1. What was the problem with the words of negotiability?

2. What was the difference for Whitaker and Fletcher if there was negotiability vs. not having negotiability?

3. What advice would you give to business people who are drafting notes for repayment?

William Kidd served as managing director of Limeco Corporation. In 2001, negotiations began between Kidd/Limeco (defendants) and R.W. Whitaker and Monty Fletcher (plaintiffs) in connection with what later became a failed effort to purchase a hockey team in Tupelo. Whitaker and Fletcher loaned Limeco $750,000. Whitaker and Fletcher claim that Kidd concealed the fact that Limeco had no assets. Whitaker also loaned Kidd an additional $100,000, with the understanding that Kidd and Limeco would be responsible for paying back the loan Whitaker had taken out from the Peoples Bank & Trust Company in Tupelo in order to make the loan to Kidd.

On July 1, 2002, the parties entered into what they referred to as promissory notes (referred to as the “Fletcher note” and the “Whitaker note”) to memorialize the terms of the loan agreements they had made in early 2002. Both Fletcher and Whitaker were granted a continuing lien on Limeco’s monies, securities, and/or other property for the entire amount of the promissory notes (each in the amount of $375,000).

On December 11, 2003, Whitaker and Fletcher filed separate complaints against Limeco and Kidd for recovery of the more than $850,000 that had never been repaid. The trial court found that, because the suit was brought after the contracts’ statute of limitations had expired, it had to be dismissed. Whitaker and Fletcher argued that the notes were negotiable instruments and their fraud claim was valid because of the six-year statute of limitations that applied with regard to negotiable instruments.

JUDICIAL OPINION

CARLSON, Justice … The Plaintiffs argue that the notes entered into by Kidd, each in the amount of $375,000, met all of the statutory requirements for negotiable instruments pursuant to Mississippi Code Section 75-3-104 (Rev.2002); thus, the complaint was timely filed within the six-year statute of limitations pursuant to Section 75-3-118(b).

The trial court dismissed the Plaintiffs’ complaint on the basis that neither of the promissory notes, each in the amount of $375,000, was a negotiable instrument under Section 75-3-104 because neither of the notes contained the required “words of negotiability.” As a result, the trial court found that the notes were not subject to the six-year statute of limitations applicable to negotiable instruments  under Section 75-3-118(b). Instead, according to the trial court, the notes were subject to the three-year statute of limitations for breach-of-contract claims.

What the Plaintiffs identify as the “Whitaker note” reads as follows: “On demand, for value received, I promise to pay to R.W. Whitaker … the sum of Three Hundred, Seventy-five Thousand Dollars ($375,000).” The written agreement identified as the “Fletcher note” contains identical language. The Plaintiffs argue that this meets the statutory definition of “payable to order” and urge this Court to interpret Section 75-3-109(b) as defining “payable to order” as follows: payable “to the order of an identified payee,” payable to an identified payee, or payable “to order.” In support of their argument, the Plaintiffs cite the canon of statutory construction that statutes written in the disjunctive set forth separate and distinct alternatives. …………………..