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Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 

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PUBLISH 

UNITED.STATES COURT OF APPEALS 

TENTH CIRCUIT 

ROBERT I. GREENBERG; ROSE GREENBERG; 

MAYNARD GREENBERG, as Co-Trustees 

of the Mal Greenberg Testamentary 

Trust, 

Plaintiffs-Appellees, 

FI Lt b 

United St1;1ttt& CHU~·f 11f Appeals 

'fenth Cir··.~;.1it 

AUG l 7 1909 

ROBER"!' L J.IOECI(ER 

Clerk 

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No. 88-1636 

SERVICE BUSINESS FORMS INDUSTRIES, 

INC.; SERVICE COMPUTER FORMS 

INDUSTRIES, INC., 

Defendants-Appellants. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

(D.C. No. 86-2769-A) 

John T. Edwards (Sarah H. Stuhr with him on the brief) of Monnet, 

Hayes, Bullis, Thompson & Edwards, Oklahoma City, Oklahoma, for 

the Plaintiffs-Appellees. 

Richard C. Ford (J. Clay Christensen with him on the brief) of 

Crowe & Dunlevy, Oklahoma City, Oklahoma, for the DefendantsAppellants. 

Before LOGAN, BRORBY, and EBEL, Circuit Judges. 

PER CURIAM 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 1 
Service Business Forms Industries, Inc. (Service Business) 

and Service Computer Forms Industries, Inc. (Service Computer), 

defendants, appeal the district court's order granting plaintiffs 

partial summary judgment on their claim for recovery of an 

accelerated debt allegedly due under Service Business' promissory 

note. The district court determined that there were no material 

issues of fact as to Service Business' default under the terms of 

the promissory note and that plaintiffs properly exercised their 

right to accelerate the unpaid principal balance and accrued 

interest. On appeal, defendants contend there are genuine issues 

of fact regarding each of its defenses. 

Plaintiffs are co-trustees of the Mal Greenberg Testamentary 

Trust (the Trust). On October 29, 1982, plaintiffs entered into a 

stock redemption agreement with Service Computer, a Nevada 

corporation presently owned and operated by Carolyn and Laurance 

Wolfberg. The Wolfbergs are the sister and brother-in-law of 

Robert Greenberg (Greenberg), a plaintiff and a trustee of the 

Trust. Under the stock redemption agreement, the Trust 

transferred all the shares it owned in Service Computer back to 

the company in exchange for $102,000. Of this amount, $2,000 was 

to be paid at closing and $100,000 was to be paid pursuant to the 

promissory note at issue here. 

Pursuant to the stock redemption agreement, Service Business, 

an affiliate of Service Computer which is also operated by the 

Wolfbergs, executed a $100,000 promissory note on October 29, 

1ga2, the closing date of the stock redemption agreement. The 

note provided for annual payments to be calculated on a 

2 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 2 
twenty-year amortization schedule with full payment to be made on 

the tenth anniversary of the note's execution. The note further 

stated that the Trust had the option to accelerate the debt and 

demand full payment if Service Business defaulted on any of its 

obligations under the note. The note did not specify a specific 

due date for the annual payments. In addition to this written 

agreement, Service Business alleged that Greenberg promised to 

execute a disclaimer of any interest he had as a beneficiary under 

the Trust. Greenberg denied that he ever made such an agreement. 

By April, 1986, Service Business had made only one payment on 

the note, in the amount of $5,000. As a result of further 

negotiation between the parties, Greenberg executed a written 

disclaimer in favor of Service Computer under which Greenberg 

disclaimed any interest he might have through inheritance in the 

family jewelry. The disclaimer was conditioned on Service 

Business' payment of all past due amounts owing under the 

promissory note and upon its "timely payment" of all future 

installments. The disclaimer also failed to designate a specific 

date for the future annual payments. Thereafter, Service Business 

paid $43,231.86 on June 26, 1986, which included partial payment 

of the 1986 installment. On November 6, 1986, not having received 

the payment from Service Business which they considered due on 

October 29, 1986, plaintiffs sent Service Business a notice of 

their intention to accelerate payment of the note. On 

November 14, 1986, and again on October 29, 1987, Service Business 

tendered payment of the installment amount owing, calculated as of 

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Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 3 
the anniversary date of the note. On both occasions, plaintiffs 

refused to accept the payments. 

