Gonderman v. State Exchange Bank, Roann

• Decision Date: 29 September 1975
• Docket Number: No. 3--274A35,3--274A35
• Citation: 334 N.E.2d 724,166 Ind.App. 181
• Parties: , 17 UCC Rep.Serv. 1241 Robert F. GONDERMAN, Defendant-Appellant, v. STATE EXCHANGE BANK, ROANN, Indiana, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 724

334 N.E.2d 724

166 Ind.App. 181, 17 UCC Rep.Serv. 1241

Robert F. GONDERMAN, Defendant-Appellant, v. STATE EXCHANGE BANK, ROANN, Indiana, Plaintiff-Appellee.

No. 3--274A35.

Court of Appeals of Indiana, Third District.

Sept. 29, 1975.

Robert F. Gonderman, pro se.

Gerald A. Kamm, Daniel A. Manion, Doran, Manion, Boynton & Kamm, South Bend, for plaintiff-appellee.

HOFFMAN, Judge.

Plaintiff-appellee State Exchange Bank, Roann, Indiana, (Bank) brought this action to recover on a promissory note which it held by way of endorsement from one Hamlet V. Boisson, the payee. In its complaint, Bank alleged, inter alia, that defendant-appellant Robert F. Gonderman had, on August 7, 1967, given such note thereby promising to pay to the order of Boisson the sum of $2,500 '(o)ne (1) year after date,' with attorney fees thereon, but without interest. It was further alleged that Boisson had endorsed the note over to the Bank; and that such note was due and unpaid. Accordingly, the Bank sought judgment, including attorney fees, in the sum of $3,300, plus costs of the action.

To this, Gonderman responded by general denial asserting, in addition, that the Bank, having accepted the note after it had become overdue, was not a holder in due course. Appellant further raised certain affirmative defenses including that of fraud and thereby alleged that he was induced by misrepresentations on the part of the payee to execute the note in question.

Following trial to the court, judgment was entered against defendant-appellant Gonderman and in favor of plaintiff-appellee Bank granting the relief requested in its complaint. Thereafter, appellant's motion to correct errors was overruled and the present appeal was perfected.

Appellee Bank does not claim the status of a holder in due course and it is clear that such a position on its part would be untenable. That one who takes an instrument must do so 'without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person', is a necessary condition to the attainment of such a status under the provisions of IC 1971, 26--1--3--302(1)(c) (Burns Code Ed.). Further, IC 1971, 26--1--3--304 (Burns Code Ed.), provides in part, that, '(3) (t)he purchaser has notice that an instrument is overdue if he has reason to know (a) that any part of the principal amount is overdue * * *.' The evidence herein discloses that at the time the note was purchased by the Bank and endorsed over by Boisson, an officer of the Bank had reason to know that the principal amount had not been paid. In this regard, Mr. James VanBuskirk, president of appellee Bank, testified that the note had been purchased from Boisson on October 1, 1968, and that at such time he 'discussed the fact that it was past due' with the payee-endorser. Furthermore, the date and statements on the face of the note itself must be considered to have accorded notice of such fact to the purchaser. Thus, upon the foregoing it would be concluded that the Bank was not a holder in due course with respect to the instrument.

As to the rights of one who is not a holder in due course, IC 1971, 26--1--3--306 (Burns Code Ed.), provides, in part, as follows:

'Unless he has the rights of a holder in due course any person takes the instrument subject to

(a) all valid claims to it on the part of any person; and

(b) all defenses of any party which would be available in an action on a simple contract; and

(c) the defenses of want or failure of consideration, nonperformance of any condition precedent, nondelivery, or delivery for a special purpose (section (26--1--)3--408); * * *.'

