Defendants move for summary judgment dismissing the complaint. [*2]

On or about July 29, 2002, Defendant, Quatro Amici, Inc. ("Quatro"),

purchased Plaintiff's restaurant. A portion of the purchase price was paid by Quatro making a promissory note in the principal sum fo $525,000 payable to the Plaintiff, Gazzi Pizza & Restaurant, Inc. ("Gazzi").

The note was self-amortizing and required Quatro to make 72 monthly payments of $8,950.73 which included interest at the rate of 7% per annum. The first installment was due on September 1, 2002. The balance of the installments were due on the first day of each successive month with the final installment being due on August 1, 2008.

Payment of the note was personally guaranteed by Defendants, Diego Stornello, Benedetto Lomanto, Julian Mercado and Jagdish Idnani.

The note contained the following provision:

"In the event any payment due hereunder shall not be paid within seven days of the due date, such payment shall bear interest at the lesser of twelve percent per annum or the highest lawful rate permitted under the applicable law,

from the date when such payment was due until paid. In addition, Maker shall pay a late payment premium of 5 percent of any principal or interest payment made more than seven (7) days after the due date thereof, which

premium shall be paid with such late payment."

The note further provided that if a monthly installment was not received within fifteen (15) days of its due date, Gazzi could declare the entire unpaid balance of principal and interest immediately due and payable.

This action relates to the payment of the note installment due on January 1, 2004.Quatro avers it tendered payment to Gazzi by check dated December 31, 2003 on January 1, 2004. At Gazzi's request, the check was made payable to "Mr. & Mrs. Purita." Frank Purita ("Purita") is the president of Gazzi.

Purita testified at his deposition that he received and deposited the check on January 14, 2004. The check was endorsed and deposited on January 14, 2004. He endorsed the check "with reservation of rights, under protest, without prejudice."

By letter dated January 19, 2004, Gazzi'a attorney advised Quatro that it was in default in the payment of the installment due on January 1, 2004. The letter indicated the payment had not been received and demanded payment of $10,275.81 by January 24, 2004. The demanded payment included principal due on January 1, 2004 of $6,462.51, interest at the rate of 12% per annum of $3,365.76 and a late payment penalty of $447.54. The letter further advised Quatro that if the payment was not received by January 24, 2004, Gazzi would declare the entire unpaid balance of the note due and payable.

Quatro did not pay the amount demanded in the January 19, 2004 letter.

Quatro continued to pay the monthly amount due pursuant to the note. Purita received and deposited the checks for the February, March and April 2004 payments. The endorsements on these checks indicated they were being accepted and deposited "with reservation of rights, under protest, without prejudice." Purita made such an endorsement upon advice of counsel.

Purita received and deposited the checks tendered for the May through October 2004 payments on the note. He endorsed these checks without restriction. [*3]

On September 25, 2004, Gazzi'a attorney sent a second letter to Quatro demanding payment of $23,274.69. The calculation of the amount due was again premised upon Quartro's failure to make the payment due for January 2004 in a timely manner. The letter acknowledged Quatro had made the monthly payments. However, Gazzi sought interest at the default rate of 12% and late payment premiums of 5% per month.

Quatro did not make the payment demanded in the September 25, 2004 letter.

In December 2004, Quatro, through its attorney, tendered a check to Gazzi in the sum of $892.91 which Quatro claimed was the amount due as additional interest and late charges assuming the January 2004 payment had not been received until January 14, 2004.

Plaintiff's attorney sent one more letter dated October 26, 2005 demanding payment of the balance due on the note. As with the previous demands, Quatro did not make the payment demanded by this letter.

Gazzi commenced this action in December 2004 by moving for summary judgment in lieu of complaint. CPLR 3213. By order dated March 23, 2006, this Court denied Plaintiff's motion for summary judgment and Defendants' cross-motion to dismiss the action.

Quatro now moves for summary judgment asserting Gazzi's acceptance and deposit of the check for the payments due for the period May through October 2004 without prejudice and without a reservation of rights constitutes a waiver of any right Gazzi had to receive default interest or penalty and to accelerate the payments due on the note.

A promissory note is a contract that is construed using the normal rules of contract interpretation. Arnav Industries, Inc. Employee Retirement Trust v. Westside Realty Assocs., 180 AD2d 463 (1st Dept. 1992).

