MEMORANDUM OPINION GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
Thе above ease came before the Court on the defendant’s motion for summary judgment filed on August 1, 2006, in response to the debtor-plaintiffs complaint alleging the creditor-defendant violated the automatic stay [i.e. 11 U.S.C. § 362(a)] by cashing the plaintiffs check after she filed a petition for relief under Chapter 13 of the U.S. Bankruptcy Code. The defendant аvers it did not violate the automatic stay because of the exception provided in 11 U.S.C. § 362(b)(ll). The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. The Court heard oral arguments on September 12, 2006 and directed the parties to file additional briefs dealing with whether the check at issue qualified as a negotiable instrument. For the reasons stated below, the Court finds the motion for summary judgment is due to be GRANTED.
Background
On April 15, 2006, the plaintiff received a “payday loan” for $500.00 from the defendant. In exchange for the $500.00 loan, the plaintiff gave the defendant a check for $587.50, which was intended to pay the principal of the loan plus interest and fees. The defendant agreed to hold the check until April 29, 2006. On May 9, 2006, the debtor-plaintiff filed for Chapter 13 bankruptcy relief. For purposes of this summary judgment, the defendant stipulates it received notice of the plaintiffs bankruptcy before negotiating her check. On May 16, 2006, the defendant presented the plaintiffs check for payment, but it was
Positions of the parties
The defendant argues that because the check was a negotiable instrument, depositing and presenting it for payment was not a violation of the automatic stay pursuant to the exemption provided in Section 362(b)(11) of the Bankruрtcy Code. The defendant cites various cases where courts have concluded presentment of a negotiable instrument is not a violation of the automatic stay. For example, in
Thomas v. Money Mart Fin. Serv., Inc. (In re Thomas,)
the Eighth Circuit found Money Mart, the creditor in a payday loan transaction, was specifically excepted from the stay when it attempted to obtain payment on checks by tendering them to the drawee bank.
In contrast, the plaintiffs brief in opposition to the defendant’s motion for summary judgment contends the payday advance transaction between the plaintiff and defendant did not create a negotiable instrument as exempted by Section 362(b)(ll). She argues the Court should not look to Title 7, Article 3 of Alabama’s Commercial Code to dеtermine whether the check is a negotiable instrument, but rather the Court should rely on Title 5, Chapter 18A of the Alabama Code, which contains the Deferred Presentment Services Act. The plaintiff contends Alabama law does not recognize the check presented by the plaintiff to the defendant as a negotiable instrument but rather should be considerеd as part of a loan agreement under the Deferred Presentment Act. Thus, the plaintiff asserts the Thomas decision is inapplicable in Alabama because it was decided under Missouri law, which does not have a Deferred Presentment Act, and because the Thomas case was decided prior to Alabama’s enactment of its Deferred Presentment Act.
Analysis
The Bankruptcy Code does not define “negotiable instrument.” However, Section 7-3-104(a) of the Alabama Code, defines a negotiable instrument as:
[A]n unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it: (1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money....
Following oral arguments on the defendant’s motion, the Court directed the parties to further brief the issue of whеther this particular check was a negotiable instrument because of how the amount of
The plaintiff and the defendant knew the check was intended for its numerical amount (i.e. $587.50) because there were other writings confirming the amount of the payment due when the loan matured. However, “Negotiability is determined from the face, the four-corners, of the instrument withоut reference to extrinsic facts.”
Participating Parts Assoc., Inc. v. Pylant,
In 1995, Section 7-3-114 of the Alabama U.C.C. replaced former Section 7-3-118(b) and (c). Former Section 7-3-118(e) provided, “[w]ords control figures except that if words are ambiguous, figures control.” If the former section was still the law, we could stop here, because the ambiguous words stating the amount of the check could be ignored, and the unambiguous numbers or figurеs would control. However, this is no longer the law. Ala. Code § 7-3-114 now provides, “[i]f an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.” (Emphasis supplied). If words prevail over numbers, then the check is payable in the amount of five eighty-seven and 50/100 dollars, which is not a fixed amount of money. If these words were the оnly reference on the face of the check available to determine if the check was payable for a fixed amount, then it would not pass the test of being a negotiable instrument. However, the amount of the check is also indicated in unambiguous numbers. Are the numbers sufficient to remove the ambiguity in the amount described by the words? In light of the requirement that “words prevail over numbers,” can the numerical amount overcome the ambiguity? The Court believes the answer is yes.
