Samuel G. McKerall v. Dennis Kaiser

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REL: 09/30/2010 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e Reporter o f Decisions, A l a b a m a A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ( ( 3 3 4 ) 2 2 9 ¬ 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . SUPREME COURT OF ALABAMA SPECIAL TERM, 2010 1090546 Samuel G. M c K e r a l l v. Dennis Appeal SMITH, recovery reverse from B a l d w i n C i r c u i t (CV-09-900066) Court Justice. Samuel entered Kaiser G. i n favor McKerall appeals of Dennis K a i s e r on a p r o m i s s o r y a n d remand. note from a summary i nKaiser's guaranteed action judgment seeking by M c K e r a l l . We 1090546 Facts On A u g u s t and P r o c e d u r a l 28, 2001, G r e a t executed a $300,000 ("the note"). Great promissory American guaranteed interest Radio the note. payment note 28, 2002. American i n favor Walter Network, Radio of and o f $3,000 Specifically, Kaiser for the president of McKerall f o r 11 m o n t h s and a l l u n p a i d Network, I n c . , Dennis J . Bowen, The t e r m s o f t h e n o t e payment o f t h e p r i n c i p a l August History required a and then interest the note, personally monthly a balloon on o r b e f o r e i n pertinent part, states: "[Great American Radio Network], f o r value r e c e i v e d , p r o m i s e [ s ] to pay t o the order of Mid-Ohio Securities Corp., f o r the benefit of Dennis L. Kaiser, t h e sum of $300,000.00, together with i n t e r e s t thereon from date a t t h e r a t e of twelve p e r c e n t ( 1 2 % ) p e r annum, p a y a b l e i n e l e v e n e q u a l monthly installments o f $3,000.00 each (i.e., I n t e r e s t o n l y ) c o m m e n c i n g one m o n t h f r o m t h e d a t e a n d c o n t i n u i n g o n t h e same d a y o f e a c h succeeding month t h e r e a f t e r u n t i l e l e v e n such payments have b e e n made, w i t h t h e e n t i r e b a l a n c e , a l l p r i n c i p a l and a l l t h e n a c c r u e d a n d u n p a i d i n t e r e s t b e i n g due and payable, in full, IN ONE FINAL BALLOON INSTALLMENT due on o r b e f o r e t w e l v e m o n t h s from date." (Capitalization Relevant protest in original.) to this appeal, the note and n o t i c e o f p r o t e s t , also states: and a l l r e q u i r e m e n t s 2 "Demand, necessary 1090546 to h o l d them l i a b l e , a r e h e r e b y w a i v e d by e a c h and e v e r y maker and e n d o r s e r o f t h i s note. and delivered under the his capacity as signed note seal of the u n d e r s i g n e d . " p r e s i d e n t of the note. "[t]his T h i s n o t e i s made, g i v e n , e x e c u t e d Under personally includes the personal that Great signature, endorsed signatures American Radio the note guaranteed payments by" and then Network or on the three Bowen, payments their the note, and personally, note over then made several that t h e b a l a n c e on t h e p r i n c i p a l On Network, seeking two February 6, Bowen, 2009, and McKerall r e c o v e r y on counts. In Kaiser the the note. first unpaid." In o f money and the second several I t i s undisputed of the note sued the Radio interspersed made on May 1, 2 0 0 7 , and i s $213,970.82. Great American Radio Baldwin Circuit Court Kaiser's count, D e f e n d a n t [ s ] $ 2 1 3 , 9 7 0 . 