Matthew D. Wiggins, Jr v. Christopher J. Janousek and Madeleine M. Griffin

Affirmed and Memorandum Opinion filed August 3, 2017.

In The

Fourteenth Court of Appeals

NO. 14-16-00801-CV

MATTHEW D. WIGGINS, JR., Appellant
V.
CHRISTOPHER J. JANOUSEK AND MADELEINE M. GRIFFIN,
Appellees

On Appeal from the 55th District Court
Harris County, Texas
Trial Court Cause No. 2015-02155

MEMORANDUM OPINION

Appellant Matthew D. Wiggins, Jr., filed suit against appellees Christopher J.
Janousek and Madeleine M. Griffin to collect on a promissory note that matured in
April 2010. Wiggins filed two traditional motions for summary judgment, which
were denied. Janousek and Griffin filed a traditional motion for summary judgment,
which was granted on the basis that Wiggins’s claims were time-barred. Wiggins
presents two issues. First, Wiggins argues that the trial court erred by granting the
summary-judgment motion filed by Janousek and Griffin. Next, Wiggins argues
that the trial court erred by denying his first summary-judgment motion. This case
turns on whether the note is a negotiable instrument. If the note is non-negotiable,
then it is subject to a four-year statute of limitations and Wiggins’s claim is time-
barred. If the note is negotiable, then it is subject to a six-year statute of limitations
and the claim is not time-barred. We find the note non-negotiable. Accordingly, we
affirm the trial court’s order granting summary judgment.

BACKGROUND

The relevant facts are not in dispute. Wiggins filed his original petition against
Janousek and Griffin on January 14, 2015, to collect on a promissory note. Wiggins
alleged that the note matured on April 1, 2010. The note states, in part:

FOR VALUE RECEIVED, the undersigned hereby jointly and
severally promise to pay to the order of Matthew D. Wiggins the sum
of Fifty-Five Thousand Dollars ($55,000) together with interest thereon
at the rate of ten percent (10%) per annum on the unpaid balance. Said
sum shall be paid in the manner following: . . . .

Immediately following this typed sentence, in handwritten terms, the note states:

Interest accrues only after cash advance date.
Interest only payable on the 1st day of month.
No pre-payment penalty.
Total amount due on 4/1/10.

The note next states, in typed sentences:

All payments shall be first applied to interest and the balance to
principal. All prepayments shall be applied in reverse order of maturity.
This note may be prepaid, at any time, in whole or part, without penalty.
Janousek and Griffin filed an answer making a general denial and alleging the
affirmative defense of a four-year statute of limitations. Wiggins subsequently filed
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a traditional motion for summary judgment outlining the elements necessary to
recover on a promissory note. The trial court denied the motion, stating:

Although the Defendants have filed only a request for continuance and
not a response to the Motion, it appears from the Motion, the summary
judgment evidence, and Defendants’ Answer that the Plaintiff’s claim
is barred by limitations. The Court is unwilling to grant the Motion
under these circumstances.
Wiggins moved for traditional summary judgment for a second time on May 20,
2016, alleging the same grounds and addressing the statute-of-limitations issue.

Janousek and Griffin filed a traditional motion for summary judgment on June
6, 2016. The Janousek/Griffin motion for summary judgment alleged that the four-
year statute of limitations barred Wiggins’s claims. Janousek and Griffin argued
that the four-year limitations period applied because the note was non-negotiable.
The trial court granted the Janousek/Griffin motion for summary judgment on June
28, 2016. Wiggins moved for a new trial, which the trial court denied in an order
dated September 12, 2016. Wiggins timely appealed.

ANALYSIS

In his first issue, Wiggins argues the trial court erred in holding that the four-
year statute of limitations barred his claim. Wiggins agrees that his claim accrued on
April 1, 2010, when the note was not paid at maturity. See G & R Inv. v. Nance, 683
S.W.2d 727, 728 (Tex. App.—Houston [14th Dist.] 1984, writ ref’d n.r.e.).

