Schuyler Co-op Assn. v. Sahs

S chuyler cooperative aSSociation , appellee , v .
charleS M. SahS, appellant .
755 N.W.2d 802
Filed September 19, 2008. 	No. S-07-454.
1. Summary Judgment. Summary judgment is proper when the pleadings and
evidence admitted at the hearing disclose that there is no genuine issue as to any
material fact or as to the ultimate inferences that may be drawn from those facts
and that the moving party is entitled to judgment as a matter of law.
2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an
appellate court views the evidence in the light most favorable to the party against
whom the judgment is granted and gives such party the benefit of all favorable
inferences deducible from the evidence.
3. Negotiable Instruments: Words and Phrases. An unconditional promise to pay
a fixed amount at a definite time is an enforceable negotiable instrument.
4. Promissory Notes: Words and Phrases. Absent a defense, a promissory note is
ordinarily a stand-alone, unqualified, enforceable promise to pay.
5. Uniform Commercial Code: Negotiable Instruments. Neb. U.C.C. § 3-117
(Reissue 2001) provides generally that to the extent the obligation under an
instrument is modified, supplemented, or nullified by another agreement, such
other agreement may serve as a defense to the obligation.
6. Contracts: Breach of Contract: Penalties and Forfeitures: Damages. The
whole subject of penalty versus liquidated damages only arises when the par-
ties to a contract have attempted to provide for a remedial right upon breach of
a contract.
7. Promissory Notes: Accounting. The execution and acceptance of a promissory
note for the balance of an unsettled account constitute the stating of an account
between the parties.
8. Promissory Notes: Proof. A written obligation for the payment of a disputed
account is conclusive between the parties and cannot be reopened either at law
or at equity, except upon clear proof of fraud, or mistake, or of an express under-
standing that certain matters were left open for future adjustment.
Appeal from the District Court for Colfax County: M ary c.
G ilbride, Judge. Affirmed.
Clark J. Grant, of Grant & Grant, for appellant.
Thomas E. Jeffers and Mathew T. Watson, of Crosby Guenzel,
L.L.P., for appellee.
W riGht, 	connolly, 	S tephan, 	M ccorMack, 	and 	M iller -
lerMan, JJ.
578 	276 NEbRASkA REPoRTS
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:52 AM CST

M iller -lerMan, J.
NATURE oF CASE
Schuyler Cooperative Association (Schuyler) filed suit in
the district court for Colfax County against Charles M. Sahs
to enforce a promissory note Sahs had executed in favor of
Schuyler. Sahs presented certain defenses which the district
court rejected. The district court concluded that the promissory
note was enforceable. The court denied Sahs’ motion for sum-
mary judgment and sustained Schuyler’s motion for summary
judgment, entering judgment in Schuyler’s favor on the promis-
sory note. Sahs appeals. We affirm.
STATEMENT oF FACTS
This action involves enforcement of a promissory note exe-
cuted February 25, 2004, in which Sahs agreed to pay Schuyler
$70,000 on or before March 1, 2004. The terms of the note
represented the amount Schuyler agreed to accept and Sahs
agreed to pay to resolve a dispute with respect to an unsettled
account. The account had been in dispute and the subject of a
lawsuit since 2002.
The record shows that on November 12, 2002, Schuyler filed
a lawsuit in the district court for Colfax County against Sahs
and others, seeking to collect an outstanding debt on an open
account. To resolve the matter, Sahs and Schuyler executed
several documents, including the promissory note at issue, a
stipulation and confession of judgment, a settlement agree-
ment, and a stipulation to dismiss the lawsuit. The promissory
note, dated February 25, 2004, states unconditionally that Sahs
will pay Schuyler $70,000 on or before March 1, and in the
confession of judgment, Sahs confesses judgment in favor of
Schuyler in the amount of $70,000.
The written settlement agreement, dated February 27, 2004,
recited that Sahs and Schuyler agree that the amount due on
the open account is $80,000, and this recital is incorporated
into the agreement. Referring to the promissory note, the
agreement provides that Sahs represents that the note is valid,
legally enforceable, and waives all defenses to Schuyler’s
right to collect except for the defense of payment. However,
the settlement agreement further provides that Schuyler would
SCHUyLER Co-oP ASSN. v. SAHS 	579
Cite as 276 Neb. 578

