Opinion ID: 628963
Heading Depth: 2
Heading Rank: 1

Heading: prepayability

Text: 12 Article 4 of the buy/sell contract provides: 13 The purchase price ... shall be paid with a negotiable promissory note which shall provide for the payment of the purchase price in 10 years with interest at the rate of 10% per annum, principal and interest payable in 120 equal, consecutive monthly payments. 14 (emphasis added). The agreement nowhere mentions prepayment of the proposed promissory note. 15 At trial, the district court conditionally allowed evidence of a subsequent oral agreement permitting prepayment of the note. Ultimately, the court admitted the evidence, finding that it was not precluded by the parol evidence rule. In the same ruling, the court found that the parties indeed entered the alleged oral agreement. 16 The court erred in finding the asserted oral agreement binding on the parties. Article 5 of the written buy/sell contract prohibits the parties from orally altering or amending the written contract. 4 Under N.H.Rev.Stat.Ann. Sec. 382-A:2-209(2), [a] signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded.... While an attempted modification can constitute a waiver, that waiver can be retracted absent a material change of position in reliance on that waiver. N.H.Rev.Stat.Ann. Sec. 382-A:2-209(4) and (5). Here, plaintiffs allege no alteration of their position in reliance on a prepayment provision. Thus, we can find no binding waiver of Article 5 by defendants. 5 Plaintiffs contend that since the written contract says nothing about prepayment, a subsequent agreement to allow prepayment does not constitute an alteration or amendment under Article 5. Rather, they argue that the agreement was independent of the written contract. Apparently, the district court agreed. Although the court did not explicitly address Article 5, it did conclude that a prepayment provision does not, by its terms, vary or contradict the terms of the Agreement.... Whitney Bros. Co., No. 90-054-S (Sept. 30, 1992), at 13. 6 17 We review this determination de novo as it centers around the interpretation of the language of the written contract. See In re SPM Mfg. Corp., 984 F.2d 1305, 1311 (1st Cir.1993) (de novo review of bankruptcy court's interpretation of unambiguous contract); Hermes Automation Technology, Inc. v. Hyundai Elec. Ind., 915 F.2d 739, 745 (1st Cir.1990) (interpretation of plain language of release agreement was question of law warranting de novo review). 18 On review, we find that the district court erred in its determination. 7 The written buy/sell contract provision regarding payment expressly contemplates payment over ten years at 10% interest. If plaintiffs prepay the note, they will avoid paying the 10% interest and thereby deviate from an express provision of the contract. Moreover, 10% interest over ten years amounts to a significant percentage of the contract price. Since prepayment would substantially alter the parties' financial positions under the contract, an agreement to permit prepayment constitutes an alteration under Article 5. 19 Furthermore, although the New Hampshire Supreme Court has never encountered this precise issue, recent holdings from that court support our conclusion. In DeCato Brothers, Inc. v. Westinghouse Credit Corp., 129 N.H. 504, 529 A.2d 952, 956 (1987), the court stated, generally, absent manifest injustice, an instrument is payable in full according to its tenor, and the maker has no right to prepay in the absence of an express provision providing for prepayment. Later, in Patterson v. Tirollo, 133 N.H. 623, 581 A.2d 74, 77 (1990) (quoting Fuller Enterprises v. Manchester Sav. Bank, 102 N.H. 117, 152 A.2d 179, 181 (1959)), the court reaffirmed that the law is clear in New Hampshire that negotiable instruments are 'payable at the time fixed therein,' and in the absence of an express provision that a mortgagor is entitled to prepay his or her note, the mortgagor has no legal right to pay the debt in advance of the maturity date. 20 Although these cases involve actual promissory notes, rather than agreements to make promissory notes, by finding prepayment precluded in the absence of a specific provision authorizing it, the New Hampshire Supreme Court demonstrated a belief that prepayment significantly alters the rights of the parties involved. 21 Finally, plaintiffs' last-ditch argument, that Sprafkin's February 3 letter constitutes a sufficient writing, needs little deliberation. 8 Sprafkin wrote the letter to Barenholtz. Thus, it cannot be construed, as plaintiffs propose, as a written offer which plaintiffs were entitled to accept orally. 22 Because Article 5 of the contract precludes plaintiffs' asserted oral agreement, the district court erred in finding the note prepayable. 9