The foregoing provisions of the Indiana Uniform Commercial Code are merely a summarization of certain basic contract principles contained in Restatement of Contracts, § 167(1), at 211 (1932), which reads as follows:

'(1) An assignee's right against the obligor is subject to all limitations of the obligee's right, to all absolute and temporary defenses thereto, and to all set-offs and counterclaims of the obligor which would have been available against the obligee had there been no assignment, provided that such defense and set-offs are based on facts existing at the time of the assignment, or are based on facts arising thereafter prior to knowledge of the assignment by the obligor.'

See also: Nat. City Bank v. Kirk (1922), 85 Ind.App. 120, 134 N.E. 772 (transfer denied).

In the case at bar, the burden of proof with regard to the affirmative defense of fraud rested upon Gonderman, the party asserting such defense. Ind. Rules of Procedure, Trial Rule 8(C). A judgment in favor of the Bank and against Gonderman was, in effect, a finding that Gonderman had not met his burden on this issue and constituted a negative judgment. See, Chicago South Shore & South Bend Railroad v. Brown (1974), Ind.App., 320 N.E.2d 809 (transfer denied).

On appeal from a negative judgment, the burden is upon the appellant to demonstrate that the decision is contrary to law. Further, it is only where the evidence is without conflict and leads to but one conclusion and the trier of fact has reached a contrary conclusion will the judgment be reversed upon such ground. Heminger v. Police Com'n of City of Fort Wayne (1974), Ind.App., 314 N.E.2d 827; Nicholas v. Zimmerman (1974), Ind.App., 307 N.E.2d 900 (transfer denied); Illinois Valley Acceptance Corp. v. Woodard (1973), Ind.App., 304 N.E.2d 859; Senst v. Bradley (1971), 150 Ind.App. 113, 275 N.E.2d 573.

The central issue to be considered therefore becomes one of whether, upon the evidence adduced at trial, appellant was entitled to judgment as a matter of law.

An examination of the evidence adduced at trial reveals that during 1967, Hamlet V Boisson, a representative of an organization known as 'Oil Investors', approached appellant on several occasions for the purpose of soliciting his investment in certain oil and gas leases which ostensibly had been made available to Boisson through his association with an unidentified corporate official and personal benefactor. Boisson pointed out that the drilling of the wells which were to be located in the vicinity of Alliance, Ohio, was an enormously expensive operation and informed appellant that he anticipated having difficulty finding reputable investors in the local community. During one such visit with Gonderman, Boisson intimated that a certain gas well was to be drilled near Alliance, and that the proposed well which was to be located between two other existing and highly productive wells could not possibly prove to be unsuccessful. Appellant initially declined Boisson's offer of an interest in the well stating that he was at present financially overextended. Gonderman further expressed skepticism in the arrangement itself and apprised Boisson of his policy not to invest in any enterprise in which the promoters did not themselves invest. Boisson then stated, 'Look, I'm putting my own money into this well.' And, Gonderman replied: 'Now is that true * * *, are you actually putting your own money in, because if you are you know it means something to me. Actually, I've never heard of a promoter putting his own money in on these wells. He expects to be carried for managing the wells and securing the original lease.' Boisson, however, assured him that, '(t)hey were all putting their own money into this venture and that they were subscribing 25 per cent of each well * * *.' Appellant thereupon became more interested but again observed that he did not find it financially convenient to invest at such time. In reply, Boisson said, 'Look, I want you in this. I'll tell you what, you give me your note and I'll see that you get the interest in the oil lease.' Thereafter, at the request of Boisson, appellant prepared and executed the note in question, accepting a personal check from Boisson and, in turn, drawing a personal check in favor of 'Oil Investors.' Although appellant subsequently made inquiries, he never obtained an assignment of interest in the lease.

Later, when the wells had begun to produce it was found that output levels were grossly below the initial representations. Gonderman became suspicious and informed Boisson on or about the date the note became due that he would not honor it until Boisson produced proof that he had invested his personal funds in the venture. Such proof was not forthcoming. Subsequently, appellant was advised by the Bank of the assignment of the note. He thereafter refused to honor the Bank's demands for payment...