Toptal's Debt Repayment Strategy Evaluated in Legal Contextby@legalpdf
150 reads

Toptal's Debt Repayment Strategy Evaluated in Legal Context

by Legal PDFMarch 1st, 2024
Read on Terminal Reader
Read this story w/o Javascript
tldt arrow

Too Long; Didn't Read

Toptal did not breach the contract by attempting to repay principal and accrued interest after the Maturity Date, as determined by the court's interpretation of the Note and NPA terms. The court highlights the clarity of contractual language, established legal principles regarding maturity dates, and rejects Mr. Grosz's arguments regarding prepayment provisions. Summary judgment is granted to Toptal on the theory of breach related to debt repayment.
featured image - Toptal's Debt Repayment Strategy Evaluated in Legal Context
Legal PDF HackerNoon profile picture

TOPTAL, LLC v. DENIS GROSZ Court Filing, retrieved on February 26, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 5 of 7.

B. Repaying Matured Debt is not a Breach

The Court agrees with Toptal's interpretation that based on the unambiguous language of the Note and the NPA, principal and accrued interest were due and payable any time after the May 14, 2014, Maturity Date. The Note itself states that “Unless earlier converted into Conversion Shares pursuant to Section 2.2 of [the NPA] ... the principal and accrued interest shall be due and payable by the Company on demand by the Lender at any time after the Maturity Date.” Consistent with that provision, the NPA provides that Mr. Grosz could have sued Toptal for principal and interest after the Maturity Date without first demanding payment before suing, as Mr. Grosz has admitted in briefs filed with the Court. E.g., Grosz's Reply in Supp. of Mot. to Dismiss at 5 n.3. Toptal thus did not breach by attempting to pay Mr. Grosz an amount equal to the principal and accrued interest on March 26, 2020, nearly six years after the Note's Maturity Date.

The Note's use of the phrase “on demand by the Lender” does not change this conclusion. California courts have held for over 150 years that a “note payable on demand[] is payable immediately, and demand need not be made.” E.g., Bell v. Sackett, 38 Cal. 407, 407 (1869); see demand accrues with the inception of the obligation and without the necessity for any demand hardly requires the citation of authority.).[4] Mr. Grosz does not cite any authority—binding or persuasive—to the contrary.[5] Thus, Toptal did not breach by attempting to repay after the Maturity Date even though Mr. Grosz had not made a demand. See Rottman v. Hevener, 54 Cal. App. 485, 488-89 (1921) (applying “the well-settled principle that an obligation for the payment of money on demand is due immediately, no actual demand is necessary, “and an “express waiver" of demand “is equivalent to a contract that the debt shall be payable without any previous demand“).

Toptal’s reading that the Note became due and payable on the Maturity Date also is consistent with the meaning of the term “Maturity Date.“ As court have observed, “maturity dates generally rank as among the most staid of contract terms. While one can muster adventurous arguments and debate about all sort of other terms, what is there to contest about the typical maturity date in a promissory note? Before the date, there is merely an obligation. On or after the date, principal and any itnerest are owed.” Fennie v. E-Fuel Corp., 2014 WL 1494370, at *1 (N.D. Cal. Apr. 16, 2014). As noted above, Mr. Grosz has admitted that he could have sued Toptal for failure to repay after the Maturity Date without first making a demand, and “[i]t is settled that an obligation ‘matures‘ when the holder of the note has a legal right to bring ana ction to force payment.” Jessup Farms v. Baldwin, 33 Cal. 3d 639 (1983).

The Court rejects Mr. Grosz's argument that the Note prohibits Toptal from paying the principal and accrued interest without his consent after the Maturity Date. The provision to which

Mr. Grosz points is a prohibition on “prepayment”—not “repayment”—and it simply stands for the uncontested fact that Toptal was prohibited from paying Mr. Grosz the principal and accrued interest prior to when it became due and payable on the Maturity Date.

Moreover, Section 7.1(a) of the NPA authorizes Mr. Grosz to declare an event of default and sue Toptal if Toptal defaulted in the payment of any part of the principal and interest more than thirty days after the Maturity Date. Mr. Grosz's argument that he could block Toptal from returning the principal and interest on the matured Note by withholding demand but at the same time declare an event of default and sue Toptal for failure to repay introduces an “unnecessary internal inconsistency.” See Dameron Hosp. Assn v. AAA N. California, Nevada & Utah Ins. xch., 229 Cal. App. 4th 549, 568 (2014); Harrison Ventures, LLC v. Alta Mira Treatment Ctr., LLC, 2010 WL 19295666, at *4 (N.D. Cal. May 12, 2010). The only reasonable interpretation, then, is that Toptal had an obligation to repay Mr. Grosz after the Maturity Date; otherwise, there would be no rational reason why Mr. Grosz could declare an event of default and sue Toptal for failing to repay thirty days after the Maturity Date. See Cal. Civ. Code § 1641 (“The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.”); id. § 1643 (“A contract must receive such an interpretation as will make it ... reasonable.”); id. § 3542 (“Interpretation must be reasonable.”).

The Court thus finds that the terms of the NPA and Note, as well as settled California law, establish that Mr. Grosz's Note became due and payable on the Maturity Date and that Toptal was within its rights to return an amount equal to Mr. Grosz's principal and accrued interest in March 2020. Summary judgment is granted to Toptal on this theory of breach.

Continue Reading Here.

[4] The Court disagrees with Mr. Grosz's argument that cases interpreting the phrase “on demand” in promissory notes are irrelevant because his Note is “a modern convertible promissory note.” It is neither uncommon nor inappropriate to review case law from the past. In any event, as Toptal observes, California courts acknowledge that convertible debt instruments have long been issued in the United States, including its initial industrial expansion and the building of railroads, see Kessler v. Gen. Cable Corp., 92 Cal. App. 3d 531, 537-39 (1979), and the California case law interpreting the “on demand” language in convertible notes is as recent as 2019, see t’Bear v. Forman, 359 F. Supp. 3d 882 (N.D. Cal. 2019).

[5] Mr. Grosz cites to the unpublished decision in Vigdor v. Super Lucky Casino, Inc., 2018 WL 6069944 (N.D. Cal. Nov. 20, 2018), but that case did not overturn a century and a half of California case law interpreting “on demand“ contracts. Vigdor did not address the interpretation of the words “on demand“ or “maturity date“ under California law (and the briefing in that case shows that none of the cases cited above were brought to the Vigdor court’s attention by either side). Further, the Vigdor note purchase agreement did not provide for default and the ability to sue for repayment if the principal and interest were not repaid within 30 days of the maturity date. Moreover, the Vigdor note purchase agreement involved multiple lenders, and the complaining noteholders only had a minority in interest who did not have the contractual ability to act absent the consent and approval of other third parties who represented a majority in interest. In this case, Mr. Grosz, as the single lender under the NPA, was at all times able to unilaterally act under his contract with Toptal without recourse to the consent of any third parties. Notably, the result in Vigdor was repayment of the principal and interest after the maturity date over the objection of certain noteholders who preferred to receive equity, just as Mr. Grosz does here.

About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings.

This court case retrieved on October 11, 2023, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction.