## Facts

- Marjorie E. Peirce provided Charles and Beverly Cronebaugh \$50,000 as a gift and agreed to loan an additional \$50,000 to help them purchase a lakefront home.
- The borrowers’ attorney drafted a promissory note and mortgage securing the loan with the borrowers’ residence and selecting Florida law.
- The note stated the principal was “to be determined at the time of contingencies,” provided for 0% interest, and included: (1) “This is a demand note, due on October 1, 2018”; (2) an option tied to a fractional share of net sale proceeds if the house was sold; and (3) an option tied to a fractional share of equity upon the borrowers’ deaths.
- After Peirce died, her estate’s personal representative demanded full payment and sought foreclosure, asserting the note was payable on demand.
- The borrowers contended no payment was required until October 1, 2018, unless earlier triggered by the sale or death contingencies.
- The estate also pursued fraudulent misrepresentation based on statements allegedly made to induce the transaction.

## Issues

1. Whether the note was a negotiable instrument under U.C.C. § 3-104(a) given that the principal amount was contingent and not fixed on the face of the note.
2. Whether the language “This is a demand note, due on October 1, 2018,” created an obligation payable upon the holder’s demand before 2018.
3. Whether the evidence supported a judgment for fraudulent misrepresentation against the borrowers.

## Decision

- The appellate court held the note was not a negotiable instrument because it did not contain an unconditional promise to pay a fixed amount of money.
- The court held the note nevertheless created a demand obligation; the “demand note” and “due on October 1, 2018” language was construed against the drafter, permitting demand at any time.
- The court reversed the trial court’s denial of foreclosure/collection based on its conclusion that the obligation was payable on demand.
- The court reversed the fraud judgment, finding the evidence insufficient to prove materially false representations.

## Legal Principles

- A note is not negotiable under U.C.C. § 3-104(a) unless it includes an unconditional promise to pay a fixed amount; a principal “to be determined” by future contingencies fails this requirement.
- When a note’s payment terms are ambiguous, the ambiguity is construed against the drafter (contra proferentem).
- A document labeled a “demand note” may be enforced as payable upon demand despite the presence of a future “due” date when the text reasonably supports that reading.
- Fraudulent misrepresentation requires proof of a materially false statement; general statements about financial stress, without proof of falsity and materiality, do not sustain a fraud judgment.

## Conclusion

The court determined that a contingent-principal note was nonnegotiable but, construed against the borrowers as drafters, was payable on demand, requiring reversal of the foreclosure denial; it also reversed the fraud judgment for lack of proof of a materially false misrepresentation.


Nagel v. Cronebaugh, 782 So. 2d 436 (Fla. Dist. Ct. App. 5th Dist. 2001)