Northern Bank v. Pefferoni Pizza Co.

• Decision Date: 08 October 1996
• Docket Number: No. A-95-118,A-95-118
• Citation: 555 N.W.2d 338,5 Neb.App. 50
• Parties: NORTHERN BANK, a Nebraska banking corporation, Appellee, v. PEFFERONI PIZZA CO., a Nebraska corporation, Appellant.
• Court: Nebraska Court of Appeals

Page 338

555 N.W.2d 338

5 Neb.App. 50

NORTHERN BANK, a Nebraska banking corporation, Appellee, v. PEFFERONI PIZZA CO., a Nebraska corporation, Appellant.

No. A-95-118.

Court of Appeals of Nebraska.

Oct. 8, 1996.

Syllabus by the Court

1. Judgments: Appeal and Error. On questions of law, an appellate court has an obligation to reach its own conclusions independent of those reached by the lower courts.

2. Statutes: Time. Statutes covering substantive matters in effect at the time of the transaction govern, not later enacted statutes.

3. Summary Judgment: Proof. The party moving for summary judgment has the burden to show that no genuine issue of material fact exists and must produce sufficient evidence to demonstrate that the moving party is entitled to judgment as a matter of law.

4. Summary Judgment: Proof. After the moving party has shown facts entitling it to a judgment as a matter of law, the opposing party has the burden to present evidence showing an issue of material fact which prevents judgment as a matter of law for the moving party.

5. Uniform Commercial Code: Negotiable Instruments. In order to recover under article 3 of the Uniform Commercial Code, the writing in question must be an instrument.

6. Negotiable Instruments. Whether an instrument is a negotiable instrument is a question of law.

7. Uniform Commercial Code: Negotiable Instruments: Words and Phrases. To be a negotiable instrument, any writing must (a) be signed by the maker or drawer; (b) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by article 3 of the Uniform Commercial Code; (c) be payable on demand or at a definite time; and (d) be payable to order or to bearer.

8. Negotiable Instruments: Words and Phrases. Instruments payable on demand include those payable at sight or on presentation and those in which no time for payment is stated.

9. Negotiable Instruments: Time: Words and Phrases. An instrument is payable at a definite time if by its terms it is payable at a definite time subject to extension to a further definite time at the option of the maker.

10. Negotiable Instruments: Time: Words and Phrases. The time of payment is definite if it can be determined from the face of the instrument.

11. Negotiable Instruments: Time. If the extension of time of payment is to be at the option of the maker, a definite time limit must be stated or the time of payment remains uncertain and the instrument is not negotiable.

J. Patrick Green, Omaha, for appellant.

Steven J. Woolley, of Polack, Woolley & Forrest, P.C., Omaha, for appellee.

IRWIN, SIEVERS and INBODY, JJ.

SIEVERS, Judge.

Northern Bank (Northern) brought suit against Pefferoni Pizza Co. (Pefferoni) on a promissory note issued as security for the underlying obligation of Walter Peffer, Jr. The Douglas County District Court granted Northern's motion for summary judgment, having found that the note was a negotiable instrument and that Northern was a holder in due course of the note. For the reasons set forth below, we reverse.

FACTUAL BACKGROUND

On September 30, 1987, Duane J. Dowd, as president of Pefferoni, signed a promissory note in the amount of $125,000 payable to W.E. Peffer Enterprises, Inc. (W.E. Enterprises). Attached to the note was a personal guaranty signed by Dowd and Ray L. Gustafson. The note was executed pursuant to a purchase agreement, also dated September 30, 1987, whereby Pefferoni purchased certain businesses from W.E. Enterprises. Interest on the note accrued at 11.5 percent per annum from September 30, 1987. In the event of default, W.E. Enterprises was entitled to the entire unpaid principal balance and the accrued but unpaid interest. Interest on the note would accrue at 12 percent per annum following default. Additionally, the following provision was included in the promissory note:

2. Principal and the interest which is provided for in the preceding paragraph shall be paid in sixty (60) equal monthly installments of $2,748.75. Such installments shall commence on November 1, 1987, and shall be paid on the first day of each month thereafter. The rate of interest provided by this Note is initially set at a rate to correspond to the interest rate presently being paid by W.E. Peffer Enterprises, Inc., a Nebraska corporation, on its separate obligations payable to Mutual State Bank and Etcetera Investments, Ltd. (collectively the "Underlying Notes"). The Maker hereof has certain rights under Purchase Agreement dated September 30, 1987, to negotiate a new loan for W.E. Peffer Enterprises, Inc., to replace the Underlying Notes in an amount up to $125,000.00 at a lower rate of interest and for a term extending up to 84 months from and after the closing on the purchase. In the event that the Maker hereof negotiates such a loan, then as of the date that the Underlying Notes are paid in full or reduced with the proceeds of the new loan, the remaining principal balance due and owing under this Note shall be re-amortized over such term and at such rate of interest as may be negotiated for W.E. Peffer Enterprises, Inc., by the Maker hereof on the new loan. When and if such events occurs [sic], a written amendment evidencing such modification shall be executed by the Maker and Holder hereof.

