## Facts

- Fred and Martha Smith loaned Gary Vaughn $9,900.
- Vaughn signed a one-page writing acknowledging the loan and stating he would repay it “when you can.”
- About 18 months passed without full repayment, and the Smiths sued for liability on the note and unjust enrichment.
- The Smiths moved for summary judgment, arguing the writing was a negotiable instrument payable on demand.
- Vaughn cross-moved for summary judgment, asserting repayment was not due because he lacked the ability to pay, supported by an affidavit describing financial hardship and partial repayment efforts.
- The Smiths did not submit evidentiary materials about surrounding circumstances to support their summary-judgment motion.
- The municipal court denied the Smiths’ motion and granted Vaughn’s cross-motion.

## Issues

1. Whether a repayment term stating the borrower will pay “when you can” makes repayment contingent solely on the borrower’s ability to pay, or instead requires payment within a reasonable time under the circumstances.
2. Whether a note payable “when you can” is a demand instrument and negotiable under Ohio’s UCC.
3. Whether the trial court erred in granting summary judgment for Vaughn and denying summary judgment for the Smiths on liability.

## Decision

- The court of appeals reversed and remanded.
- The note was not payable on demand and was not a negotiable instrument because “when you can” specifies a conditional time for payment, defeating negotiability.
- The phrase “when you can” required repayment within a reasonable time determined by all the circumstances, not solely by Vaughn’s asserted inability to pay.
- The trial court erred in granting summary judgment to Vaughn and in denying the Smiths summary judgment on liability under the proper legal construction of the repayment term.

## Legal Principles

- A writing is payable on demand only if it so states or if it specifies no time for payment; “when you can” states a time for payment and is not equivalent to omitting a time.
- A conditional promise to pay is not negotiable; a “when you can” repayment condition renders an instrument nonnegotiable.
- Under Ohio law, “when you can” (and similar language) is construed as requiring payment within a reasonable time, assessed objectively from all circumstances, and does not give the obligor unilateral control to postpone payment indefinitely.
- Summary judgment is improper where it rests on an incorrect legal interpretation of the parties’ repayment obligation.

## Conclusion

The appellate court held that a loan agreement requiring repayment “when you can” is nonnegotiable and becomes due within a reasonable time based on the circumstances, rejecting the borrower’s claim that payment was excused absent proven ability to pay; it reversed summary judgment for the borrower and remanded for further proceedings.


Smith v. Vaughn, 882 N.E.2d 941 (Ohio Ct. App. 2007)