Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from an order of the Superior Court of Fresno County. Franklin P. Jones, Judge. Super. Ct. No. 472997-6
David Burkenroad for Appellant.
No appearance for Respondent Patricia Edwards.
Coleman & Horowitt and Christine J. Levin for Respondent William Hancock.
OPINION
VARTABEDIAN, Acting P. J.
This frivolous appeal arises from the trial court’s denial of an equally frivolous motion for preliminary injunction and other relief. Appellant David J. Edwards sought the injunctive relief to prevent his examination as a debtor; he essentially contended that he had satisfied the judgment by tendering a “bill of exchange.” We affirm the trial court’s denial of relief.
FACTS AND PROCEDURAL HISTORY
Appellant is the debtor on a judgment in favor of respondent William Hancock (hereafter respondent) for attorney fees awarded to him from appellant in a 1994 dissolution of marriage action in which appellant was petitioner, Patricia Edwards was respondent, and Hancock represented Patricia Edwards. Approximately $43,000 was owed on the judgment when the current round of litigation began in 2005.
Respondent served on appellant an order to appear for examination (see Code Civ. Proc., § 708.110) and a subpoena for production of documents. In response, appellant filed an ex parte application for temporary restraining order and order to show cause re preliminary injunction. The basis for the ex parte application, according to the application, was that appellant had more than a year earlier tendered to respondent “a Bonded UCC Contract Trust Registered Bill of Exchange …, a legally acknowledged negotiable instrument for discharge of [respondent’s] claim.” Appellant submitted the bill of exchange and other documents to respondent, who apparently ignored them.
We note that the term “bill of exchange” is not used in division 3 of the California Uniform Commercial Code or in article 3 of the Uniform Commercial Code. The official comment to section 3-104 of the Uniform Commercial Code, which is identical to California Uniform Commercial Code section 3104, states that “bill of exchange” “is generally understood to be a synonym for the term ‘draft.’” (West's Ann.Cal.Com.Code (2002 ed.) aft. § 3104, p. 177, com. 4.) Drafts, in turn, constitute one of the two broad classifications of instruments, notes and drafts. Notes are a promise to pay made by the maker, whereas a draft is an order to a third party to pay, usually on behalf of or from the account of the maker. We return to these definitional issues in the discussion section, post.
Because respondent did not attempt to process the bill of exchange and because he did not affirmatively assert any claimed deficiency of the bill of exchange, the judgment was satisfied by appellant’s tender, according to the application. After several hearings, which appellant dragged out for nearly a year, the court entered its order denying the application for order to show cause for a preliminary injunction and appellant’s motion for reconsideration of that order. Appellant filed a timely notice of appeal.
DISCUSSION
A bill of exchange similar to the one appellant tendered to respondent in this case was described as “a worthless piece of paper, consisting of nothing more than a string of words that sound as though they belong in a legal document, but which, in reality, are incomprehensible, signifying nothing.” (McElroy v. Chase Manhattan Mortgage Corp. (2005) 134 Cal.App.4th 388, 393 (McElroy).) We will not repeat the discussion in that case in any detail but will, instead, focus on appellant’s claimed differences between that case and this one.
A. The Documents
Although the documentation in the present case is equally incomprehensible as that in McElroy, we think it may be made more comprehensible by starting with certain documents that led up to the bill of exchange. Appellant was served a notice of renewal of judgment and an application for renewal that contains a breakdown of the claimed amount of the judgment. These documents, on standard Judicial Council forms, now bear an inscription across them, apparently from a rubber stamp. We quote the inscription below; blanks on the stamped inscription have been filled in by hand and are rendered in italics here:
“Non-Negotiable Charge Back
Office Holder - Secretary of the Treasury
I accept for value all related endorsements in accordance with
UCC 3-419, HJR 102 and Public Law 73-10. Charge my Private UCC Contract
Trust Account Employer Identification # 551306566 for the
registration fees and command the memory of account # 551306566
to charge the same to the Debtor’s Order, or your Order.
Employer Identification # 551306566
Pre-Paid—Preferred Stock
Priority—Exempt from Levy
Posted Certified Account - Invoice # 65661005041
Bond # E13977830 ”
This inscription, identical on both the notice of renewal and the application for renewal, is neither signed nor dated.
