Alpacas of America, LLC v. Groome
317 P.3d 1103
Wash. Ct. App.2014Background
- Alpacas of America, LLC (AOA) sold alpacas to Sam and Odalis Groome in 2006 and 2007; each sale was accompanied by a promissory note and a security agreement.
- AOA sued in April 2012 claiming the Groomes defaulted in October 2007 and seeking recovery on the two promissory notes.
- The Groomes moved to dismiss under CR 12(b)(6), arguing the action was time-barred by the 4-year statute of limitations for sales of goods (WUCC art. 2).
- AOA argued the notes were negotiable instruments governed by WUCC art. 3, imposing a 6-year statute of limitations.
- The trial court dismissed under the 4-year sales statute, reasoning the notes were part of the underlying sales contracts and not negotiable instruments; it awarded attorney fees to the Groomes.
- The court of appeals reversed: it held the notes were unconditional, negotiable instruments under article 3 (so a 6-year limitations period applied) and vacated the attorney-fee award to the Groomes.
Issues
| Issue | Plaintiff's Argument (AOA) | Defendant's Argument (Groomes) | Held |
|---|---|---|---|
| Whether the promissory notes are negotiable instruments under WUCC art. 3 | Notes are unconditional promises and thus negotiable, so 6-year limitations applies | Notes are part of and governed by the sales contracts (referenced each other), so 4-year sales statute applies | Notes are negotiable instruments; 6-year statute applies |
| Whether references to sales contracts (“pursuant to”, security terms, notice provisions) make the notes conditional | References do not make the promise conditional; holder can determine payment rights from the note alone | Those cross-references require consulting the contracts, destroying negotiability | References like “pursuant to” or security/notice clauses do not render the promise conditional; negotiability preserved |
| Whether a note given in connection with a sale gives rise to a separate remedy under Article 3 | Suing on the note is a distinct remedy from suing on the sales contract; choice of remedies supports art. 3 action | Under facts, contract and note are one transaction and cannot be divorced for limitations purposes | Adopts rule that a negotiable note creates a separate promise and remedy; holder may sue on the note |
| Whether prevailing-party attorney fees awarded to Groomes should stand after reversal | N/A (AOA sought reversal) | Groomes claimed entitlement under contract fee clause as prevailing party | Fee award reversed because Groomes are no longer prevailing party on appeal |
Key Cases Cited
- Kinney v. Cook, 159 Wn.2d 837 (2007) (standard of review for CR 12(b)(6) dismissal)
- Brinnon Group v. Jefferson County, 159 Wn. App. 446 (2011) (standard for reviewing denial of reconsideration)
- O'Neill v. Steppat, 270 N.W.2d 375 (S.D. 1978) (promissory note given in payment for a sale constitutes a separate negotiable promise; holder may sue on the note)