Janousek and Griffin assert that the note contemplates future advances and
allows partial prepayments without penalty. They argue these factors render the note
non-negotiable. In support of their contention, Janousek and Griffin chiefly rely on
two Texas cases in which the notes’ principals were not for a fixed amount (also
referred to as a “sum certain”) as required to satisfy negotiability. See Bank of

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America, N.A. v. Alta Logistics, Inc., 2015 WL 505373, at *3 (Tex. App.—Dallas
2015, no pet.); Diversified Fin. Sys., Inc. v. Hill, Heard, O’Neal, Gilstrap & Goetz,
99 S.W.3d 349, 357 (Tex. App.—Fort Worth 2003, no pet.). We discuss these cases
in turn.

A. Standard of review

We review a summary judgment de novo. Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). To prevail on a
traditional motion for summary judgment, a movant must establish “there is no
genuine issue as to any material fact and the moving party is entitled to judgment as
a matter of law.” Tex. R. Civ. P. 166a(c).

When both parties move for summary judgment, each party bears the burden
of establishing it is entitled to judgment as a matter of law. City of Garland v. Dallas
Morning News, 22 S.W.3d 351, 356 (Tex. 2000). When the trial court grants one
motion and denies the other, we review the summary-judgment evidence presented
by both parties and determine all questions presented. Id. We render the judgment
the trial court should have rendered or reverse and remand if neither party has met
its summary-judgment burden. Id.

A defendant moving for summary judgment on the affirmative defense of
limitations has the burden to conclusively establish that defense. See Tex. R. Civ. P.
94; KPMG Peat Marwick v. Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748
(Tex. 1999). The defendant/movant must prove when the claim accrued and, if the
plaintiff pleads the discovery rule, then the defendant/movant must conclusively
negate it. See KPMG Peat Marwick, 988 S.W.2d at 748.1 If the defendant/movant
establishes that the statute of limitations bars the action, then the burden shifts and

1
Wiggins has not pleaded the discovery rule.

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the plaintiff/nonmovant must adduce summary-judgment proof raising a fact issue
in avoidance of the statute of limitations. Id.

B. The “sum certain” requirement for negotiability

To resolve the parties’ arguments about the appropriate statute of limitations,
we must first determine whether the note is a negotiable instrument. This is a
question of law. Guniganti v. Kalvakuntla, 346 S.W.3d 242, 248 (Tex. App.—
Houston [14th Dist.] 2011, no pet.). If a claim is based on a negotiable instrument,
the six-year statute of limitations in section 3.118 controls rather than the four-year
statute of limitations in section 16.004(3) for debt. Educap, Inc. v. Sanchez, 2013
WL 3243390, at *3 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) (mem. op.);
see Tex. Bus. & Com Code Ann. § 3.118 (West 2002) (providing statute of
limitations to sue on negotiable instruments is six years); Tex. Civ. Prac. & Rem.
Code Ann. § 16.004(3) (West 2002) (providing statute of limitations to sue on a debt
is four years).

A negotiable instrument is “an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the promise
or order” upon demand or at a definite time, and is payable to order or to bearer.
Tex. Bus. & Com. Code Ann. § 3.104(a) (West 2002). The sum certain requirement
is designed to provide commercial certainty in the transfer of negotiable instruments
and to make negotiable instruments the functional equivalent of money. Amberboy
v. Societe de Banque Privee, 831 S.W.2d 793, 797 (Tex. 1992). This requirement is
not satisfied if “one cannot determine from the face of [the] note the extent of the
maker’s liability.” FFP Marketing Co. v. Long Lane Master Trust, IV, 169 S.W.3d
402, 408 (Tex. App.—Fort Worth 2005, no pet.).