Attached to the bill of exchange is a document entitled “ACTUAL AND CONSTRUCTIVE NOTICE—NON-NEGOTIABLE—ACCEPTANCE FOR VALUE” This notice refers to the inscribed renewal documents. The notice purports to inform respondent’s attorneys that the renewal documents are a “public offering” and are “Accepted for Value” by appellant. The notice then states “the claims have been discharged under Public Policy with Exempt Exchange Item #1009 and acknowledgement has been received from [Secretary of the Treasury] John W. Snow - Trustee - without dishonor .… Notice of Pre-authorized Transfer by the Undersigned is on file with the UCC Contract Trust [an entity not otherwise identified].” The notice describes the inscription as a tender of payment of the judgment and demands the attorneys “adjust [the amounts claimed on the judgment] dollar for dollar” within three days. This notice is signed by appellant, is undated, and shows copies were sent to various Internal Revenue Service officials not otherwise mentioned in the notice.
Finally, there is the bill of exchange itself, addressed to John W. Snow, Secretary, Department of the Treasury. This document states that appellant has enclosed “Commercial Agreements” “accepted for assessed value” and requests that the Secretary “Charge back the Undersigned’s UCC Contract Trust … for the same value” shown in the “commercial agreements,” namely, the $43,979.08 shown in the application for renewal of respondent’s judgment against appellant. The bill demands “settlement” of the account by the Secretary within three days. This document, once again, is signed by appellant but undated. According to a certified mail receipt attached to the documents, they were received by the Department of the Treasury on December 1, 2004.
As far as we can tell, based on the documents themselves and appellant’s briefs filed in this appeal, what the documents are trying to say (or trying not to say directly, perhaps) is approximately the following: Appellant has notified the Treasury that his Social Security tax payments are to be held in trust for him and that the interest on this trust account is available to him for his own use. Appellant has provided to respondent a form by which respondent can demand of the Secretary, on appellant’s order, that the Secretary debit appellant’s trust account interest in the sum of $43,979.08 and (although not stated in so many words) send that sum to respondent or, perhaps, credit it to respondent’s estimated tax account with the Internal Revenue Service. That interpretation of the documents, however, is only slightly more than an educated guess because the documents are, as stated in McElroy, supra, 134 Cal.App.4th at page 393, incomprehensible.
B. Negotiable Instrument
Our discussion now brings us to consideration of appellant’s contentions on appeal. Most of appellant’s arguments founder on one simple fact: the bill of exchange is not a negotiable instrument. We will explain briefly why it is not, and then discuss the consequences for appellant’s other arguments.
“Order” is used in two senses in the definition of a negotiable instrument. First, a draft or bill of exchange is distinguished from a “note” in that the draft “orders” a third party to pay money to the payee of the draft, while a note constitutes a promise to pay by the maker of the note. In that sense, a draft cannot merely request or suggest that the third party make payment; the draft must “order” the third party to pay.
For a draft to be a negotiable instrument, however, it must also be payable “to bearer or to the order of bearer.” (Cal. U. Com. Code, § 3109.) “Negotiable” means the right to payment can be transferred from the original payee to one who becomes fully entitled to payment—hence, the instrument is “negotiated.” (See § 3201, subd. (a) [“‘Negotiation’ means a transfer of possession … of an instrument by a person other than the issuer to a person who thereby becomes its holder.” (Italics added.)].) If a right to payment is personal to the payee, the instrument is not negotiable, because the right to payment cannot readily be transferred from the original payee to a subsequent payee.
Further statutory references are to the California Uniform Commercial Code unless otherwise stated.
The California Uniform Commercial Code requires one of two forms for the designation of the payee of an instrument if it is to be negotiable: the instrument must be payable to “bearer”—that is, as relevant here, the instrument is payable to whomever has possession of the instrument (§ 3109, subd. (a)(1))—or it must be “payable to order.” Payable to order means that the instrument is payable to a named payee or to someone designated by the payee. (See § 3109, subd. (b).) In this sense, then, either an order to pay (i.e., a draft) or a promise to pay (i.e., a note) is negotiable only if it is payable to bearer or is payable to the payee or someone designated by the payee, that is, in the latter case, to whom the payee orders the instrument paid. That aspect of the “order” requirement is applicable both to notes and drafts, while the first use of “order” is applicable only to drafts and, indeed, constitutes the distinguishing feature of a draft.
