183 N.W.2d 906 | Mich. Ct. App. | 1970
WATTLES
v.
AGELASTOS
Michigan Court of Appeals.
Kerr, Wattles and Russell (Richard D. Weber, of counsel), for plaintiff.
Cartsos, Christi & Rosati, for defendants.
*626 Before: FITZGERALD, P.J., and QUINN and O'HARA,[*] JJ.
O'HARA, J.
Plaintiff, ancillary administrator of the estate of Elizabeth Vassel, was granted summary judgment below on a claim arising out of a promissory note. Defendants appeal as of right.
In 1964, defendants purchased a restaurant business from plaintiff's decedent. The purchase price was $30,000; defendants paid $8,300 in cash, executed a promissory note for the balance and gave a security interest in the restaurant and fixtures.
The note promised payments of $250 per month. We can establish from the record that defendants defaulted on the note some time in 1966 when the unpaid balance was $18,824.35. At that time, plaintiff's decedent and defendants agreed to sell the restaurant business to a third party for $10,350. Plaintiff's decedent credited that amount to the unpaid balance due on the note and a memorandum agreement was executed which reduced the monthly payments to $150 per month.
Defendants again defaulted, leaving a principal balance due of $6,974.35. Summary judgment was granted below to plaintiff in that amount.
Contrary to defendants' claim, we do not agree that the sale of the business to the third party extinguished the plaintiff's right to sue on the note. It was not intended as a foreclosure sale of secured collateral under MCLA § 440.9504 (Stat Ann 1964 Rev § 19.9504). Even were it a foreclosure sale it would not necessarily impair the right to hold defendants for the deficiency on the note. MCLA § 440.9504(2) (Stat Ann 1964 Rev § 19.9504[2]).
*627 Defendant Milton Agelastos admitted that he and plaintiff's decedent agreed to sell their interests to the third party. Furthermore, defendants admitted in their pleadings that immediately after the sale there remained an outstanding indebtedness on the note. It is apparent from these admissions that the parties contemplated that in return for defendants' sale of their interest, plaintiff's decedent would give a credit of $10,350 on the note and reduce the monthly installments thereon. The result is a partial novation to the extent of $10,350 received from the third party. See Ceabuske v. Smolarz (1924), 229 Mich 100.
The remaining issue is whether plaintiff was entitled to judgment in the full amount of the unpaid balance of the note, or whether recovery was limited to the amount of installments in default at judgment.
The note executed by defendants contained an acceleration clause which gave the holder, upon default of monthly payments, the option to mature the entire balance due. Defendants do not contest the validity of that clause, but argue that the memorandum agreement (which contained no such clause) constituted a new undertaking, independent from the prior obligation. We disagree.
The memorandum agreement was not a new negotiable note. A holder of a negotiable instrument must be able to determine the amount payable from the instrument itself. It must be payable in a sum certain in money. MCLA § 440.3106 (Stat Ann 1964 Rev § 19.3106). This agreement, by its terms, did not specify the amount payable, but required reference to the prior promissory note to determine the balance due. It is clear from the record that the memorandum only modified the time for payment and amount of monthly installments. It, in effect, created a new contract between the parties; *628 the note and extension agreement constituting one contract. Buckman v. Hill Military Academy (1948), 182 Ore 621, 189 P2d 575. The other terms of the note not modified by the extention agreement, and specifically the provisions of the acceleration clause, were still in effect. Earhart v. Robinson (Tex Civ App, 1919), 215 SW 973; Hasman v. Canman (1933), 136 Cal App 91 (28 P2d 372).
The trial judge was correct in ruling that no genuine issue of material fact existed and defendants had not raised a valid defense.
Affirmed.
All concurred.
NOTES
[*] Former Supreme Court Justice, sitting on the Court of Appeals by assignment pursuant to Const 1963, art 6, § 23 as amended in 1968.
