Coral Gables, Inc. v. Heim
| Decision Date | 05 November 1935 |
| Citation | 120 Conn. 419,181 A. 613 |
| Court | Connecticut Supreme Court |
| Parties | CORAL GABLES, Inc., v. HEIM. |
Appeal from Superior Court, Fairfield County; Earnest C. Simpson Judge.
Action on a promissory note by Coral Gables, Inc., indorsee, against Lewis R. Heim, maker. The case was tried to the court. Judgment for defendant, and plaintiff appeals.
Error and new trial ordered.
Stephen B. Vreeland, of New York City, and Fred L. Griffin of Stamford, for appellant.
Norman King Parsells and David S. Day, both of Bridgeport, for appellee.
Argued before MALTBIE, C.J., and HAINES, HINMAN, BANKS, and AVERY JJ.
On September 12, 1925, Coral Gables Corporation, a land development company engaged in developing a tract of land in the city of Coral Gables, Fla., entered into a contract with the defendant in which it agreed to sell and he agreed to buy a lot in such development for the sum of $7,500. Defendant paid $1,875 upon the purchase price and gave his note for the balance of $5,625 dated September 12, 1925, and payable to the order of Coral Gables Corporation in thirty-six monthly payments of $156.25 each, commencing October 12, 1925. In its contract Coral Gables Corporation covenanted and agreed with the defendant that " where not already completed, streets will be paved, sidewalks constructed, water mains and electric feed wires installed, all of a kind similar to such improvements in similar completed sections of Coral Gables, and without additional cost to said second party," the defendant. On or about April 1, 1927, Coral Gables Corporation transferred defendant's note, together with several hundred similar notes given for the purchase of lots having an aggregate value of about $750,000, to the Biscayne Trust Company, as trustee, for the consideration of $600,000, which was at the rate of 83 per cent. of the balance due on the notes. At the same time it transferred to the trust company the contracts for the purchase of lots accompanying the notes, including that of the defendant. The trust company at that time had knowledge of the terms of defendant's contract. Coral Gables Corporation had not at that time made the improvements which it had agreed to make in its contract with the defendant. On April 1, 1927, the Biscayne Trust Company transferred defendant's note to the plaintiff, Coral Gables, Inc.
Defendant paid $3,437.50 on the note up to July 7, 1927, but claims that the failure of Coral Gables Corporation to complete the improvements which it agreed to make constitutes a defense to the plaintiff's action to recover the unpaid balance of the note. Plaintiff contends that the Biscayne Trust Company was a holder in due course, and claims a right to recover as a holder through a holder in due course who takes the note free from any infirmities in the hands of the original payee.
The trial court reached the conclusion that the Biscayne Trust Company, having taken the note with knowledge of the terms of the executory contract between Coral Gables Corporation and the defendant, and that a breach of the contract would affect the consideration for the note, stood in no better position than the Coral Gables Corporation. The court thus held that knowledge by an indorsee that the note was given in consideration of an executory agreement by the payee deprives him of his character as a holder in due course if the payee fails to perform, even though he had no knowledge of a breach of the agreement when he acquired the note. Defendant claims that such is the law of Florida, which it is agreed should control.
The trial court relied upon the case of Sumter County State Bank v. Hays, 68 Fla. 473, 67 So. 109, as determining the law of Florida, stating in its memorandum of decision that the present case falls squarely within the principles of law laid down in that decision. In that case the defense to the action upon the note was that the sole consideration for the note was an executory contract, and that at the time of the indorsement of the note to the plaintiff it had notice of the conditions of the contract and that they had been broken. In its reply the plaintiff alleged that it purchased the note immediately after its execution, and had no notice of any breach of the executory contract which was the consideration for which the note was given. A demurrer to this pleading was sustained and the court held that, though the plaintiff had no knowledge of the breach of the contract, its knowledge of the contract and its conditions rendered it not a holder in due course, and said that since the plaintiff knew that the contract was the consideration for the note, and that a breach of the condition of the contract would affect the consideration for the note, it took no better title than its indorsee. If this were the final pronouncement of the Florida court upon this question, it would seem to furnish a sound basis for the conclusion of the trial court that the Biscayne Trust Company, having taken the note with knowledge of the executory contract between the defendant and Coral Gables Corporation, stood in no better position than the latter, regardless of whether it had knowledge of a breach of the contract. Subsequent decisions of that court, however, convince us that it is not now the law of Florida that knowledge by an indorsee that the note was given in...
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Coral Gables, Inc. v. Heim
...lot. The improvements were never made and the development fell into a dilapidated condition. For a complete statement of the facts, see 120 Conn. 419. Facts reviewed. That the plaintiff's assignor of the note in question took the same with the actual knowledge that the development in which ......