Plaintiffs brought this action to recover the accelerated 

amount of the principal and accrued interest under the note. In 

its answer, defendants raised several defenses, including waiver, 

estoppel, and lack of default under the terms of the note. 

Defendants also filed a counterclaim, alleging failure of 

consideration by virtue of Greenberg's refusal to execute a 

disclaimer of any interest in the Trust funds. Plaintiffs moved 

for summary judgment and, after a hearing, the district court 

granted partial summary judgment in their favor. The court found 

that the terms of the contract clearly designated the payments to 

be due on October 29th of each year, by virtue of the date of the 

note's execution and the fact ·that annual payments were calculated 

on the basis of a twenty-year amortization. The court further 

held that there were no material issues of fact as to waiver, 

estoppel, or default and found that Business Service had defaulted 

on its payment obligations, that the Trust had the right to 

accelerate the balance owing upon default, and that the Trust 

properly exercised its right to accelerate. The court ruled, 

however, that there were material issues of fact regarding the 

issue of whether Service Business received full consideration for 

the stock 

allegedly 

redemption 

failed to 

agreement with the Trust because Greenberg 

issue a disclaimer of any interest as 

beneficiary under the Trust. This last issue was presented to the 

jury, which returned a verdict in favor of Greenberg and the 

Trust. 

4 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 4 
On appeal, Service Business contends that there are several 

genuine issues of fact which precluded the granting of partial 

summary judgment. First, Service Business contends that it did 

not default on its obligations under the note because the document 

did not specify a date on which payment was due, and argues under 

Oklahoma law that payment was thereby due within a reasonable 

time. We disagree. Oklahoma statute dictates that contracts are 

to be interpreted according to the intent of the parties at the 

time the instrument was executed. Okla. Stat. tit. 15, §§ 152, 

153 (1981). Intent must be determined by construing the contract 

as a whole, and the court must construe the contract so as to give 

effect to each provision. Amoco Prod. Co. v. Lindley, 609 P.2d 

733, 741 (Okla. 1980). The language of the note setting the date 

of final payment as October 29, 1992, and the method for 

calculating the amount of annual payments clearly indicate that 

the parties' intended that payments were to have been made on the 

anniversary date of the note. 1 

Second, Service Business asserts that plaintiffs did not 

accelerate the note in good faith. Service Business claims the 

duty of good faith arises both under the Uniform Commercial Code 

1 Service Business relies on Okla. Stat. tit. 15, § 173 (1981), 

which states that the law implies a reasonable time for payment 

when no date is provided for performance of a contractual 

obligation. But the law implies a reasonable time for payment 

only when the contract is ambiguous and the intention of the 

parties cannot be determined from the express language and terms 

of the contract. See id. § 154; Lindhorst v. Wright, 616 P.2d 

450, 453 (Okla. App. 1980). Because the terms of the agreement as 

a whole clearly indicate a time for payment, this rule cannot 

appropriately be applied to the promissory note at issue in this 

case. 

5 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 5 
(UCC), Okla. Stat. tit. 12A, § 1-208 (1981), and under the common 

law doctrine of good faith in the performance of a contract. 

Section 1-208 provides: 

Id.; 

44-45 

that 

the 

A term providing that one party •.• may accelerate 

payment or performance or require collateral or 

additional collateral "at will" or "when he deems 

himself insecure" or in words of similar import shall be 

construed to mean that he shall have power to do so only 

if he in good faith believes that the prospect of 

payment or performance is impaired. The burden of 

establishing lack of good faith is on the party against 

whom the power has been exercised. 

see also Mitchell v. Ford Motor Credit Co., 688 P.2d 42, 

(Okla. 1984)(acceleration by a secured party). In finding 

plaintiffs properly exercised their power of acceleration, 

district court implicitly found that the good faith 

requirement set forth in § 1-208 does not apply to notes that 

permit acceleration at the option of the holder upon default by 

the debtor. We agree. 

