The Pennsylvania Supreme Court has agreed to hear an appeal in Osprey Portfolio, LLC v. Izett, on the issue of the applicable statute of limitations for a loan guaranty that is signed under seal. In Osprey, the lender argued that a guaranty is an "instrument" which, if signed under seal, is governed by a 20-year statute of limitations pursuant to 42 Pa. C.S. 5529. The guarantor argued that a guaranty is merely a "contract" which is governed by a four-year statute of limitations pursuant to 42 Pa. C.S. 5525.
Since the statute of limitations does not provide a definition of an “instrument”, the determination of which timeframe is applicable hinges on whether the standard Black’s Law Dictionary definition of “instrument”, being a written document that defines rights, duties, entitlements and obligations of the parties, or the Uniform Commercial Code definition of an “instrument”, being a negotiable instrument (for payment of a fixed amount of money), is used. Both the trial court and the Superior Court held that the ordinary meaning applied, and denied Izett’s Petition to Strike and/or Open a judgment confessed against him. However, in the event that the Supreme Court reverses, then lenders will need to act quickly to collect on guaranties that are approaching the four year mark. Presently, guaranty holders should review their guaranties, and carefully consider filing a claim if the four year period will expire in the near future.
Oral arguments on the appeal were scheduled to be held on November 28, 2012.