Appellant points to the phrase in the bill of exchange directing “command Memory of account [number redacted in record] to charge the same to the Debtor’s Order or your Order.” As appellant states in his opening brief, “[i]t is obvious that ‘your order’ refers to the order of the Secretary.” But it is equally obvious, and not contested by appellant, that the bill of exchange is not payable to the order of the payee—here, judgment creditor—to whose order it must be payable if it is to be negotiable. That is, the judgment creditor has no right to call upon the payor of the bill of exchange for payment or to transfer that right (by negotiation of the instrument) to another who will then have the right to payment. As a result of the absence of this fundamental element of negotiability in the bill of exchange, it is not a negotiable instrument.
Appellant inadvertently acknowledges as much later in his opening brief. As he phrases the matter, the document “clearly identif[ies] [respondent] as the person to whom payment is ordered to be made.” The point of negotiability is that the documents must establish a right to payment in whomever, as payee, respondent designates (or “orders”), not that the maker merely orders payment to the payee.
C. Objection to Tender of Bill of Exchange
Appellant contends that Code of Civil Procedure section 2076 required respondent to promptly make any objection to the “terms of the instrument” tendered for payment of a debt, that respondent failed to offer such objections, and that the debt was thereby discharged. Appellant acknowledges respondent objected to the bill of exchange on the basis it was not a negotiable instrument, but contends respondent was obligated by Code of Civil Procedure section 2076 to make specific objections so that appellant could correct the deficiencies.
The objection that the bill of exchange was not negotiable is a specific objection. Respondent had no obligation to tell appellant how to fix the problem.
More important, tender of the documents, including the bill of exchange, was a sham and did not constitute merely a defective tender of payment; instead, “it amounted to no tender at all.” (McElroy, supra, 134 Cal.App.4th at p. 394.) Respondent had no obligation to respond to the sham tender of payment, whether by specific objection or otherwise. (Ibid.) Respondent’s failure to object did not result in satisfaction of the judgment.
Because the bill of exchange was not negotiable, appellant’s attempts to distinguish McElroy, supra, 134 Cal.App.4th 388, are unpersuasive.
D. Excluded Testimony
Appellant contends the trial court erred in excluding testimony from Barton Buhtz, purportedly an “investigative reporter and consumer advocate.” The testimony apparently would have explained how the Secretary of the Treasury would process the bill of exchange if it were presented for payment. In addition, appellant claims Buhtz would have given evidence to show that “there was a viable source of payment” for the bill of exchange. (Apparently, based on a letter from Buhtz submitted by appellant, the idea is that when the Secretary does not affirmatively dishonor the bill of exchange, respondent would be entitled to deduct the amount stated in the bill of exchange from respondent’s quarterly estimated income tax payments.)
In this case, as noted above, the bill of exchange was not a negotiable instrument and respondent had no obligation to accept it. In terms of payment of appellant’s judgment debt, the documents were, as a matter of law, worthless. Accordingly, evidence about the methods in which the documents could have been presented for payment and processed, if respondent had elected to take those steps, is wholly irrelevant, since respondent, as was his right, did not accept the bill of exchange. The court did not err in excluding the testimony.
E. Presentment
Finally, appellant contends various provisions of the California Uniform Commercial Code required respondent to present the bill of exchange to the Secretary of the Treasury for payment and that the trial court erred in concluding the bill would not have been honored if it had been presented. Regardless of the sham nature of the claimed “IMF contract trust account” and, indeed, if we were to assume the bill of exchange would have been paid, all of the code provisions imposing a duty on respondent to present the bill of exchange for payment are a part of division 3 of the California Uniform Commercial Code. That division is entitled “Negotiable Instruments” (§ 3101) and the “division applies to negotiable instruments.” As we have concluded above, the bill of exchange, either by itself or together with the other documents annexed to it, was not a negotiable instrument. Accordingly, appellant has failed to demonstrate that the court’s conclusion prejudiced appellant in any way: appellant’s tender of payment with a nonnegotiable bill of exchange was “no tender at all,” whether it might have been paid or not. (McElroy, supra, 134 Cal.App.4th at p. 394.)
DISPOSITION
The order after judgment is affirmed. Respondent is awarded costs on appeal.
WE CONCUR: GOMES, J., HILL, J.