IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
______________________________________________
JOE WALDRON,
Plaintiff-Appellant,
Bradford Chancery No. 20,214
Vs. C.A. No. 01A01-9712-CH-00740
GARY DELFFS and wife CLARA
DELFFS and JAMES COY DELFFS,
Defendants-Appellees.
____________________________________________________________________________
FROM THE BEDFORD COUNTY CHANCERY COURT
THE HONORABLE TYRUS C. COBB, JUDGE
FILED
August 24, 1998
Cecil W. Crowson
Appellate Court Clerk
John H. Norton, III of Shelbyville
Thomas F. Bloom of Nashville
For Appellant
Allen Shoffner of Shelbyville
For Appellee, James Coy Delffs
REVERSED AND REMANDED
Opinion filed:
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
ALAN E. HIGHERS, JUDGE
HOLLY KIRBY LILLARD, JUDGE
This case involves an attempt to recover money on a loan. Plaintiff/Appellant Joe
Waldron (Waldron) appeals from the trial court’s order granting judgment on the pleadings to
Defendant/Appellee James Coy Delffs.
Waldron’s Complaint alleges that on May 1, 1991, Defendants Gary and Clara Delffs
borrowed from Waldron $50,000 at an interest rate of thirteen (13%) percent. This indebtedness
was to be due and payable on May 1, 1992. In July of 1991, Gary and Clara Delffs borrowed
an additional $30,000 from Waldron that was also to be due and payable on May 1, 1992. The
loan was still outstanding on May 1, 1992, at which time Waldron extended the loan for another
year and lent an additional $4,000 to Gary and Clara Delffs. At this time, a note evidencing the
total indebtedness was signed by Gary and Clara Delffs, as well as by James Coy Delffs, the
father of Gary Delffs. The sum plus twelve (12%) percent interest was to be due and payable
on May 1, 1993. The loan was again renewed in May of 1993, at which time Waldron alleges
that he was owed the principal indebtedness of $120,000 plus eleven (11%) percent interest to
be due and payable on May 1, 1994.
When the loan was again not paid off in May of 1994, the parties entered into further
negotiations that resulted in the execution on June 10, 1994 of the note at issue in this case. This
instrument provides in pertinent part:
----------------------------- after date ------------- promise to pay
to the order of one hundred and fifty three thousand and four
hundred and fourty dollars Dollars
(The language underlined was written in by hand. Unused space is evidenced by hyphens.) A
copy of the note is attached as an addendum to this Opinion. Although there is some confusion
on the document, Waldron alleges that the note was due and payable by all defendants by June
10, 1995.1 Alleging that this document is a promissory note, Waldron sought judgment on the
“note” in the amount of $174,014.72 plus interest.
The defendants filed an Answer admitting that Waldron made certain loans to Gary
Delffs but disputing the amounts and interest rates represented in Waldron’s complaint. The
defendants also averred that the money was loaned solely to Gary Delffs, that the defendants
signed the note in blank, and that the note is unenforceable since no consideration was provided
for the defendants’ signatures. Defendant James Delffs filed an Amended Answer, Counter-
Claim, and Cross-Claim asserting that the note was blank when signed and completed without
authority, the note was “fraudulently and materially altered,” Waldron was not a holder in due
1
Apparently the instrument originally indicated that the amount is due on June 6,
1994, but the document was subsequently altered by Waldron with Gary Delffs’s consent to
show “1995,” instead.
2
course, a condition precedent had not been satisfied, the note fails for lack of consideration,
Waldron and the other defendants conspired to deceive him into signing the document, the note
violates the Statute of Frauds, and the interest rate on the note is usurious. Waldron filed a
summary judgment motion, and James Delffs filed a motion for judgment on the pleadings or,
alternatively, for summary judgment.
On January 10, 1997, the trial court entered judgment on the pleadings for James Delffs
and dismissed the complaint as to him, finding that the instrument failed to qualify as a valid
promissory note. The trial court also found that this instrument was not a sufficient
memorandum of a promise to pay the debt of another to satisfy the Statute of Frauds. In
November of 1997, the trial court entered a judgment against the remaining defendants.
Thereafter, Waldron timely filed a Notice of Appeal of the trial court’s January order. James
Delffs is the sole Appellee in this case.
The sole issue for review is whether the trial court erred in granting judgment on the
pleadings to James Delffs. When a motion for judgment on the pleadings is made by the
defendant, it is in effect a motion to dismiss for failure to state a claim upon which relief can be
granted. 3 Nancy F. MacLean & Bradley A. MacLean, Tennessee Practice 190 (2nd ed. 1989).
