@stark-stark.com or by phone at 267-907-9600. www.stark-stark.com.