forgo collection on the $70,000 promissory note in the event
that Sahs paid a compromised sum of $53,072.81 as fol-
lows: $19,000 at the time of the execution of the agreement;
$1,000 each month thereafter, for 34 months; and a payment
of $72.81 in the 35th and final month. These monthly pay-
ments were due the 1st of the month and delinquent after the
15th of the month. In the event Sahs failed to timely make
these monthly payments, the agreement states that Schuyler
had the immediate right to bring an action on the preexisting
promissory note for the full $70,000 amount of the note, with
credit given for any payments Sahs had made under the settle-
ment agreement.
Sahs made certain payments to Schuyler, in accordance with
the schedule of the settlement agreement. However, Sahs failed
to make his May 2006 payment when due on May 1, and the
payment became delinquent after May 15.
on May 26, 2006, Schuyler filed suit in the district court
for Colfax County against Sahs, seeking to enforce the promis-
sory note. This suit gives rise to the instant appeal. In this suit,
Schuyler alleged that Sahs had paid $45,000 to date and that
therefore, $25,000 was owed on the promissory note. Sahs filed
an answer in which he admitted the underlying facts, including
execution of the promissory note, but claimed that the amount
sought by Schuyler was an unreasonable penalty in violation of
public policy, and therefore, unenforceable.
on July 10, 2006, Sahs filed a motion for summary judg-
ment seeking dismissal of the suit. Sahs claimed that the
promissory note constituted an unenforceable penalty pro-
vision. The court overruled Sahs’ motion for lack of an ade-
quate record.
on February 22, 2007, Schuyler filed a motion for sum-
mary judgment, which came on for an evidentiary hearing on
March 14. In an order filed April 24, the district court sus-
tained Schuyler’s motion. The district court entered judgment
in Schuyler’s favor and against Sahs in the amount of $70,000,
with credit for payments already made by Sahs to Schuyler,
plus interest as set forth in the promissory note and costs.
Sahs appeals.
580 	276 NEbRASkA REPoRTS

ASSIGNMENTS oF ERRoR
Sahs claims the district court erred (1) in overruling his
motion for summary judgment and (2) in sustaining Schuyler’s
motion for summary judgment.
STANDARDS oF REVIEW
[1,2] Summary judgment is proper when the pleadings and
evidence admitted at the hearing disclose that there is no
genuine issue as to any material fact or as to the ultimate infer-
ences that may be drawn from those facts and that the moving
party is entitled to judgment as a matter of law. See County of
Hitchcock v. Barger, 275 Neb. 872, 750 N.W.2d 357 (2008). In
reviewing a summary judgment, an appellate court views the
evidence in the light most favorable to the party against whom
the judgment is granted and gives such party the benefit of all
favorable inferences deducible from the evidence. See id.
ANALySIS
The issue presented in this appeal is whether the promissory
note is enforceable. Sahs claims, in effect, that the promis-
sory note serves as the damage provision for breach of the
settlement agreement and that such provision is not enforce-
able, because the $70,000 amount in the promissory note is
an unreasonable penalty when compared to the $53,072.81
obligation contained in the settlement agreement. The district
court rejected a similar argument and found the promissory
note to be enforceable, denied Sahs’ motion for summary judg-
ment, and granted Schuyler’s motion for summary judgment.
Sahs contends that the district court erred when it made these
rulings. As discussed below, because the promissory note con-
stituted the stating of a previously unsettled account and is not
a damage provision, we conclude that the promissory note is a
separate and enforceable agreement. Accordingly, we affirm.
[3] The promissory note at issue is an unconditional prom-
ise to pay a fixed amount at a definite time and, as such, is an
enforceable negotiable instrument. See, Neb. U.C.C. § 3-104
(Cum. Supp. 2006) (defining negotiable instruments); Neb.
U.C.C. § 3-106 (Reissue 2001) (defining unconditional prom-
ise). Although the promissory note was executed in the same
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Cite as 276 Neb. 578

timeframe as the settlement agreement, it contains no express
conditions of payment and it does not state that it is subject to
the settlement agreement or another writing. See § 3-106. The
promissory note, therefore, is not conditional, and contrary to
Sahs’ argument, its viability is not conditioned on the contents
of the subsequently executed settlement agreement.
[4,5] Absent a defense, a promissory note is ordinarily
a stand-alone, unqualified, enforceable promise to pay. See,
Citicorp Intern. Trading v. Western Oil & Refining, 790 F.
Supp. 428, 434 (S.D.N.y. 1992) (concluding that note is stand-
alone document and that “[p]roof of a note and a failure to
make payment theron establishes a prima facie case for recov-
ery on that note”); Neb. U.C.C. § 3-308 (Reissue 2001) (stating
that if validity of signatures on instrument is admitted, plain-
tiff producing document is entitled to payment unless defend-
ant proves defense); Barelmann v. Fox, 239 Neb. 771, 478
N.W.2d 548 (1992) (holding that when there is no proof that
notes in question were paid off or otherwise discharged, notes
established indebtedness). Notwithstanding the foregoing, Sahs
nevertheless claims that the settlement agreement serves to
modify or supplement the contents of the promissory note. We
understand this argument to be a claim asserted under Neb.
U.C.C. § 3-117 (Reissue 2001), which provides generally that
to the extent the obligation under an instrument is modified,
supplemented, or nullified by another agreement, such other
agreement may serve as a defense to the obligation.
To the extent Sahs is relying on the settlement agreement
to modify his obligation under the promissory note, his argu-
ment is unavailing as a defense. Even taking the inferences in
favor of Sahs, rather than minimizing his $70,000 obligation
under the promissory note, the settlement agreement states
and the parties agreed that Sahs owed Schuyler $80,000.
The settlement agreement as a whole states that Sahs owes
Schuyler $80,000, that the parties have agreed that Schuyler
will accept $70,000 as reflected in the promissory note as
full settlement, but that Schuyler will forgo collecting on
the promissory note and accept $53,072.81 if Sahs pays the
$53,072.81 in a timely manner. The terms of the settlement
agreement do not impact or nullify Sahs’ $70,000 obligation
582 	276 NEbRASkA REPoRTS

