On June 26, 2025, Justice Chan of the New York County Commercial Division issued a decision in Canaan Equity Partners III, LLC v. Verance Corp., 2025 NY Slip Op. 32540(U), holding that even though a lender chose not to demand repayment of a note for 15 years did not make the note not an instrument for the payment of money only, explaining:
There is no real dispute that the Note is an instrument for payment of money only. Promissory notes are classically considered such instruments.
Defendant attempts to avoid this outcome arguing that the promissory note is not an instrument for the payment of money only because the parties treated it as an equity instrument for the past fifteen years. However, defendant points to no case law applying CPLR 3213 that allows the usage of a Note as equity to overwrite its clear terms defining a debt. Instead, defendant uses federal bankruptcy case – In re Live Primary, LLC, (626 BR 171, 197-198) and a federal tax court case – PepsiCo Puerto Rico, Inc. (TC Memo 2012-269) to invite application of a thirteen-factor test to recharacterize the Note as equity. Defendant’s invitation is declined as the promissory note is clear that it is an instrument for repayment of a loan. As it is undisputed that the Note was intended as an instrument for payment of money, there is no need to examine thirteen-factors· worth of extrinsic evidence to find otherwise. By extension, defendant’s arguments as to equitable estoppel and waiver both fail due to their reliance on this unnecessary debt/equity instrument distinction.
(Internal quotations and citations omitted).