The sum-certain requirement applies only to the note’s principal. Tex. Bus. &
Com. Code Ann. § 3.112 cmt. 1 (West 2002); Burns v. Resolution Trust Corp., 880
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S.W.2d 149, 153 (Tex. App.—Houston [14th Dist.] 1994, no writ). Several courts
have held notes are non-negotiable because they represent a revolving line-of-credit
agreement, wherein the amount advanced to borrower affects the principal amount
due, and the principal is not readily determinable on the face of the note. See, e.g.,
Resolution Trust Corp. v. Oaks Apartments Joint Venture, 966 F.2d 995, 1001 (5th
Cir. 1992) (holding note non-negotiable because principal amount due was “the sum
of [$2,000,000] or so much thereof as may be advanced”); Alta Logistics, 2015 WL
505373 at *2 (finding note non-negotiable because it contemplated multiple
advances, revolving line of credit, and language that principle amount was a specific
sum or “so much as may be outstanding”); Diversified Fin. Sys., 99 S.W.3d at 357
(note contemplating multiple advances and revolving line of credit non-negotiable);
NAB Asset Venture III, L.P. v. John O’Brien & Assoc., No. 05-96-01453-CV, 1999
WL 88776, at *1, *5 (Tex. App.—Dallas Feb. 23, 1999, pet. denied) (mem. op.)
(same).

In Diversified Financial Systems, the note at issue represented a revolving line
of credit. 99 S.W.3d at 354. The Diversified Financial Systems court held:

The note between Hill Gilstrap and Commonwealth explicitly provides
that multiple advances are contemplated by the parties and that Hill
Gilstrap will be entitled to additional credit up to the maximum amount
of the note once payments have been applied against the outstanding
balance of the note. The note states that Hill Gilstrap promises to pay
$50,000 to Commonwealth, but that it also states that at the signing of
the note the Firm has only received a principal advance of $13,000.
Accordingly, the note is not for a fixed amount of money and is not a
negotiable instrument.
Id. at 357.

In Alta Logistics, the Dallas Court of Appeals held that a note was non-
negotiable because the amount due on the note at any given time was not readily

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determinable. 2015 WL 505373 at *2. The note represented “a revolving line-of-
credit, the borrower may prepay all or any portion of the amount due without
incurring any prepayment penalty, the Note states the amount due is $125,000 ‘or so
much as may be outstanding,’ and the unpaid principal balance may not be
determinable without reference to BOA’s internal records[.]” Id.

The note in this case is unclear as to whether there is only one cash-advance
date. If the entire amount of $55,000 was already advanced at the time of the note,
then it would seem unnecessary to include a sentence about interest accruing only
after the cash advance. Additionally, the note does not represent a revolving line of
credit agreement. In these respects, the note differs from the notes in Alta Logistics
and Diversified Financial Systems. See id.; Diversified Fin. Sys., 99 S.W.3d at 357.
Further, the note does not state that the principal balance due depends on the amount
advanced. See Resolution Trust Corp., 966 F.2d at 1001.

The date of the cash advance cannot be readily determined. Nor can the
amount of interest because it accrues on the unknown cash-advance date. The note
permits partial prepayments that shall be applied first to interest and then to
principal. To determine the amount due, a purchaser of the note would have to know
how much money was applied first to interest and then to principal, and if any other
partial prepayments have been made. Because the note lacks such information, a
purchaser of the note must look beyond the note, to items such as receipts to ascertain
the amount of principal Janousek and Griffin owed at any given time. See Alta
Logistics, 2015 WL 505373 at *2 (note non-negotiable because amount due at any
given time not readily determinable and required reference to internal business
records); FFP Mktg., 169 S.W.3d at 408 (sum certain requirement not satisfied if
face of note does not reflect extent of maker’s liability). The note is non-negotiable.
The four-year statute of limitations applies to Wiggins’s claims.

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 Janousek and Griffin have conclusively established their affirmative defense
of limitations. Wiggins filed suit on his claims more than four years after they
accrued, and accordingly, they are time-barred. We overrule Wiggins’s first and
second issues.2

CONCLUSION

We affirm the trial court’s order granting final summary judgment.

/s/ Marc W. Brown
Justice

Panel consists of Justices Christopher, Brown, and Wise.

2
We need not discuss Wiggins’s second issue regarding the trial court’s denial of his
summary-judgment motion because we already have determined that his claims on the note are
time-barred. See Tex. R. App. P. 47.1.

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