The only Oklahoma case we have located which addresses the 

question of whether the good faith requirement under the UCC 

applies to acceleration on default clauses is Knittel v. Security 

State Bank, Mooreland, Okla., 593 P.2d 92 (Okla. 1979). The case 

did not directly address the issue; however, it upheld a 

challenged jury instruction which stated that the good faith 

requirement under§ 1-208 did not apply to an acceleration on 

default clause. Id. at 97. Because a court must determine 

whether a challenged jury instruction properly states the 

applicable law, see Big Horn Coal Co. v. Commonwealth Edison Co., 

852 F.2d 1259, 1271 (10th Cir. 1988), it logically follows that 

6 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 6 
Knittel supports the position that the UCC good faith requirement 

does not apply to acceleration on default clauses. 

Several states have similarly held that the UCC good· faith 

requirement is not applicable when the acceleration clause is 

based on an event in the debtor's complete control. ~ Brummund 

v. First Nat'l Bank, 99 N.M. 221, 656 P.2d 884, 887 (1983)(relying 

on North Carolina law); Bowen v. Danna, 276 Ark. 528, 637 S.W.2d 

560, 564 (1982); In re Sutton Invs., Inc., 46 N.C. App. 654, 266 

S.E.2d 686 7 690 (1980); Crockett v. First Fed. Sav. & Loan Ass'n, 

289 N.C. 620, 224 S.E.2d 580, 588 (1976). But see Brown v. AVEMCO 

Inv. Corp., 603 F.2d 1367, 1375-80 (9th Cir. 1979)(comparing the 

applicability of UCC § 1-208 on "default" acceleration clauses as 

opposed to "insecurity" acceleration clauses under Texas law). 

Because of the ruling in Knittel and the general consensus in 

other jurisdictions, we conclude that Oklahoma would not apply the 

good faith requirement in§ 1-208 to the acceleration on default 

clause at issue in this case. 

Service Business also claims that plaintiffs failed to 

perform their contract in good faith under common law equitable 

principles. Service Business relies on Brown v. AVEMCO Inv. 

Corp., in which the Ninth Circuit applied the common law doctrine 

of good faith to a due-on-lease clause contained in a security 

agreement executed in conjunction with a promissory note. 2 603 

2 Under the security agreement, the creditor, AVEMCO, had the 

option to accelerate the entire debt if the debtor leased the 

property, an airplane, without its written consent. In 1973, the 

debtor leased the airplane to a third party and also executed an 

option to purchase. The debtor sent notice of the agreement to 

AVEMCO. Two years later, the lessee exercised its option to 

(continued on next page) 

7 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 7 
F.2d at 1375-79. In reversing a jury verdict in favor of the 

creditor, the court noted that, under Texas law, acceleration 

clauses are designed to protect a creditor from conduct or events 

that jeopardize or impair the creditor's security. Id. at 1376. 

The court held that the jury should have been instructed on the 

issue of the creditor's good faith in exercising the due-on-lease 

clause when evidence existed that it inequitably desired to take 

advantage of a technical default, not because it in good faith 

feared its security was impaired. Id. at 1379. This decision was 

based on Texas case law which clearly mandated that equitable 

considerations should be applied when a creditor exercises an 

optional right to accelerate for the sole purpose of receiving the 

entire payment rather than for the purpose of protecting its debt. 

Id. We must determine whether Oklahoma would likewise impose an 

equitable duty on a creditor to not use the power of acceleration 

when its security is not impaired. 