A clear and complete written agreement should be enforced in accordance with its terms. South Road Assocs., LLC v. International Business Machines Corp., 4 NY3d 272 (2005); Greenfield v. Philles Records, Inc., 98 NY2d 562 (2002); and W.W.W. Assocs. v. Giancontieri, 77 NY2d 157 (1990). In interpreting a contract, the court must give "...practical interpretation to the language employed and the parties reasonable expectations." Slamow v. Del Col, 174 AD2d 725, 726 (2nd Dept. 1991) aff'd, 79 NY2d 1916 (1992). See also, AFBT-II, LLC v. Country Village on Mooney Pond, Inc., 305 AD2d 340 (2nd Dept. 2003); and Del Vecchio v. Cohen 288 AD2d 426 (2nd Dept. 2001).

The note was secured by a security agreement. Paragraph 2 of the note incorporates by reference the terms of the security agreement and indicates that if the terms of the note and security agreement are in conflict, the terms of the security agreement will prevail. Where the terms of one agreement are incorporated by reference into another agreement, the court must review both agreements. See, Peter Scalamandre & Sons, Inc. v. Village Dock, Inc., 187 AD2d 496 (2nd Dept. 1992), lv. den., 81 NY2d 710 (1993). The Court has not been provided with a copy of the security agreement by either side.

The January 2004 payment of the note was due on January 1, 2004. The note provided that the payment must be received within seven days of the due date. If the payment was not received within seven days of the due date, the interest on that installment went from the 7% per annum as provided by the note to the lesser of the maximum legal interest rate or 12% per annum. Additionally, if the payment was not received within seven days of the due date, Gazzi was then entitled to a 5% penalty of the principal and interest.

In this case, Purita testified at deposition that he received the January 2004 payment on [*4]January 14th. This testimony is uncontroverted. Thus, for the month of January 2004, the interest rate on the note was 12%. Gazzi was also entitled to receive the 5% penalty. Quatro did not pay interest of 12% on the January installment nor the late fee.

The note does not indicate whether acceptance of payment after default constitutes a waiver of the right to accelerate.Without reviewing the security agreement, the Court cannot determine if Gazzi was contractually permitted to accept the payment without waiving its right to accelerate upon default.

Quatro asserts Gazzi waived the right to accelerate by accepting checks in payment of the note and failing to endorse them in such a way as to indicate a reservation of rights.

The holder of a note may waive the right to accelerate by inaction. 80 NY Jur2d

Negotiable Instruments and Other Commercial Paper §359. This is not the circumstance in this case. Gazzi immediately notified Quatro of its default in payment of the January 2004 payment. Gazzi also advised Quatro of its intent to accelerate by letters dated September 25, 2004 and October 26, 2005.

Tender of the amount in default prior to the exercise of the right to accelerate may terminate the right to accelerate. Id. See, Hirsch v. Badler, 3 AD2d 921 (2nd Dept. 1957); and Gold v. Vanden Brul, 28 Misc 2d 644 (Sup.Ct. Monroe Co. 1961). Quatro did not do this. Additionally, Gazzi and Quatro do not agree on the method to be used to calculate the amount due or the amount due as a result of the late payment of the January 2004 installment. Therefore, Quatro's tender of a check in December 2004 of the amount it claims is due does not necessarily cure the default or terminate Gazzi's right to accelerate.

Acceptance of partial payment of the debt after acceleration does not constitute a waiver fo acceleration. UMLIC VP, LLC v. Mellace, 19 AD3d 684 (2nd Dept. 2005). If Gazzi properly accelerated the note, then its acceptance of payments thereafter would not constitute a waiver of its acceleration.

Summary judgment can be granted only if the party seeking summary judgment establishes that there are no triable issues of fact.Lesocovich v. 180 Madison Avenue Corp., 81 NY2d 982 (1993); and Zuckerman v. City of New York, 49 NY2d 557 (1980). In this case, triable issues of fact exist regarding the primary issues: (1) what was the proper amount due and owing as a result of Quatro's undenied late payment; and (2) if Quatro did not tender the proper amount, did its late payment of the January 2004 installment entitle Gazzi to accelerate the balance due under the note.

Since Quatro has failed to establish an entitlement to judgment as a matter of law, its motion for summary judgment must be denied. Winegrad v. New York Univ. Medical Ctr., 64 NY2d 851 (1985); Widmaier v. Master Products, Mfg., 9 AD3d 362 (2nd Dept., 2004); and Ron v. New York City Housing Auth., 262 AD2d 76 (1st Dept., 1999).

Accordingly, it is,

ORDERED, that Defendants' motion for summary judgment is denied.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY_____________________________

February 16, 2007Hon. LEONARD B. AUSTIN, J.S.C.