The opinion of the court was delivered by: Munson, District Judge.
MEMORANDUM-DECISION & ORDER
Before the court at this time are defendant's motion to
dismiss and the United States' motion for a protective order
and for summary judgment. The court heard argument on February
16, 1990 in Syracuse, New York. For the reasons stated in this
opinion the court denies defendant's motion to dismiss and
grants the United States' motion for summary judgment.*fn1
The basic facts in this case are not in dispute. The United
States seeks to recover for defendant's default on two
promissory notes which the defendant signed with the Department
of Housing and Urban Development (HUD). The first note was
executed on November 7, 1980 in the amount of $28,100. The
second note was executed on March 3, 1981 in the amount of
$45,300. Both loans were to be paid in regular monthly
installments and contained acceleration clauses which permitted
the government, at its option, to demand payment of the note's
total unpaid principal if any installment was unpaid at the
time the next installment became due. Plaintiff's Memorandum of
Law, Exhibit A & B, Doc. 20. The first loan payment on the
November 7, 1980 loan was due December 1, 1980. The first loan
payment on the second loan was due April 1, 1981. Defendant
admits that he never made any of the required payments under
either loan.*fn2
On March 20, 1984, HUD sent defendant a letter informing him
that it was accelerating on the first loan for non-payment. On
August 1, 1985, HUD sent defendant a similar letter with regard
to the second loan. Defendant contends that he never received
either letter since both were sent to the mortgaged property
rather than to his legal residence.
The government initiated the present action on August 4,
1988. Subsequently, the court permitted the government to amend
its complaint in an Order filed May 12, 1989. See Doc. 8. The
amended complaint only seeks personal judgment against
defendant. The original complaint also sought foreclosure on
the mortgaged properties but this claim was dropped when
subsequent to the initiation of this action the City of
Syracuse foreclosed on the
property for failure to pay taxes. See Affidavit of William H.
Pease ¶ 6, Doc. 6.
The central issue raised by the motions before the court is
whether this action was timely commenced under the applicable
statute of limitations. Both parties agree that a six year
statute of limitations applies to the present action. This
limitation period is found in 28 U.S.C. § 2415(a) which
provides in relevant part that "every action for money damages
brought by the United States or an officer or agency thereof
which is founded upon any contract express or implied in law or
fact, shall be barred unless the complaint is filed within six
years after the right of action accrues. . . ." The legal
dispute in this case involves the question of when the
government's right of action accrued. The government contends
that the statute of limitations began to run on the unpaid
future installments when HUD notified defendant by letter that
it was accelerating the loans, which as noted above was March
20, 1984 and August 1, 1985 respectively. However, the
government asserts that since each installment payment
constitutes a separate contract, with regard to all
installments which were unpaid as of March 20, 1984 and August
1, 1985, it can recover only those installments which came due
six years prior to the commencement of this action on August 4,
1988. Accordingly, the government concedes that it may not seek
recovery on any unpaid installments that became due prior to
August 4, 1982. By contrast, defendant contends that the
government's right of action accrued upon defendant's initial
default on each loan. Since defendant failed to make any
payments on either loan, he argues that the statute of
limitations began running on December 1, 1980 with regard to
the first loan and April 1, 1981 with regard to the second
loan. Consequently, defendant argues that the government's
entire action is time barred under 28 U.S.C. § 2415(a).
This court's review of the case law reveals that the
government's right of action accrues in a case such as this
when the government first makes a demand for payment in full.
In United States v. Alessi, 599 F.2d 513 (2d Cir. 1979) (per
curiam), the Second Circuit held that if the terms of the
agreement provide that the principal does not become due until
the government chooses to accelerate, then under 28 U.S.C. § 2415(a)
the government's right of action accrues not at the
time of default but when the government exercises its right to
accelerate. The court further noted that, "Such acceleration
must consist of either notice of election to the mortgagor or
of some unequivocal overt act (such as initiating a foreclosure
suit) manifesting an election in such a way as to entitle the
mortgagor, if he desires, to discharge the principal of the
mortgage." (emphasis in original); see also United States v.
Lowy, 703 F. Supp. 1040, 1043 (E.D.N.Y. 1989) (holding that the
government's "demand letters triggered the running of the
statute").
In the present case, as noted, the government sent defendant
letters informing him that it was accelerating the total unpaid
amount of each loan. Although defendant claims that he never
received any notice of the government's acceleration because
the letters were sent to the mortgaged property rather than his
legal residence, it is clear that at least with respect to the
1984 letter the notice was sent to the address which was listed
as defendant's residence in the mortgage document, namely,
Paradice Road, Central Square, New York 13036.*fn3
See Complaint, Exhibit 2, Doc. 1. Even if this was no longer
defendant's residence, defendant can not insulate himself from
liability simply by changing residences without notifying the
government. Moreover, even assuming that the government did not
sufficiently notify defendant of its election to accelerate
prior to commencing this action, this does not help defendant.
In Alessi the court held that the initiation of suit
constituted a notice of election to accelerate which acted to
trigger
the statute of limitations. Accordingly, whether the government
manifested its election to accelerate in 1984 and 1985 or at
the time it initiated this suit, under the reasoning of the
court's decision in Alessi the government commenced this suit
within six years of the accrual of its right of action.
Defendant also argues that it would be unfair to allow the
government to recover in this action when it did not act
promptly upon defendant's default in accelerating on the loans
and then commencing this action. The court notes that recent
decisions from other jurisdictions add the requirement that for
the cause of action to accrue on the first demand for full
payment, the demand for payment must be made within a
reasonable time. See United States v. Rollinson, 866 F.2d 1463,
1466 (D.C. Cir.), cert. denied, ___ U.S. ___, 110 S.Ct. 71, 107
L.Ed.2d 37 (1989): Curry v. United States, 679 F. Supp. 966, 970
(N.D.Cal. 1987); but see United States v. Lowy, 703 F. Supp. 1040,
1043 (E.D.N.Y. 1989) (refusing to follow the rule that
the first demand come within a reasonable time). This
requirement appears to have been added so that the lender would
not be in a position to inordinately postpone operation of the
statute of limitations.*fn4
Even if this court were to inject a reasonableness
requirement into the Alessi rule, this court is unwilling to
find that the government's delay either in providing notice of
acceleration or in commencing this action was unreasonable
under the circumstances. Although the stated facts in Alessi
are not entirely clear, it appears that the government in that
case gave notice of its acceleration at least five and a half
years after the initial default. See United States v. Alessi,
599 F.2d at 515 n. 4. In the present case, the government gave
notice of its acceleration approximately three years and four
months after defendant's default on the first loan and four
years and four months after defendant's default on the second
loan. Furthermore, because both notes provided in express terms
that the "[f]ailure of the Government to exercise [the
acceleration] option shall not constitute a waiver of such
default," defendant's subjective belief, or hope, that the
government no longer intended to seek repayment on the loans as
a result of its delay, and that he might thereby avoid his debt
was unjustified. Finally, since defendant has not articulated
any tangible prejudice which he has suffered as a result of the
government's delay,*fn5 to permit defendant to shirk his
financial obligation would be to provide him with a windfall at
the expense of the public fisc. The court refuses to sanction
such a result.
Accordingly, the court grants the government's motion for
summary judgment and denies defendant's motion to dismiss. The
government is directed to submit a proposed order setting forth
the total amount claimed in light of the foregoing decision.
Such order should include a statement indicating how the amount
claimed was calculated and a direction to the clerk of the
court to enter judgment in accordance with the terms of the
order.