A motion to dismiss for failure to state a claim upon which relief can be granted is the
equivalent of a demurrer under our former common law procedure. Cornporpst v. Sloan, 528
S.W.2d 188, 190 (Tenn. 1975). Such a motion admits the truth of all relevant and material
averments in the complaint but asserts that such facts cannot constitute a cause of action. Id. at
190. In considering whether to dismiss a complaint for failure to state a claim upon which relief
can be granted the court should construe the complaint liberally in favor of the plaintiff taking
all of the allegations of fact therein as true. Humphries v. West End Terrace, Inc., 795 S.W.2d
128, 130 (Tenn. App. 1990). A complaint should not be dismissed upon such a motion “unless
it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that
would entitle the plaintiff to relief. Id. at 130 (quoting Fuerst v. Methodist Hosp. South, 566
S.W.2d 847, 848 (Tenn. 1978)). In the instant case, the complaint seeks recovery on a written
instrument attached as an exhibit and a determination of the validity of the instrument is a
question of law. Therefore, our review of the trial court’s order is de novo on the record before
this Court. Warren v. Estate of Kirk, 954 S.W.2d 722, 723 (Tenn. 1997).
The instrument at issue was executed in June of 1994. The Tennessee General Assembly amended
3
its version of the Uniform Commercial Code (UCC) in 1995.2 There is no dispute that the applicable statutes in this case
are those that existed at the time that the document was signed in 1994. See Shell v. State, 893 S.W.2d 416, 419
(Tenn. 1995) (“[A] basic rule of statutory construction provides that statutes are to be applied prospectively, unless the
legislature clearly indicates to the contrary.”); 17A Am. Jur. 2d Contracts § 254 (1991) (“[I]t is the law in force at
the time a contractual transaction is consummated and made effectual that must be looked to as determining its validity
and effect.”).
Tennessee Code Annotated § 47-3-104 (Supp. 1992)3 states:
(1) Any writing to be a negotiable instrument within this chapter must:
(a) be signed by the maker or drawer; and
(b) contain an unconditional promise or order to pay:
(i) a sum certain in money;
(ii) a sum in money which is determinable
by a formula as provided in the writing,
whether or not such formula requires the
use of extrinsic criteria; or
(iii) a sum of money the amount of which
is subject to renegotiation upon either the
passage of time or the occurrence of an
event.
(c) be payable on demand or at a definite time; and
(d) be payable to order or to bearer.
Subsections (c) and (d) are in dispute in the present case. We shall first examine the latter subsection.
Subsection (d) requires that the instrument be payable to order or bearer. Id. § 47-3-104 (1)(d). Since, the
parties do not dispute that the document is not order paper, the issue concerns whether the document constitutes bearer
paper. Tennessee Code Annotated § 47-3-111 (1979) states that an instrument is bearer paper if it is paya
(a) bearer or the order of bearer; or
(b) a specified person or bearer; or
(c) “cash” or the order of “cash,” or any other indication which does not purport
to designate a specific payee.
Since there is no dispute that subsections (a) and (b) are inapplicableand that the instrument in the present case is not
made payable to “cash” or order thereof, inquiry in this matter focuses on whether the instrument includes “any other
indication which does not purport to designate a specific payee.” Id. § 47-3-111 (c).
No Tennessee cases have addressed the issue at hand. James Delffs cites decisions in Davis v. Davis, 838
S.W.2d 415 (Ky. App. 1992), and Parker v. Pledger, 601 S.W.2d 897 (Ark. App. 1980), in which courts in our
neighboring states held that instrumentsthat contain blank space where the payee is intended to be designated are not
bearer instruments. These decisions are fully supported by the official comments to § 3-111 of the UCC, as it existed
at that time, which state:
2
This revision was placed into effect on July 1, 1996.
3
This is the supplement to the 1979 bound volume.
4
Paragraph (c) is reworded to remove any possible implication that “Pay to the
order of _____” makes an instrument payable to bearer.
T.C.A. § 47-3-111 Comments to Official Text. We find that these cases are inapposite to the case at hand, since the
parties in the instant case did not leave blank the space designated for the listing of the payee.
James Delffs also cites Broadway Mgmt. Corp. v. Briggs, 332 N.E.2d 131 (Ill. App. 1975), a case in
which the factual circumstances are remarkablysimilar to the instant case. In Broadway Mgmt., the instrument at
issue reads in pertinent part as follows:
Ninety Days after date, , we, or either of us, promise to pay to the order of Three
Thousand Four Hundred Ninety Eight and 45/100 - - - - - - - Dollars.” (The
underlined words and symbols have been typed in; the remainder is printed.)
