Mirbel, Wendel 7/5/2020
For Educational Use Only
Woodworth v. Richmond Indiana Venture, 1990 WL 293436 (1990)
13 UCC Rep.Serv.2d 1149
1990 WL 293436 (Ohio Com.Pl.)
Court of Common Pleas of Ohio, Franklin County
WOODWORTH
v.
THE RICHMOND INDIANA VENTURE
Case No. 89CV-11-7919
|
September 19, 1990
Callaghan & Company's Headnote and Classification
P3104.5, P3104.30, P3112.1Effect of other promise on
negotiability and holder in due course status.
Ohio Com.Pl. Sept. 19, 1990
Bank which held promissory note was not a holder in due
course since the note was nonnegotiable due to the fact
that it contained another promise in addition to the one to
pay a sum certain. The note, which was payable to the
partnership to which it had been issued “or holder,” contained
a clause that upon maker's failure to make timely payment,
the partnership, at its option, could terminate his partnership
interest. This was more than a mere reference to a partnership
agreement or a recitation of security; it was clearly a promise
by the maker resulting in a forfeiture in the event of default.
Nothing in § 3-104 or § 3-112 authorizes such a forfeiture
term in a negotiable instrument. The term thus rendered
the negotiability of the note doubtful; where there is doubt,
Official Comment 5 to § 3-104 indicates that a finding against
negotiability should be made.
UCC Sections Cited: § 3-104 and Official Comment 5, §
3-112.
Attorneys and Law Firms
Richard A. Frye and John A. Gleason of Schwartz, Kelm,
Warren & Rubenstein, Columbus, for plaintiff.
Algenon L. Marbley of Vorys, Sater, Seymour & Pease,
Columbus, and Pamela M. Williams, Hogan & Hartson,
Baltimore, Maryland, for Signet Bank/Maryland.
This matter is before the court on plaintiff's motion for partial
summary judgment and defendant Signet Bank's motion
for summary judgment. On December 18, 1987, plaintiff
executed a promissory note in which he promised to pay to
the order of The Richmond Indiana Venture, A Limited
Partnership or holder the sum of $655,625.00. The promissory
note was given to pay part of the deferred portion of plaintiff's
investment in the partnership. The promissory note was
subsequently assigned or negotiated to defendant, Signet
Bank. Plaintiff is in default on the promissory note having
failed to make payments that fell due on July 1, 1989 and July
1, 1990. Plaintiff filed this action on November 2, 1989.
The standard for granting summary judgment is clear. On a
motion for summary judgment, the moving party bears the
burden of demonstrating that no genuine issue of material
fact exists and that it is entitled to judgment as a matter of
law. Adickes v. S. H. Kress and Co. (1970),
398 U.S. 144;
Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.
2d 64, 66. The court will construe the evidence most strongly
in favor of the party against whom the motion for summary
judgment is made. Harless, 54 Ohio St. 2d at 66.
In order to be negotiable, a promissory note must be a signed,
unconditional promise to pay a sum certain in money which is
payable on demand or at a definite, stated time. The note must
be payable to order or bearer and contain no other promise,
order, obligation, or power given by the maker except as
authorized by §§ 1303.01 to
1303.78, inclusive, of the
Revised Code. R.C. § 1303.03 <<UCC § 3-104>>; UCC §
3-104.
The policy under pre-Code law was that instruments
should be as concise as possible and free from collateral
engagements. Akron Auto Finance Co. v. Stonebraker (1941),
66 Ohio App. 507. As noted above, the Code continues this
policy by mandating that the unconditional promise to pay not
be cluttered by other promises, orders, obligations, or powers
unless otherwise authorized.
The promissory note at issue contains the following term:
Opinion
JOHNSON, J.
“The undersigned agrees that, in the event any payment due
pursuant to the terms of this note be not timely made, at the
option of the Partnership, the undersigned shall retroactively
© 2020 Thomson Reuters. No claim to original U.S. Government Works.
1
Mirbel, Wendel 7/5/2020
For Educational Use Only
Woodworth v. Richmond Indiana Venture, 1990 WL 293436 (1990)
13 UCC Rep.Serv.2d 1149
lose any interest in the Partnership from the date hereof
and the Partnership shall have no obligation to account for
any payments theretofore made by the undersigned, and that
this remedy is in addition to other remedies afforded by the
Partnership Agreement.”
This term is clearly a promise by the maker resulting in
a forfeiture of his partnership interest and payments in the
event of default. The term is more than a mere reference
to the partnership agreement, a recitation of security, or an
agreement to protect collateral; it is a forfeiture provision in
addition to other remedies under the referenced partnership
agreement.
In Pacific Finance Loans v. Goodwin (1974), 41 Ohio
App. 2d 141 [16 UCC Rep Serv 750], the court held
that the requirement of an unconditional promise to pay is
contravened by a term providing for the repossession of
collateral by a seller without judicial process. The case sub
judice is analogous since the term at issue is a forfeiture
without resort to judicial process.
End of Document
Nothing in R.C. § 1303.04 or § 1303.11 <<UCC §
3-112>> authorizes the forfeiture term at issue. Based on
the above analysis, the court finds that the negotiability
of this promissory note is doubtful. Where there is doubt,
the decision should be against negotiability. Official Code
Comment 5 to UCC § 3-104; R.C. § 1303.03 <<UCC
§ 3-104>>. Since the promissory note is not negotiable,
defendant Signet Bank cannot claim the status of a holder in
due course and is subject to ordinary contract defenses that
plaintiff may assert.
Having considered the pleadings and memoranda filed
herein, the court finds that plaintiff has fulfilled his burden.
Accordingly, plaintiff's motion is sustained. Defendant's
motion is denied. Counsel for plaintiff shall prepare an
appropriate entry.
All Citations
1990 WL 293436, 13 UCC Rep.Serv.2d 1149
© 2020 Thomson Reuters. No claim to original U.S. Government Works.
© 2020 Thomson Reuters. No claim to original U.S. Government Works.
2