LEXIS NEXIS Academic BARCLAYS BANK PLC Plaintiff Appellant v MARK JOHNSON Defendant Appellee NO COA97 849 COURT OF APPEALS OF NORTH CAROLINA 129 N C App 370 499 S E 2d 768 1998 N C App LEXIS 515 37 U C C Rep Serv 2d Callaghan 338 February 25 1998 Heard in the Court of Appeals April 30 1998 Filed PRIOR HISTORY 1 Appeal by plaintiff from judgment entered 11 April 1997 by Judge Catherine C Eagles in Stokes County Superior Court DISPOSITION Affirmed HEADNOTES 1 Negotiable Instruments and Other Commercial Paper 10 NCI4th action on note not payable on demand or at definite time summary judgment for defendant The trial court did not err in an action seeking payment of the balance owed on a note by granting summary judgment for defendant where it was undisputed that the note did not state either that it was payable on demand or at a definite time The note does not meet the requirements of the preamended N C G S 25 3 104 1 for negotiability plaintiff does not qualify as a holder in due course and plaintiff is not immune from the defense of failure of consideration 2 Negotiable Instruments and Other Commercial Paper 97 NCI4th note partial payment not waiver of defense of failure of consideration The trial court did not err by entering summary judgment in favor of defendant and denying summary judgment for plaintiff in an action to collect the balance due on a note where plaintiff contended that defendant waived his right to contest whether the note was enforceable by making the initial six payments on the note Defendant s grounds to contest payment for failure of consideration did not arise until two deliveries of dental supplies were not made rather than evidencing a waiver of the defense of consideration the initial six payments evidenced a good faith intent to comply with the contract COUNSEL Smith Debnam Hibbert L L P by Caren D Enloe and Byron L Saintsing for plaintiff appellant Browder McGrath by J Tyrone Browder for defendant appellee JUDGES McGEE Judge Judges WYNN and JOHN concur OPINIONBY McGEE OPINION 371 769 McGEE Judge Defendant executed a promissory note for 28 979 15 on 27 January 1993 in favor of Healthco International Inc to secure payment for dental supplies defendant purchased from Healthco for his dental practice The pertinent language of the note provided that it was payable in Successive Monthly Installments of Each and in 11 Successive Monthly Installments of 2 414 92 Each thereafter and in a final payment of 2 415 03 thereafter The first installment being payable on the day of 19 and the remaining installments on the same date of each month thereafter until paid 2 The blank indicating the date of the initial installment payment was never filled in by either party Barclays Bank purchased this note on 5 February 1993 Defendant made six payments on the note with the first payment being on 22 March 1993 Defendant then defaulted on the note by failing to make the remaining six payments Barclays Bank filed a complaint on 18 April 1995 seeking payment of the balance owed on the note Defendant filed an answer alleging as a defense the failure of consideration as Healthco International did not complete delivery of the dental supplies purchased by defendant The answer further alleged that Barclays Bank was not a holder in due course as the note was incomplete on its face and Barclays Bank knew or should have known of this defect Both parties filed motions for summary judgment In a judgment entered 11 April 1997 the trial court entered summary judgment for defendant and denied summary judgment for Barclays Bank Barclays Bank appeals from this judgment 372 I The main issue in this case is whether Barclays Bank as purchaser of the promissory note is a holder in due course and thus immune from the defense of failure of 3 consideration asserted by defendant This question is determined by whether the promissory note constitutes a negotiable instrument even though it does not state that it is payable on demand or at a definite time This case is governed by the pre amended Article 3 of our Uniform Commercial Code N C Gen Stat 25 3 101 et seq 1986 since the promissory note was executed prior to 1 October 1995 Kane Plaza Associates v Chadwick 126 N C App 661 665 486 S E 2d 465 467 1997 A holder in due course is one who takes an instrument for value in good faith and without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person N C Gen Stat 25 3 302 1 1986 One may only be a holder in due course of a negotiable instrument See N C Gen Stat 25 3 102 1 e 1986 defining instrument as negotiable instrument One of the requirements of a negotiable instrument under N C Gen Stat 25 3 104 1 1986 is that it be payable on demand 770 or at a definite time An instrument is payable at a definite time if by its terms it is payable a on or before a stated date or at a fixed period 4 after a stated date or b at a fixed period after sight or c at a definite time subject to any acceleration or d at a definite time subject to extension at the option of the holder or to extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event 2 An instrument which by its terms is otherwise payable only upon an act or event uncertain as to time of occurrence is not payable at a definite time even though the act or event has occurred N C Gen Stat 25 3 109 1986 Barclays Bank argues that the note is a negotiable instrument even though it does not state that it is payable on demand or at a definite 373 time We disagree Historically our courts have required strict compliance with the requirements set out under the Uniform Commercial Code defining negotiable instruments Gray v American Express Co 34 N C App 714 716 239 S E 2d 621 623 1977 holding that a note payable neither to order nor to bearer is not negotiable as specificity on the face of the instrument is required under N C G S 25 3 104 See also Savings 5 Loan Assoc v Trust Co 282 N C 44 54 191 S E 2d 683 690 1972 holding that draft was not negotiable because it was payable to two named payees without the addition of the words or order or any similar words of negotiability The drafters of the Code encouraged the courts to strictly interpret the definitional requirements to the extent that in doubtful cases the court s decision should be against negotiability Official Comment to N C G S 25 3 104 1986 Knight Publishing Co v Chase Manhattan Bank
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