There are no blanks on the face of the instrument, any unused space having been
filled in with hyphens.
Id. at 132. After citing the aforementioned portion of the official comments to U.C.C. § 3-111, the Illinois Court found:
The instrument here is not bearer paper. We cannot say that it “does not
purport to designate a specific payee.” Rather, we believe the wording of the
instrument is clear in its implication that the payee’s name is to be inserted
between the promise and the amount, so that the literal absence of blanks is
legally insignificant.
Broadway Mgmt., 332 N.E.2d at 133. James Delffs also cites Anderson’s treatise on the UCC, which states:
“When a note is improperlywritten so that the blank for the name of the payee shows the amount to be paid, the paper
is not bearer paper.” Ronald A. Anderson, Uniform Commercial Code § 3-111:4, at 275-76 (3d ed. 1994). However,
Broadway Mgmt. is the only authority cited by Anderson in support of this contention.
We believe that the holding in Broadway Mgmt. is difficult to reconcile with a reading of the official
comments to UCC § 3-111. When interpreting subsection (c), the comments specifically state:
Instruments payable to the order of an estate, trust, fund, partnership,
unincorporated association or office are covered by the preceding section. This
subsection applies only to such language as “Pay cash,” “Pay to the order of
cash,” “Pay to the order of one keg of nails,” or other words which do not purport
to designate any specific payee.
T.C.A. § 47-3-111 Comments to Official Text. Interpreting this comment, White and Summers have opined that “it
appears that any document which directs payment to or to the order of an inanimate object qualifies as a bearer
instrument.. . .” James J. White and Robert S. Summers,Uniform Commercial Code § 14-4, at 621 (3d ed. 1993); see
also Crandall, Herbert & Lawrence, Uniform Commercial Code § 16.3.1 (1996).
As stated previously, T.C.A. § 47-3-111 provides that an instrument constitutes bearer paper if it is payable
to “any other indication which does not purport to designate a specific payee.” Id. § 47-3-111 (c) (emphasis
added). The provision does not contain any language that qualifies the language, “any other indication.” Id. There
is no logical justification for creating a distinction between the designation of an inanimateobject, such as a keg of nails,
as the payee and the designation of a certain sum of money as the payee. Judicially creating such a distinction would
5
risk uncertaintyfor contracting parties,thus thwarting the very intent of the adoption of the UCC. See T.C.A. § 47-1-
102 (2) (1996). Moreover, Waldron aptly notes that it would appear to be a “perversion of logic” if an instrument
payable to “cash” qualifies as bearer paper, whereas an instrument payable to a specificamount of cash fails to qualify
as bearer paper. Therefore, we decline to follow the holding of the Illinois Court in Broadway Mgmt. and, instead,
hold that the instrument at issue qualifies as a negotiable instrument since it constitutes bearer paper.
Alternatively, James Delffs also asserts that the instrument fails to qualify as a negotiableinstrument because
it does not satisfy the requirement in T.C.A. § 47-3-104 (c) that it be payable “at a definite time.” James Delffs argues
that since Waldron altered the payable date from “June 10, 1994" to “June 10, 1995," there is ambiguity on the face of
the document. This contention is without merit for two reasons. First, we are dealing with a motion for judgment on
the pleadings,and the note as part of the pleadings indicates that the payment date is June 10, 1995, which we take as
true. In any event, a negotiableinstrument must be “payableon demand or at a definite time.” T.C.A. § 47-3-104 (c).
If the payable date had not been altered, we know it would have been payable on the date that it was executed, June 10,
1994. Therefore, it should be considered a demand note. See T.C.A. § 47-3-108 (1979); In re: Estate of Myers,
55 Tenn. App. 195, 206, 397 S.W.2d 831, 837 (1965). Thus, the fact that the note was altered enured to the benefit of
James Delffs.4
Since the note at issue satisfies the criteriaset forth in T.C.A. § 47-3-104, it qualifies as a negotiableinstrument.
Accordingly, the order of the trial court dismissing plaintiff’s complaint against James Delffs is reversed, and this case
is remanded to the trial court for such further proceedings as are necessary. Costs of the appeal are assessed against the
Appellee.
_________________________________
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
____________________________________
ALAN E. HIGHERS, JUDGE
____________________________________
HOLLY KIRBY LILLARD, JUDGE
4
As a practical matter if the testimony of the parties was considered it appears that
the alteration was made with the consent of Gary Dellfs.
6