The Oklahoma Supreme Court has ruled on two occasions that an 

acceleration clause contained in a mortgage will not be enforced 

where the conduct of the mortgagee has been unconscionable or 

inequitable. Continental Fed. Sav. & Loan Ass'n v. Fetter, 564 

P.2d 1013, 1019 (Okla. 1977); Murphy v. Fox, 278 P.2d 820, 826 

(continued from previous page) 

purchase and tendered full payment of the remainder owing under 

the promissory note. AVEMCO, after two years of inaction, refused 

the tendered payment and instead exercised its option to 

accelerate under the due-on-lease clause but also demanded an 

additional sum for the cost of insurance premiums. After the 

debtor refused to pay the additional amount, AVEMCO repossessed 

the airplane and sold it for a higher profit. 603 F.2d at 1369. 

8 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 8 
(Okla. 1955). In Continental, the court denied a bank's request 

to accelerate and foreclose· on a mortgage based on a 

due-on-transfer clause when the bank refused to consent to a 

transfer solely because the mortgagor would not pay a substantial 

transfer fee. The transfer fee was an additional condition 

unilaterally imposed by the bank and was not contained in the 

original mortgage agreement. The court held the bank's conduct in 

demanding additional payment was unconscionable and denied its 

requested relief. 564 P.2d 1019. 

In Murphy, the court refused to permit a mortgagee to 

accelerate the maturity of a promissory note because the court 

found that the mortgagee had attempted to hinder timely payment by 

the mortgagor and had encouraged its default. 278 P.2d at 824. 

The court determined that this conduct was motivated solely by the 

mortgagee's desire to accelerate the maturity of the entire debt 

and held that the technical default of tendering late payment of 

taxes was insufficient to justify acceleration when the mortgagee 

had acted unconscionably. Id. at 826. 

According to our reading of these cases, whether the Oklahoma 

court permits acceleration depends on the conduct of the mortgagee 

and whether he has dealt fairly with the debtor or has acted 

oppressively or unconscionably. This view is consistent with that 

of several other jurisdictions. See Phipps v. First Fed. Sav. & 

Loan Ass'n, 438 N.W.2d 814, 819 (S.D. 1989)(an acceleration clause 

will be enforced absent fraud, bad faith, or other conduct on part 

of the mortgagee which would make it unconscionable to enforce the 

clause); Key Int'l Mfg., Inc. v. Stillman, 130 A.D. 475, 480 

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Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 9 
N.Y.S.2d 528, 530 (1984)(absent some element of fraud, 

exploitative overreachin~ or unconscionable conduct by the 

creditor, the court should enforce an acceleration clause), aff'd 

as modified, 66 N.Y.2d 924, 489 N.E.2d 764, 498 N.Y.S.2d 795 

(1985); Bowen v. Danna, 637 S.W.2d at 564 (a court in equity can 

relieve a debtor from the hardship of acceleration based on 

accident, mistake, fraud, or inequitable conduct of the creditor); 

First Fed. Sav. & Loan Ass'n v. Ram, 135 Ariz. 178, 659 P.2d 1323, 

1325 (Ct. App. 1982)(same); Ciavarelli v. Zimmerman, 122 Ariz. 

143, 593 P.2d 697, 698-99 (Ct. App. 1979)(same). 

Nothing in the record warrants an application of these 

equitable principles in the instant case. Plaintiffs did not 

exercise their option to accelerate after a considerable delay. 

_S_e_e~, __ e_.g_., Brown, 603 F.2d at 1379; Caspert v. Anderson 

Apartments, Inc., 196 Misc. 555, 94 N.Y.S.2d 521, 526 (Sup. Ct. 

1949). Nor did the default concern a technical, secondary 

obligation such as payment of taxes. 3 Rather, the default 

violated the essence of the written agreement, timely payment of 

principal and interest. 4 Finally, no evidence was presented that 

3 In Murphy, the court discussed several cases from other 

jurisdictions which considered a technical default to be a failure 

to comply with a secondary obligation such as payment of taxes or 

assessments as opposed to a default on payment of principal or 

interest. See 278 P.2d at 825. Generally, these cases consider a 

default in payment of a principal or interest payment to be a 

substantial breach rather than a technical default. See e.g., 

Graf v. Hope Bldg. Corp., 254 N.Y. 1, 171 N.E. 884, 885-86 (1930). 