8 2 , due 2 0 0 7 , w h i c h sum in Great American years. t h a t t h e l a s t p a y m e n t on t h e n o t e was Bowen that in on and states R a d i o N e t w o r k t i m e l y made t h e f i r s t interest McKerall Network, capacities. Great American of and Bowen, i n Kaiser complaint contained " c l a i m [ e d ] of the f r o m [ t h e m ] b y a c c o u n t on May interest count, 3 of $263,739.79 i s Kaiser claimed that 1, still "the 1090546 following amounts principal of are $213,970.82, $71,316.48, due and interest for a total owing under [the of $263,739.79, of $549,027.09, note,] attorneys plus fee costs of court." Only M c K e r a l l Kaiser moved answered K a i s e r ' s f o r entry of a default A m e r i c a n R a d i o N e t w o r k and Bowen. motion, entering Radio Network Bowen for a default Accordingly, judgment The t r i a l judgment f o r $555,177.54 $555,177.54. complaint. against court granted the against Great American and a d e f a u l t judgment McKerall was Great the only against remaining defendant. Kaiser judgment. issues and McKerall Kaiser, filed cross-motions i n h i s motion, of m a t e r i a l fact argued e x i s t e d and, for a that therefore, e n t i t l e d t o a summary j u d g m e n t a g a i n s t M c K e r a l l . his motion, barred that Kaiser's by t h e a p p l i c a b l e s t a t u t e of The summary argued trial court judgment $346,283.80, plus in denied favor costs. claims McKerall 4 genuine that he was McKerall, i n against him were limitations. McKerall's of no summary Kaiser m o t i o n and in appeals the that entered amount judgment. a of 1090546 Standard of Review " T h i s C o u r t ' s r e v i e w o f a s u m m a r y j u d g m e n t i s de novo. W i l l i a m s v. S t a t e Farm Mut. A u t o . I n s . Co., 8 8 6 So. 2d 72 , 74 (Ala. 2003). We a p p l y t h e same standard of review as the trial court applied. S p e c i f i c a l l y , we m u s t d e t e r m i n e w h e t h e r t h e m o v a n t h a s made a p r i m a f a c i e s h o w i n g t h a t no g e n u i n e i s s u e of m a t e r i a l fact exists and that the movant i s e n t i t l e d t o a j u d g m e n t as a m a t t e r o f l a w . Rule 5 6 ( c ) , A l a . R. C i v . P.; B l u e C r o s s & B l u e S h i e l d o f A l a b a m a v. H o d u r s k i , 899 So. 2d 949, 952-53 ( A l a . 2004). In making such a d e t e r m i n a t i o n , we must r e v i e w the e v i d e n c e i n the l i g h t most f a v o r a b l e t o t h e n o n m o v a n t . W i l s o n v . B r o w n , 496 So. 2d 7 5 6 , 758 (Ala. 1986). Once t h e movant makes a p r i m a f a c i e s h o w i n g t h a t t h e r e i s no g e n u i n e i s s u e o f m a t e r i a l f a c t , the b u r d e n t h e n s h i f t s to the nonmovant to p r o d u c e ' s u b s t a n t i a l e v i d e n c e ' as t o t h e existence of a genuine issue of m a t e r i a l fact. Bass v. S o u t h T r u s t B a n k o f B a l d w i n C o u n t y , 538 So. 2d 794, 797-98 ( A l a . 1 9 8 9 ) ; A l a . Code 1975, § 12-21-12." Dow v. (Ala. Alabama Democratic Party, 897 So. 2d 1035, 1038-39 Kaiser's 2004). Discussion On claims appeal, McKerall r e a s s e r t s h i s argument t h a t against him barred were limitations and, entering summary Kaiser. a McKerall limitations entitled the applicable that therefore, by the trial judgment argues against that the him "Note payable at a definite 5 of erred in favor of statute of court and in applicable i s § 7-3-118, A l a . Code 1975. statute Section time," 7-3-118(a), provides that, 1090546 with exceptions obligation m u s t be relevant of a p a r t y t o pay i n the note or, years a f t e r the McKerall A u g u s t 28, due date action was not filed until Kaiser's claims response, under s e a l ; provides that under s e a l " action due due date." has August against McKerall As applicable 1975, were date or (Emphasis him 6, Because dates within added.) that the by note § argues 7-3-118. is a contract 2002, filed contract years that Kaiser within 10 Section the the or w r i t i n g a f t e r the cause argues 6-2-33(1) that applicable cause of action his claims statute an a l t e r n a t i v e a r g u m e n t , K a i s e r c o n t e n d s