Court Opinion

ID: 9738358
Source: CourtListenerOpinion
Date Created: 2023-08-26 19:51:11.166295+00
Date Added: 2024-06-11T10:42:52.011901
License: Public Domain

SHARPNACK, Chief Judge,
concurring.
Although I agree with the disposition of this case by the majority, I come to agreement by a different path. The majority opinion begins its analysis with the preliminary question of whether "this line of credit" constitutes a negotiable instrument. However, I respectfully urge that the appropriate threshold question is whether the document in question is a negotiable instrument. Contrary to the majority determination, I answer that question in the affirmative. Moreover, I find that the document is not a line of credit but rather a note for two million dollars.
The document with which we deal here provides as follows:
"On April 30, 1992 for value received, the undersigned ("Borrower") promises to pay to the order of SOCIETY BANK, INDIANA ("BANK") at its principal office in South Bend, Indiana: Two Million and 00/100 DOLLARS with interest from date hereof to maturity or until paid in fall...."
Record, p. 33. In the right margin of the document is a notation under the heading "disbursement" which indicates "Draws to C/A #946009-372." Record, p. 33.
A negotiable instrument must meet the following qualifications:
"(1) Be signed by the maker or drawer; and
(2) 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 this Article; and
(3) Be payable on demand or at a definite time; and
(4) Be payable to order or to bearer.
Ind.Code § 26-1-3-104(1).4 In determining the negotiability of an instrument, a court may look only to the face of the document. See First State Bank at Gallup v. Clark, 570 P.2d 1144, 1146 (N.M.1977); Walls v. Morris Chevrolet, Inc., 515 P.2d 1405, 1406 (Okla.Ct.App.1973). This restriction satisfies the purposes underlying a negotiable instrument, which is:
"to declare that transferees in the ordinary course of business are only to be held liable for information appearing in the instrument itself and will not be expected to know of any limitations on negotiability or changes in terms, etc., contained in any separate documents. The whole idea of the facilitation of easy transfer of note and instruments requires that a transferee be able to trust what the instrument says, and be able to determine the validity of the note and its negotiability from the language of the note itself."
Gallup, 570 P.2d at 1147. In addition, "{nle-gotiable notes are designed to be couriers without excess luggage ... and so negotiability must be determined from the face of the note without regard to outside sources." Walls, 515 P.2d at 1407.
*67Pursuant to the terms of this instrument, there is a clear unconditional promise to pay two million dollars. The only troubling aspect of the note is the reference to the "draws" language. The majority relies on this language to substantiate its conclusion that the instrument is a line of credit which is not negotiable because the sum certain requirement is not satisfied. The majority also uses the "draws" language to demonstrate that the unconditional promise requirement is not satisfied because USAD's ability to make draws on the account was dependent on the sufficiency of USAD's accounts receivable. Majority opinion at 62-63.
However, I find that the "draws" language does not destroy the negotiability of an otherwise negotiable instrument. The "draws" reference does not tell us anything, let alone that the parties may have issued this note in conjunction with a line of credit. For all the document shows, Yin and Kung promised to pay two million dollars. Furthermore, that the parties may have issued this note in conjunction with a line of credit is immaterial to the present issue. In determining the negotiability of this instrument, this court is bound by the written terms of the note. The reference to the "draws" language does not otherwise demonstrate that the note is nonnegotiable.
Finally, I find that the cases relied upon by the majority to support its conclusion that the note does not satisfy the sum certain requirement are distinguishable. In support of its argument, the majority relies on two cases: Resolution Trust Corp. v. Oaks Apts. Joint Venture, 966 F.2d 995 (5th Cir.1992), reh'g denied and In re Hipp v. Lawrence Systems, 71 BR. 643 (N.D.Tex.1987). In Resolution Trust, the Fifth Cireuit upheld the district court's determination that a note for "TWO MILLION AND NO/100 DOLLARS ($2,000,000.00) or so much thereof as may be advanced in accordance with the terms of a certain Loan Agreement ..." did not constitute a sum certain. Resolution Trust, 966 F.2d at 1001-1002. The Fifth Circuit reasoned "that the Note fails to disclose the payment of a sum certain. The language employed by the Note fails to disclose the exact amount to be repaid by the Partners. The amount advanced to the Partners cannot be certainly determined absent an inquiry to other documents. Since the Note does not facially demand payment of a sum certain, the Note is non-negotiable." Id.
In Hipp, the Northern District of Texas Bankruptey Court resolved a similar issue. The court reasoned that a promise to pay $2,000,000.00 "or so much thereof as may be advanced" did not constitute a sum certain. Hipp, 71 B.R. at 648.
However, absent from the present note is the limiting language found in the Resolution Trust and Hipp notes. Because the present note does not contain such limiting language, the cases relied upon by the majority are not dispositive. Rather, the note on its face promises payment of a sum certain of $2,000,000.00. Accordingly, I find that the note provides for an unconditional promise to pay a sum certain, and thus, qualifies as a negotiable instrument.
On finding that the note is a negotiable instrument, the next step is to determine whether Yin and Kung, the sureties, are limited to I.C. § 3-606 defenses (the "UCC defenses") or, whether they may raise common law defenses as well. Because the majority determined that the note was nonnegotiable, the majority opinion did not address the seope of the UCC surety defenses, which are applicable only to negotiable instruments.
Yin and Kung argue that the trial court erred in denying them the benefit of common law surety defenses and restricting them to UCC defenses. The analysis begins with I.C. § 26-1-1-103 which provides, "Tulnless displaced by the particular provisions of IC 26-1, the principles of law and equity, ... shall supplement the provisions of IC 26-1." I.C. § 26-1-1-108. Yin and Kung contend that the trial court erroneously excluded common law surety defenses despite the fact that I.C. § 26-1-3-606 did not displace those common law defenses. Society contends that if the surety defenses were not limited to those provided in I.C. § 26-1-3-606, then neither it nor the court would be able to look to the statute for guidance as to acceptable defenses.
*68However, in light of the express language of I.C. § 26-1-1-108, Society's argument is not persuasive. Applying the mandate of 1.C. § 26-1-1-108, the common law defenses may not be excluded absent an express provision in I.C. § 26-1-3-606. Therefore, the trial court erred in denying the appellants the benefit of such defenses. Moreover, as demonstrated in the majority opinion, there are genuine issues of material fact as to those defenses which preclude the entry of summary judgment.
Accordingly, upon this rationale, I am able to concur in the determination that the entry of summary judgment should be reversed and this cause remanded for a trial on the merits.

. Ind.Code §§ 26-1-3-101 et seq. were repealed effective July 1, 1994, and codified at 1.C. §§ 26-1-3.1. However, the court must apply the law in effect at the time of the execution of the agreement, Michael v. Rainier, 246 Ind. 293, 205 N.E.2d 543, 544 (1965), and, therefore, I.C. §§ 26-1-3-101 et seq. must be applied to this case.