Walls v. Morris Chevrolet, Inc., 45972

• Decision Date: 09 October 1973
• Docket Number: No. 45972,No. 1,45972,1
• Citation: 515 P.2d 1405
• Parties: 13 UCC Rep.Serv. 493 Jimmy WALLS, on behalf of himself and all others similarly situated, Appellant, v. MORRIS CHEVROLET, INC., and Morris Investment Co., Inc., Appellees
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

Page 1405

515 P.2d 1405

13 UCC Rep.Serv. 493

Jimmy WALLS, on behalf of himself and all others similarly situated, Appellant, v. MORRIS CHEVROLET, INC., and Morris Investment Co., Inc., Appellees.

No. 45972.

Court of Appeals of Oklahoma, Division No. 1.

Oct. 9, 1973 Released for Publication by Order of Court of Appeals.

Wendell E. Wightman, Oklahoma City, D. Kent Meyers and Robert D. McCutcheon, Crowe, Dunlevy, Thweatt, Swinford, Johnson & Burdick, Oklahoma City, for appellant.

Bryce A. Baggett, Fellers, Snider, Baggett, Blankenship & Bailey, John K. Speck and Arnold T. Fleig, Speck, Philbin & Fleig, Oklahoma City, for appellees.

BAILEY, Presiding Judge:

Plaintiff sued defendants for allegedly taking a negotiable instrument in conjunction with a consumer credit sale in violation of 14A O.S.1971, § 2--403. He sought the recovery of three times the amount of the credit service charge, the maximum penalty provided for such violations, for himself and for others similarly situated. The note and security agreement signed by the plaintiff were on the same sheet of paper and defendants demurred on several grounds, including that the papers did not include a negotiable instrument.

The trial court sustained the demurrer and dismissed the petition when the plaintiff declined to amend. Plaintiff appeals.

First, both parties assume that the note, considered by itself, is not negotiable. So do we. The sum payable from the face of the note does not appear to be a sum certain because of the privilege stated in the note of refund of any unearned finance charge based on the Rule of 78 upon prepayment of the balance. The amount of the finance charge is not apparent from the face of the note and therefore the sum to be paid is uncertain in the event of prepayment. Under 12A O.S.1971, § 3--106: '(1) The sum payable is a sum certain even though it is to be paid . . . (c) with a stated discount . . . if paid before . . . the date fixed for payment . . .' In this instance the amount of the discount is not stated in the note and cannot be computed from its face. As is stated in the Uniform Commercial Code Comment to this section: 'A stated discount or addition for early or late payment does not affect the certainty of the sum so long as the computation can be made . . . The computation must be one which can be made from the instrument itself . . .'

To overcome the absence of a sum certain on the face of the note, the plaintiff argues that the amount of the finance charge appears in the accompanying security agreement, that the security agreement and the note should be considered one instrument because on the same sheet of paper, that so construed the missing term is supplied and both note and security agreement are negotiable.

For the proposition that the note and security agreement must be considered one instrument for purposes of determining negotiability plaintiff relies upon the apparently pre-Code case of Commerce Acceptance of Oklahoma City v. Henderson, 446 P.2d 297 (Okl.1968). In that case the Oklahoma Supreme Court held that the terms in the conditional sales contract destroyed the negotiability of a note attached to it, saying:

'The Conditional Sales Contract and 'NOTE' must be considered one instrument, since admittedly not dismembered until after assignment to plaintiff. We note, however, the 'NOTE' sued upon showed to be secured by a Conditional Sales Contract.' 446 P.2d at 300.

We think that this quoted language continues to have vitality under the Code. Willier & Hart, U.C.C. Reporter-Digest & 3--104, A2, Comment 1 states in part:

'Indeed, there is a significant difference between a separate agreement, which is 'part of the same instrument' and a separate agreement, contemporaneously executed, which is not 'part of the same instrument.' In the first situation, a promise included in the separate agreement might render the whole writing non-negotiable under Section 3--104(1)(b). In the second situation, the separate agreement would in no way affect the negotiability of the contemporaneously executed promissory note under Section 3--119 . . .'

However both the above comment and the Commerce Acceptance Case make it clear that a note may be made Non-negotiable by the added terms of an...