which 28, Kaiser's 2009, M c K e r a l l were b a r r e d Assuming statute time a c t i o n must have note. commenced w i t h i n 28, the contends t h a t the a p p l i c a b l e s t a t u t e accrued. on limitations. the " [ a ] c t i o n s f o u n d e d upon any m u s t be enforce i s accelerated, i s § 6-2-33, A l a . Code 1975. accrued Code date February argues t h e r e f o r e , he of l i m i t a t i o n s in against Kaiser to 2008, s i x y e a r s a f t e r A u g u s t stated In due accelerated the the action a note payable at a d e f i n i t e i f a 2002, of "an a r g u e s t h a t u n d e r § 7-3-118 K a i s e r ' s b e e n commenced by that here, commenced w i t h i n s i x y e a r s a f t e r t h e stated six not of provides limitations a six-year 6 is § statute 6-2-34(4), of of that Ala. limitations 1090546 for " [ a ] c t i o n s f o u n d e d on p r o m i s e s i n w r i t i n g n o t u n d e r seal," and t h a t , u n d e r § 6-2-16, A l a . Code 1 9 7 5 , t h e p a r t i a l p a y m e n t s of the note extended the date of the the accrual last payment, alternate argument, K a i s e r complaint asserts a of the cause claim May contends against 1, of a c t i o n 2007. that McKerall until As count another one 1 of h i s f o r recovery of money d u e on a n o p e n a c c o u n t . Section 6-2-37, A l a . Code 1 9 7 5 , provides recover money that unliquidated "the date when, by contends not "[a]ctions to a c c o u n t " m u s t be c o m m e n c e d of the l a s t contract or item the until May 1, 2007, a p p l i c a b l e s t a t u t e of l i m i t a t i o n s until May 1 account or from i s due." t h a t , u n d e r § 6-2-37, h i s c l a i m a g a i n s t accrue and, by w i t h i n three of the account usage, due open years of the 6-2-16, A l a . Code McKerall d i d therefore, that the f o r c o u n t one d i d n o t e x p i r e 1975, provides: "No a c t , p r o m i s e o r a c k n o w l e d g m e n t i s s u f f i c i e n t t o remove t h e b a r t o an a c t i o n c r e a t e d by t h e p r o v i s i o n s of t h i s chapter, nor i s such evidence of a new a n d c o n t i n u i n g contract, except a p a r t i a l p a y m e n t , made u p o n t h e c o n t r a c t b y t h e p a r t y s o u g h t t o be c h a r g e d b e f o r e the bar i s complete o r an u n c o n d i t i o n a l promise i n w r i t i n g s i g n e d by t h e p a r t y t o be c h a r g e d thereby." 7 time Kaiser 1, 2 0 1 0 . Section or 1090546 First, negotiable provides not 1975, must consider instrument, that apply Sections we to whether because 6-2-2(e), p r o v i s i o n s w i t h i n Chapter negotiable instruments 7-3-118 a n d 7 - 4 - 1 1 . " defines § the note a "negotiable constitutes a A l a . Code 2 of T i t l e which are 6 1975, "shall governed by S e c t i o n 7 - 3 - 1 0 4 ( a ) , A l a . Code instrument" as follows: "[A]n u n c o n d i t i o n a l promise or order to pay a f i x e d amount o f money, w i t h o r w i t h o u t i n t e r e s t o r o t h e r charges d e s c r i b e d i n the promise or order, i f i t : "(1) I s p a y a b l e t o b e a r e r or t o at the time i t i s i s s u e d or f i r s t into possession of a holder; order comes "(2) Is payable d e f i n i t e t i m e ; and at on demand or a "(3) Does not state any other u n d e r t a k i n g o r i n s t r u c t i o n by t h e p e r s o n p r o m i s i n g o r o r d e r i n g p a y m e n t t o do a n y a c t i n a d d i t i o n t o t h e p a y m e n t o f money, b u t t h e p r o m i s e o r o r d e r may c o n t a i n ( i ) a n u n d e r t a k i n g or power t o g i v e , m a i n t a i n , o r p r o t e c t c o l l a t e r a l t o secure payment, ( i i ) an a u t h o r i z a t i o n o r p o w e r t o t h e h o l d e r t o c o n f e s s j u d g m e n t o r r e a l i z e on o r d i s p o s e of c o l l a t e r a l , or ( i i i ) a waiver of the benefit of any law intended f o r the a d v a n t a g e o r p r o t e c t i o n o f an o b l i g o r . " We conclude that instrument because i t negotiable instruments the note meets in § constitutes a l l the 7-3-104(a). 