under the preexisting promissory note except to the extent that
Schuyler agreed to forbear collecting on the promissory note
if Sahs paid timely. The undisputed evidence shows that Sahs
failed to pay timely under the settlement agreement. Therefore,
Schuyler was relieved of its agreement to forbear collection of
the $70,000 promissory note and is entitled to bring this action
to collect on the note.
[6] Much discussion was had at the trial level and in the
appellate briefs as to whether the $70,000 amount may have
been either a penalty provision or a liquidated damage provi-
sion purportedly occasioned by Sahs’ breach of the settlement
agreement. The $70,000 amount is not a damage provision
for breach of the settlement agreement, and therefore, a dis-
cussion of the distinction between liquidated damages and
penalty provisions is unnecessary to our analysis. As we have
recently observed, “‘[t]he whole subject of penalty versus
liquidated damages only arises when the parties to a contract
have attempted to provide for a remedial right upon breach of
a contract.’” Berens & Tate v. Iron Mt. Info. Mgmt., 275 Neb.
425, 431-32, 747 N.W.2d 383, 388 (2008) (quoting B.F. Saul
Real Estate Inv. Trust v. McGovern, 683 S.W.2d 531 (Tex. App.
1984)). The promissory note at issue here is not a remedial
right, but, rather, a separate preexisting obligation to which the
parties agreed.
[7,8] As the undisputed facts show, the $70,000 amount is
neither a penalty nor a liquidated damages provision, because
the $70,000 amount was not to be paid because of a breach
of the settlement agreement, but, rather, because it constituted
the stating of an account which was previously in dispute. We
have cited favorably to cases stating that the execution and
acceptance of a promissory note for the balance of an unsettled
account constitute the stating of an account between the parties.
See Hansen v. Abbott, 187 Neb. 248, 188 N.W.2d 717 (1971).
Such written obligation for the payment of a disputed account
is conclusive between the parties and cannot be reopened either
at law or at equity, except upon clear proof of fraud, or mis-
take, or of an express understanding that certain matters were
left open for future adjustment. Id. See, similarly, Barelmann v.
Fox, 239 Neb. 771, 478 N.W.2d 548 (1992).
SCHUyLER Co-oP ASSN. v. SAHS 	583
Cite as 276 Neb. 578

In the instant case, even taking the inferences in favor of
Sahs, as we must do on appellate review of a summary judg-
ment, see County of Hitchcock v. Barger, 275 Neb. 872, 750
N.W.2d 357 (2008), it is clear from the evidence that the
promissory note represented an agreement between Sahs and
Schuyler to settle Sahs’ $80,000 indebtedness for $70,000.
As such, the $70,000 promissory note represented an agree-
ment between the parties that $70,000 would be accepted by
Schuyler as full payment and settlement of the account and
the $70,000 was not a damage provision in the settlement
agreement. The promissory note was an unconditional promise
by Sahs to pay Schuyler and was enforceable, as the district
court determined.
Summary judgment is proper when the pleadings and evi-
dence admitted at the hearing disclose that there is no genuine
issue as to any material fact or as to the ultimate inferences
that may be drawn from those facts and that the moving party
is entitled to judgment as a matter of law. Thrower v. Anson,
276 Neb. 102, 752 N.W.2d 555 (2008). Schuyler presented
uncontroverted evidence that Sahs failed to make his May 2006
payment under the settlement agreement when due on May 1
and that such payment had not been made by May 15. Schuyler
was no longer obligated to forbear collection of the promissory
note. Schuyler properly filed this action to demand payment of
the full amount due under the promissory note, with credit for
payments previously received. As the district court correctly
concluded, Schuyler was entitled to judgment.
CoNCLUSIoN
The district court correctly determined that the promissory
note was enforceable. The district court did not err in deny-
ing Sahs’ motion for summary judgment and in sustaining
Schuyler’s motion and entering judgment in favor of Schuyler
on the promissory note. We affirm.
affirMed .
heavican, C.J., and G errard, J., not participating.
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