On January 14, 1988, Walter Peffer, Jr., executed a personal promissory note (Peffer note) in the amount of $35,000 for the purpose of obtaining a loan from Northern. As security for the Peffer note, W.E. Enterprises, via the signature of Walter Peffer, Jr., as president, assigned the above-described promissory note of September 30, 1987, payable by Pefferoni to W.E. Enterprises, to Northern. We shall hereafter refer to the September 30, 1987, note as the "collateral note." Walter Peffer, Jr., by his own admission, failed to make any payments on the Peffer note from and including the payment due September 1, 1988, and effective October 1, 1988, Northern elected to declare the entire unpaid principal balance and accrued interest under the Peffer note to be immediately due and filed suit. On September 1, 1989, the Douglas County District Court granted Northern's motion for summary judgment against Walter Peffer, Jr., on the Peffer note.

Regarding the collateral note, no payment was made after the regularly scheduled monthly payment of July 1, 1988. On September 22, 1988, Northern notified Pefferoni that it was in default as a result of failure to pay the installments due August 1 and September 1, 1988. After Pefferoni failed to cure the default, Northern elected to declare the entire unpaid principal balance and accrued interest under the collateral note to be immediately due and payable. Northern contends that it never received any payments on the collateral note from any person or entity.

Northern filed suit against Pefferoni on April 19, 1993, seeking judgment for the unpaid principal balance and accrued interest on the collateral note in the amount of $170,676.96. In the petition, Northern alleged that the total sum due under the Peffer note was $57,053.84. In its answer, Pefferoni denied that it was liable to Northern on the collateral note. Among other defenses, Pefferoni alleged that Northern was not a holder of the collateral note, that the collateral note did not contain an unconditional promise or order to pay a sum certain in money, that W.E. Enterprises had failed to perform its obligations under the purchase agreement, that Walter E. Peffer, Jr., had made misrepresentations for the purpose of inducing Pefferoni to execute the purchase agreement, that the collateral note lacked consideration, and that Northern had no standing to bring an action in an amount in excess of its security interest in the collateral note.

Northern subsequently filed for summary judgment, and Pefferoni responded with a motion for judgment on the pleadings. At the hearing on both matters, Northern submitted into evidence a certified copy of the judgment entered by the Douglas County District Court against Walter Peffer, Jr., on the Peffer note; two affidavits of Brenda L. Lawson, a vice president of Northern; the original $125,000 collateral note; an affidavit of Walter Peffer, Jr.; and certain portions of the deposition of Dowd. Pefferoni submitted the balance of the Dowd deposition.

The district court found that Northern was a holder in due course of the collateral note and that the collateral note was a negotiable instrument. As a result, the district court overruled Pefferoni's motion for judgment on the pleadings and granted Northern's motion for summary judgment. The court ordered that Northern be awarded an amount equal to the indebtedness on the collateral note as of November 21, 1994, but did not specify the amount of that judgment. (Our disposition of this case allows us to over look the fact that a judgment for money must specify with definiteness and certainty the amount for which it is rendered and must be in such a form that a clerk is able to issue an execution upon it which an officer will be able to execute without requiring external proof and another hearing. See Lenz v. Lenz, 222 Neb. 85, 382 N.W.2d 323 (1986).) Northern has since become American National Bank.

ASSIGNMENTS OF ERROR

Pefferoni contends that the district court erred in granting summary judgment in favor of Northern. Specifically, Pefferoni argues that the district court erred in awarding Northern the full amount of its prayer on the grounds that it was a holder in due course, in finding that the collateral note was a negotiable instrument, and in finding that the question of Northern's good faith in taking the collateral note did not raise a triable issue of fact.

STANDARD OF REVIEW

On questions of law, an appellate court has an obligation to reach its own conclusions independent of those reached by the lower courts. Kelley v. Benchmark Homes, Inc., 250 Neb. 367, ...