8 a negotiable characteristics The note is of "an 1090546 unconditional the order of Kaiser of Mid-Ohio S e c u r i t i e s "at a definite instruction" addition Ala. has promise ... t o pay a f i x e d by G r e a t Code 1975. no e f f e c t Corporation time" without American Radio to the o b l i g a t i o n The fact on w h e t h e r amount to f o r the b e n e f i t any "undertaking or N e t w o r k t o do a n y t h i n g i n t o make p a y m e n t s . that o f money" the note was § 7-3-104(a), seal instrument. i t i s a negotiable made u n d e r See Foster v. H a c i e n d a N i r v a n a , I n c . , 32 S o . 3 d 1 2 5 6 , 1 2 5 9 ( A l a . 2009) ("[I]f note the promissory ... § 6 - 2 - 2 ( e ) c l e a r l y limitations promissory of § mandates t h a t 7-3-118 note, payable must regardless c o n t r a c t under s e a l . " ) . enforce limitations a definite i s found instrument the six-year s t a t u t e of apply to of whether [a] a negotiable time, the claim the note Because t h i s present o b l i g a t i o n s under at i s a negotiable a a c t i o n seeks to instrument applicable that statute was of i n § 7 - 3 - 1 1 8 ( a ) , A l a . Code 1975, and n o t 6-2-2(e), Code 1 9 7 5 . We against note the i s also §§ 6 - 2 - 3 3 , 6 - 2 - 3 4 , o r 6 - 2 - 3 7 , A l a . C o d e 1 9 7 5 . S e e § Ala. on must next McKerall consider accrued. i s not a negotiable when Kaiser's K a i s e r makes instrument; 9 cause of action no a r g u m e n t t h a t t h e instead, Kaiser argues 1090546 that, "[s]hould a negotiable against accrue until make argument, K a i s e r states that statute filing As of of on the on McKerall an brief, that, p. the 3-118 the 11. not with and when Section exceptions "Note payable on argues did this this cause of six-year upon the relevant facts nor period of this of 10 case, c a u s e o f a c t i o n a c c r u e d when t h e 10 under cause l a s t p a y m e n t was 7-3-118(b) p r o v i d e s , not that, demand," h i s a c c r u e d when t h e continuous the a § 7-3-118(a) began r u n n i n g i f neither principal to he 7-3-118 K a i s e r argues t h a t the here, in pertinent " [ i ] f no interest 118(b) not of Comment t o § barred a did support define of filing a c t i o n to enforce for cause that until In is note, p a y m e n t i s made t o t h e m a k e r , an paid this action. entitled note. the note Official does Accordingly, action against McKerall the at notes that of to of a l t e r n a t i v e argument, K a i s e r 7-3-118(b), on note that § 7-3-118," h i s a guarantor limitations this argument as "Section action accrues." th[e] made d e m a n d Kaiser Kaiser's accept g o v e r n e d by McKerall, demand action. Court instrument action not the on years." Kaiser the for note i s Applying l a s t p a y m e n t was part, n o t e has contends of made demand the § been § that made, May 7-3the 1, 1090546 2007, and does not t h a t the six-year expire until Contrary to i t s terms, McKerall note. The necessary every note to limitations arguments, was as them due a this at liable Therefore, and a requisite endorser endorsed of from that action the to payable note, date are of for ... this § commence the at a d e f i n i t e t h e due under § enforce to ... s i x years on the note" the the the t i m e m u s t be and and was claim "filed of So. the their by the 11 of by and on the and McKerall (Emphasis K a i s e r ' s cause of a c c r u e d on t h e due party § s