4 The court in Continental Federal Savings & Loan Association v. 

Fetter stated: 

[A]cceleration clauses are bargained-for elements 

of mortgages and notes to protect the mortgagee from 

risks connected with transfer of the mortgaged property. 

(continued on next page) 

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Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 10 
Greenberg attempted to hinder or otherwise cause the default so as 

to make his conduct unconscionable. 5 Defendants had complete 

control over the event which triggered plaintiffs' right to 

accelerate. The mere fact that the plaintiffs' interest might not 

have been in jeopardy, without some misconduct on the part of the 

plaintiffs, does not warrant a refusal to enforce an acceleration 

clause which was a bargained-for element of the contract between 

the parties. Under the circumstances of this case, we conclude 

that there are no material issues of fact under the applicable 

Oklahoma law regarding the enforceability of the acceleration 

clause and the issue of good faith. 

Service Business also asserts that plaintiffs waived their 

right to accelerate through their prior acceptance of late 

payments. Ordinarily, prior acceptance of late payments only 

waives the right to accelerate as to those past installments. 

McGowan v. Paso!, 605 S.W.2d 728, 732 (Tex. Civ. App. 1980). When 

a creditor establishes a prior course of dealing in accepting late 

(continued from previous page) 

The underlying rationale for an acceleration clause is 

to insure that a responsible party is in possession, to 

protect the mortgagee from unanticipated risks, and to 

afford the l~nder the right to be assured of the safety 

of his security. However, an action to accelerate and 

foreclose a mortgage is an equitable proceeding, and the 

equitable powers of the court will not be invoked to 

impose an extreme penalty on a mortgagor with no showing 

that he has violated the substance of the agreement. 

564 P.2d at 1017-18 (footnote omitted)(emphasis added). 

5 Any issue as to Greenberg's refusal to provide a disclaimer was 

conclusively decided by the jury, which decision is not an issue 

in this appeal. 

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Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 11 
payments, the creditor is estopped from declaring total debt due 

on future defaults. Id. Estoppel does not apply, however, when 

the obliger gives the debtor notice that the terms of the 

agreement will be enforced in the future. Id.; Dunn v. General 

Equities of Iowa, Ltd., 319 N.W.2d 515, 517 (Iowa 1982); see also 

Sternberg v. Mason, 339 So.2d 373, 376 (La. Ct. App. 1976)(waiver 

rule has 

punctual 

no application where obligee made frequent demands for 

payment or accepted tardy payment as a result of 

unwilling or forced indulgence). Because Service Business or its 

officers received adequate notice by virtue of the disclaimer 

executed in April, 1986, that the trustees demanded all future 

payments to be made timely, no material issue of fact exists on 

the issue of waiver. 

Defendants also argue that they did not receive a fair trial 

on the disclaimer issue because they were not permitted to 

introduce evidence 

accelerating the note. 

concerning Greenberg's motivation in 

Apparently, the district court refused to 

allow any evidence concerning the default because the issue had 

been decided on summary judgment. The question of whether certain 

evidence is relevant to an issue before the jury is within the 

sound discretion of the district court. United States v. 

Alexander,- 849 F.2d 1293, 1301 (10th Cir. 1988). If Service 

Business believed evidence regarding Greenberg's motivation was 

relevant to its claim tried to the jury, it should have made such 

an objection during trial. 

the record, we do not 

discretion in so ruling. 

Based on the objections contained in 

believe the trial court abused its 

12 

Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 12 
' ( The judgment of the United States District Court for the 

Western District of Oklahoma is AFFIRMED. 

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Appellate Case: 88-1636 Document: 01019841876 Date Filed: 08/17/1989 Page: 14