For the words to prevail over numbers, the two must be “contradictory.” Ala. Code § 7-3-114. The words “five eighty-seven and 50/100 dollars” do not contradict the numbers $587.50. The numbers clarify the ambiguity in the words. If, for example, the words conflicted with the numbers (e.g. five
thousand
eighty-sеven and 50/100 dollars vs. $587.50), then the two would be contradictory, and the amount stated in
The next issue to determine if this check was a negotiable instrument is whether the promise to pay was unconditional.
1
Ala.Code § 7-3-106 explains that a promise or order is unconditional unless it contains an express condition to payment, or the order is subject to or governed by another writing, or the rights or obligations with respect to the order are stated in another writing. The plaintiff asserts the Customer Agreement executed in connection with the loan is the “other writing,” thus the plaintiffs check is not a negotiable instrument because it was conditioned upon the terms of the Customer Agreement. The Court disagrees that the plaintiffs check states it is subject to or governed by another writing as set out in Section 7-3-106(a), because the check itself contains no conspicuous statement referring to another writing. As stated above, negotiability is determined from the face, the four corners, of the instrument without reference tо extrinsic facts, thus the check itself must reference another writing.
See Holsonback v. First State Bank of Albertville,
The plaintiff also asserts the check was not a negotiable instrument because it was controlled by Alabama’s Deferred Presentment Services Act (“DPSA”). The plaintiff is correct that the transaction, including the check, falls squarely under the DPSA; however, that does not affect the check’s status as a negotiable instrument. It is clear that when determining whether an instrument is a negotiable instrument, a party dealing with the check is not required to look beyond the four corners of the check.
See Meyer v. Meyer,
The Court also finds the check meets the requirements for a negotiable instrument as set out in Section 7-3-104 of the Alabama Code because it was payable at a definite time. 3 The plаintiff argues that the check is not a “check” as defined in Section 7-3-104(f) because it is not payable on demand. The Court disagrees. Section 7-3-108(a) provides that a “[check] is ‘payable on demand’ if it (i) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (ii) does not state any time of pаyment.” The check at issue does not state any time of payment; it is, therefore, payable on demand. Thus the check is a negotiable instrument, and its negotiation, deposit and presentment for payment fell within the exception to the automatic stay provided by Section 362(b)(ll) of the Bankruptcy Code. 4
Conclusion
For the reasons stated above, the plaintiffs check was a negotiable instrument governed by Article 3 of the Alabama U.C.C. Presentment of a negotiable instrument is not a violation of the automatic stay. 11 U.S.C. § 362(b)(ll). Payday loan companies were non-existent or at least not as prevalent when Alabama enacted the U.C.C. or when its last major revision was adopted in 1995. However, the payday loan industry was going strong
Notes
. The parties do not dispute whether the check was payable to bearer or order at the time it was issued or first came into possession of the holder, аs required by Ala.Code § 7-3-104(a)(l) (1975). Thus this element of negotiability is not in issue.
. Ala Code § 7-3-117 (1975) provides, ”[s]ub-ject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified by a separate agreement оf the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented, or nullified by an agreement under this section, the agreement is a defense to the obligаtion.”
. The Court will not delve into the intricacies of the issue of whether the check was a negotiable instrument based on when it was payable because this issue was not raised by the parties. However, the Court's reasoning is as follows: Clearly based on the four corners of the check, it was payable on demand on April 15, 2006, which was the date of the lоan transaction and the date written on the check. Based on the Customer Agreement, the check was not to be presented until April 29, 2006. A stranger to the transaction would not know of the conditions imposed by the Customer Agreement, thus on its face the check was payable on April 15, 2006.
. As mentioned, the plaintiff's check was not paid, and her only damages were the NSF fees charged to her account by her bank. Although the Court is holding that the automatic stay was not violated because of the exception provided under 11 U.S.C. § 362(b)(ll), if the check had been paid, the Court would then be faced with determining whether the funds received by the defendant would constitute a postpetition transfer subject to avoidance under 11 U.S.C. § 549.