i x years 7-3-118 to pay commenced w i t h i n 3d a t 1264 plaintiffs, the and each note. See on because, time, K a i s e r had a claim n i n e months a f t e r barred and action a l l requirements note," action. obligation d a t e " ) ; F o s t e r , 32 7-3-118, a note 2002, 2002, waived 7-3-118(a), 28, of liability and hereby guaranteed" under August enforce after cause definite a c t i o n a g a i n s t M c K e r a l l to e n f o r c e the note date therefore 2013. s t a t e s t h a t "[d]emand and "personally added.) note demand hold maker of d a t e o f t h e n o t e , A u g u s t 28, the waived 1, Kaiser's a c c r u e d on t h e due by May statute a statute of that, sought the promissory final note s i x years (holding who ("an p a y m e n t was to note due limitations); 1090546 Spragins (1939) "'the v. McCaleb, 237 Ala. ( h o l d i n g t h a t when an [e]ndorser evidenced Bank of by the Mobile, 658 , 661, e n d o r s e r of 188 209 Ala. 620, (quoting 624, 96 251, a note waives becomes u n c o n d i t i o n a l l y l i a b l e instrument.'" So. So. Little 763, demand f o r the v. 767 debt Peoples' (1923)). B e c a u s e K a i s e r commenced h i s a c t i o n a g a i n s t M c K e r a l l than s i x years a f t e r the due date of the 253 note, Kaiser's 2 more claims K a i s e r a r g u e s t h a t , u n d e r § 6 - 2 - 1 6 , t h e p a y m e n t on May 1, 2 0 0 7 , b a r r e d t h e e x p i r a t i o n o f t h e s i x - y e a r s t a t u t e o f limitations found i n § 7-3-118(a). In support of this a r g u m e n t , K a i s e r n o t e s t h a t t h e A l a b a m a Comment t o § 7 - 3 - 1 1 8 states, in pertinent part: 2 " A l a . C o d e S e c t i o n 6-2-16 c o n t i n u e s t o a p p l y t o d e t e r m i n e the s u f f i c i e n c y of a p a r t i a l payment or a w r i t t e n p r o m i s e to remove the b a r t o an action. Section 6-2-16 is applicable to negotiable instruments as w e l l as n o n - n e g o t i a b l e instruments. S t e w a r t v. Jones, 614 So. 2d 1023 ( A l a . 1 993). S e c t i o n 6-2-16 i s n o t d i s p l a c e d b y S e c t i o n 3 - 1 1 8 , except with respect to subsection (b) o f Section 3-118." The A l a b a m a Comment was a d d e d as p a r t o f a w h o l e s a l e r e v i s i o n o f C h a p t e r 3 o f T i t l e 7 i n 1995 when t h e l e g i s l a t u r e a d o p t e d A r t i c l e 3 of the U n i f o r m C o m m e r c i a l Code. B e c a u s e S t e w a r t v. J o n e s , 614 So. 2d 1023 ( A l a . 1993), p r e d a t e s the e f f e c t i v e d a t e o f § 6 - 2 - 2 ( e ) on J a n u a r y 1, 1 9 9 6 , we c o n c l u d e t h a t t h e statement that "[§] 6-2-16 is applicable to negotiable instruments as w e l l as non-negotiable instruments" is no longer v a l i d . A c c o r d i n g l y , we p r e t e r m i t f u r t h e r d i s c u s s i o n o f t h e a p p l i c a b i l i t y o f § 6-2-16 t o t h i s a c t i o n . 12 1090546 against McKerall limitations. trial court are barred by the applicable See § 7 - 3 - 1 1 8 , A l a . C o d e 1 9 7 5 . erred i n entering statute Accordingly, a summary j u d g m e n t of the for Kaiser. Conclusion Based trial on court proceedings the foregoing, and this consistent with R E V E R S E D AND Lyons, remand reverse cause this the judgment to that court Parker, J . , concurs opinion. a n d Shaw, J J . , c o n c u r . i n the 13 result. of the for further REMANDED. Woodall, Murdock, we 1090546 MURDOCK, J u s t i c e I Also, concur in take this I presented and (concurring in this the O f f i c i a l the i n the result reached opportunity case based Comment result). to note by the that on § 7 - 3 - 6 0 5 ( b ) , thereto. 14 main no opinion. argument A l a . Code is 1975,

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