James Talcott, Inc. v. Shulman

• Decision Date: 09 March 1964
• Docket Number: No. A--469,A--469
• Citation: 82 N.J.Super. 438,198 A.2d 98
• Parties: JAMES TALCOTT, INC., a corporation of the State of New York, Plaintiff-Respendent, v. Joseph SHULMAN, Defendant and Third-Party Plaintiff-Appellant, v. SAYVE CORPORATION OF AMERICA, INC., et al., Third-Party Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 438

82 N.J.Super. 438

198 A.2d 98

JAMES TALCOTT, INC., a corporation of the State of New York, Plaintiff-Respendent, v. Joseph SHULMAN, Defendant and Third-Party Plaintiff-Appellant, v. SAYVE CORPORATION OF AMERICA, INC., et al., Third-Party Defendants.

No. A--469.

Superior Court of New Jersey, Appellate Division Argued Feb. 24, 1964.

Decided March 9, 1964.

Theodore W. Trautwein, Hackensack, for appellant.

Walter J. Bilder, Newark, for respondent (Bilder, Bilder & Freeman, Newark, attorneys, Walter J. Bilder, Newark, on the brief).

Before Judges GOLDMANN, KILKENNY and COLLESTER.

The opinion of the court was delivered by

COLLESTER, J.A.D.

Defendant Joseph Shulman appeals from a summary judgment granted by the Bergen County Court in favor of plaintiff James Talcott, Inc. (Talcott) for $25,124.60 in a suit on a negotiable promissory note. The issues on this appeal are (1) whether the pleadings, affidavits and depositions filed showed a genuine issue of material facts precluding the entry of summary judgment, and (2) whether plaintiff the status of a holder in due course of a negotiable instrument.

Defendant is a New Jersey resident engaged in the practice of dentistry. One Jerome Wallens of Atlanta, Georgia, who was related by marriage to defendant, was president of Franchised Business Opportunities, Inc. (Franchised Business), which corporation was a sales agent for Sayve Corporation of America (Sayve). Sayve was a manufacturer and manufacturer's representative for the sale of portable laundry establishments and equipment.

In 1959 defendant became interested in a proposed venture to install coin-operated laundry business in Georgia. As a result, a corporation known as Professional Investment Corp., Inc. (Professional Investment) was organized in Georgia, in which defendant and others became stockholders. Defendant was elected president.

On October 15, 1959 Professional Investment purchased the equipment and a portable building required to install a coin-operated laundry in Atlanta from Franchised Business for $33,932.50. As part of the transaction, Professional Investment executed a conditional sales contract with the seller and delivered over its promissory note to Franchised Business in the sum of $27,007.52 as part of the purchase price. Defendant signed the note as a comaker.

The note was payable in 59 successive monthly installment of $450 each and a final installment of $457.50. It further provided that payments would be made at the office of plaintiff James Talcott, Inc. in New York City, 'or at such other place as the holder hereof may from time to time appoint.'

The conditional sales contract contained the following provision:

'Seller may transfer and sell this agreement and note to James Talcott, Inc., 225 Fourth Avenue, New York 3, New York, in which event assignee shall have all the rights of the Seller hereunder and Buyer agrees to pay the unpaid balance owing to James Talcott, Inc., on due dates. Buyer agrees that Buyer's obligation hereunder shall be unaffected by any default or obligation of the Seller arising out of the sale of the chattels or otherwise and agrees not to interpose any claim against the Seller as a defense, offset or counterclaim in any action by assignee upon this contract or said note.'

Following the execution of the conditional sales contract and promissory note, Franchised Business assigned the contract and transferred the note by endorsement to Sayve.

Plaintiff is an industrial finance company. On September 11, 1959 it had entered into an agreement with Sayve whereby it agreed to purchase from the latter conditional sales contracts, installment sales paper, promissory notes and other forms of obligation acceptable to plaintiff, arising out of a sale, lease or rental of machinery, equipment or other merchandise by Sayve to its customers.

In the operation of its finance company business it was the practice of plaintiff to prepare and distribute blank forms of conditional sales agreements and promissory notes to companies who sold them commercial paper. The forms used by Franchised Business and defendant in the above mentioned sale had been prepared by plaintiff and supplied to Sayve for the latter's use.

On December 11, 1959 Sayve sold defendant's promissory note to plaintiff for $19,445.39, transferring it by endorsement. Sayve also assigned the conditional sales contract to plaintiff. On the same date Sayve delivered over to plaintiff a certificate of installation dated November 27, 1959, purportedly signed by defendant as president of Professional Investment, which certified that the equipment described in the conditional sales contract had been delivered and installed.

Professional Investment paid plaintiff installment payments due on said note for 14 successive months, totalling $6,300. It defaulted on the payment due March 21, 1961, and failed thereafter to make further payments. Plaintiff exercised its option to declare the unpaid balance immediately due and payable and thereafter brought suit on the note against defendant, the comaker.

Defendant's answer admitted execution and delivery of the note, and that plaintiff was the holder and owner thereof. He denied plaintiff was a holder in due course.

Defendant alleged that he was fraudulently induced to sign the note as a comaker by Jerome Wallens; that he received no consideration for signing it; that the equipment purchased proved to be defective; and that plaintiff was guilty of fraud in the negotiation of the note and had notice of all defects.

Plaintiff moved for summary judgment pursuant to R.R. 4:58. From the pleadings and motion papers, the trial judge found no genuine issue as to any material facts challenged and that plaintiff was entitled to judgment as a matter of law.

It is to be noted that the negotiable promissory note, which is the subject matter of plaintiff's action, was executed prior to January 1, 1963, the effective date of the Uniform Commercial Code, L.1961, c. 120; N.J.S. 12A: 1--101 et seq., N.J.S.A., and thus is governed by R.S. 7:1--1 et seq., N.J.S.A., the pre-existing Negotiable Instruments Law. See N.J.S. 12A:10--101, N.J.S.A.

Defendant having admitted plaintiff is the holder and owner of the note, there is a Prima facie presumption that plaintiff is a holder in due course. R.S. 7:2--59, N.J.S.A. Accordingly, the burden of proving that the statutory requirements of a holder in due course did not exist at the time plaintiff accepted the note from Sayve is upon the defendant. See R.S. 7:2--52, N.J.S.A.; Bancredit, Inc. v. Bethea, 65 N.J.Super. 538, 543, 168 A.2d 250 (App.Div.1961); Crown Capital Corp. v. Broderick, 130 N.J.L. 198, 200, 32 A.2d 289 (Sup.Ct.1943).

Defendant challenges plaintiff's status as a holder in due course on the ground that plaintiff's purchase of the note was not made in good faith, and that when plaintiff acquired the note it had notice of its infirmities. See R.S. 7:2--52, N.J.S.A.

Defendant's affidavit states that he Believes Franchised Business, Sayve and plaintiff worked in close concert, each having knowledge of representations made in each conditional sale and were, in effect, one organization. Based on this Belief, he stated that Wallens was, In effect, an agent of plaintiff, to whom knowledge of Wallens' fraudulent representations and the fact that the equipment sold was defective must be imputed. He further denied signing the certificate of installation, stating that someone had signed his name thereto, without his authority.

Defendant also relies...