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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Hillsborough-southern judicial district
No. 97-027
WILLIAM C. BARNSLEY
v.
EMPIRE MORTGAGE LIMITED PARTNERSHIP V
March 31, 1998
William E. Aivalikles, of Nashua, by brief and orally, for the plaintiff.
Law Offices of John L. Allen & Associates, P.C. of Manchester (Richard M. Husband on the brief and orally), for the defendant.
HORTON, J. The plaintiff, William C. Barnsley, appeals the Superior Court's (Hollman, J.) grant of summary judgment in favor of the defendant, Empire Mortgage Limited Partnership V. We reverse and remand.
On November 8, 1988, the plaintiff executed a commercial real estate promissory note and mortgage for $180,000 with the Hillsborough Bank and Trust Company (bank), secured by four building lots located in Temple and one lot located in New Ipswich. The note provided for monthly interest payments "at a rate equal to the base lending rate of Hillsborough Bank & Trust Company, Inc., plus Four (4.0%) percent, adjusted daily."
The bank foreclosed on three lots by June 1991. In August 1991, the plaintiff learned of foreclosure proceedings scheduled for September 1991 on the last two lots, which were subsequently cancelled. Around August 30, 1991, the Federal Deposit Insurance Corporation (FDIC) assumed the obligations of the then-failed bank and distributed many of the bank's assets, not including the subject note, to Peterborough Savings Bank. On June 25, 1995, the FDIC, as receiver for the bank, assigned the Barnsley mortgage to the defendant.
In 1996, the defendant notified the plaintiff of plans to foreclose the mortgage on the last two lots on May 23, alleging an outstanding balance due on the $180,000 promissory note. In May 1996, the plaintiff filed an ex parte bill in equity to enjoin the foreclosure proceedings. The plaintiff alleges that through the foreclosure sales, and pursuant to an agreement dated August 10, 1988, the promissory note has been paid. The plaintiff has not provided a copy of this agreement to this court on appeal. See Sup. Ct. R. 13(3). The defendant alleges that after the bank paid the plaintiff's other debts, no funds were available to satisfy the mortgage. The defendant also contends that the plaintiff offered no evidence to the contrary. Finding the note to be negotiable, and the defendant to be a holder in due course, the trial court did not consider the merits of Barnsley's arguments. The defendant moved for summary judgment. After a hearing, the superior court granted the plaintiff's request for a preliminary injunction to enjoin the foreclosure proceedings. In November 1996, however, the court granted the defendant's motion for summary judgment. The plaintiff appeals.
On appeal, the plaintiff argues: (1) because the note includes a variable interest rate, it is not for a sum certain and is therefore non-negotiable; (2) because the note is non-negotiable, the defendant is not a holder in due course and is therefore a holder subject to the plaintiff's defense of payment; and (3) the mortgage deed was void since the plaintiff had paid the note in full.
"When reviewing a motion for summary judgment, the court must consider the evidence in the light most favorable to the party opposing the motion and take all reasonable inferences from the evidence in that party's favor." High Country Assocs. v. New Hampshire Ins. Co., 139 N.H. 39, 41, 648 A.2d 474, 476 (1994) (citation omitted). We find that the trial court erred as a matter of law in granting summary judgment to the defendant.
Although the defendant and the trial court considered recent amendments to the Uniform Commercial Code (UCC), see RSA 382-A:3-101 et seq. (1994), we apply only the 1961 version of the UCC since it governed negotiable instruments at the time of the execution of the promissory note in question. See N.H. CONST. pt. I, art. 23.
To be negotiable, a note must be for a "sum certain." Former RSA 382-A:3-106(1) (1961) (amended and recodified 1994) provided:
The sum payable is a sum certain even though it is to be paid
(a) with stated interest or by stated installments; or
(b) with stated different rates of interest before and after default or a specified date; or
(c) with a stated discount or addition if paid before or after the date fixed for payment; or
(d) with exchange or less exchange, whether at a fixed rate or at the current rate; or
(e) with costs of collection or an attorney's fee or both upon default.
Official Comment 1 further provided:
It is sufficient that at any time of payment the holder is able to determine the amount then payable from the instrument itself with any necessary computation. . . . The computation must be one which can be made from the instrument itself without reference to any outside source, and this section does not make negotiable a note payable with interest "at the current rate."
Former RSA 382-A:3-106 Official Comment 1.
The negotiability of a variable interest rate note under the 1961 UCC is a question of first impression. Since a primary purpose of the UCC is "to make uniform the law among the various jurisdictions," RSA 382-A:1-102(1)(c) (1961), we look to other jurisdictions for guidance. Courts grappling with the negotiability of variable interest rate notes have been divided. See 5A R. Anderson, Uniform Commercial Code