LEXIS-NEXIS® AcademicLEXIS-NEXIS® AcademicBARCLAYS BANK PLC, Plaintiff Appellant v. MARK JOHNSON, DefendantAppellee 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 byJudge 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 dateof 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 onthe 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 notcomplete 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 indue 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
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