Liberty Loan Corp. of Eunice, Inc. v. Lavine

• Decision Date: 24 December 1975
• Docket Number: No. 5208,5208
• Citation: 324 So.2d 481
• Parties: LIBERTY LOAN CORPORATION OF EUNICE, INC., Plaintiff-Appellant, v. Paul LAVINE et al., Defendant-Appellee.
• Court: Court of Appeal of Louisiana — District of US

Page 481

324 So.2d 481

LIBERTY LOAN CORPORATION OF EUNICE, INC., Plaintiff-Appellant, v. Paul LAVINE et al., Defendant-Appellee.

No. 5208.

Court of Appeal of Louisiana, Third Circuit.

Dec. 24, 1975.

Tate & McManus, by Vernon C. McManus, Eunice, for plaintiff-appellant.

Sandoz, Sandoz & Schiff, by Gerald H. Schiff, Opelousas, for defendant-appellee.

Before HOOD, HUMPHRIES and PETERS, JJ.

HUMPHRIES, Judge.

This is an appeal from an adverse judgment rendered in an action on a promissory note. We reverse.

Liberty Loan Corporation of Eunice, Inc. (Liberty Loan) brought an action against Paul and Antee Lavine for the unpaid balance on a promissory note executed by these two defendants. The defendants resisted the claim on the contention that the plaintiff was not a holder in due course and that there was a partial failure of consideration.

In November of 1968, the plaintiff entered into a contract with Long's Siding and Remodeling Company whereby the latter was to install aluminum insulation and siding on the defendants' house. The defendants desired to add an addition to their house, and it was agreed in the contract that after this addition was completed, the contractor was to place siding on the new addition. The amount of the contract was $4,860.00. The contract price was to be represented by a promissory note payable monthly over a 5 year span.

In addition to the amount of the contract, the defendants needed $2,000.00 additional money to pay off other obligations and $500 to add to the house. The need for these sums and the other incidentals of making the loan ran the note to $7,596.60. The note was dated November 6, 1968 and was signed by Paul and Antee Lavine as makers. It was made payable to the order of 'ourselves' and endorsed in blank. It provided for 60 consecutive monthly payments of $121.61 each. The first payment was due on January 4, 1969. This note was endorsed by Long to Securities Investment Company of St. Louis. Securities Investment Company sent the money to the makers.

In April of 1969 Securities Investment Company of St. Louis wrote the makers and advised them that it had an 'affiliate office' near the makers residence, whose corporate name was Liberty Loan Corporation. The letter stated that because of the nearness of that corporation to the defendants it was assigning the account to that office. Securities Investment Company, without endorsement, sent the note to Liberty Loan Corporation of Eunice. The makers paid on the note until there was only $1,384.22 remaining due and payable. The last payment was in May of 1973.

The trial judge held that Securites because it was an 'actual party to the original transaction.' The mere fact that an investment company is a party to or knowledgeable of the initial transaction does not deprive it of subsequently becoming a holder in due course when a homeowner executes a note. Many lending institutions are in on the original transaction or knowledgeable of the original transaction for various reasons. They try to protect the dignity of the subsequent mortgage or they try to see that a competent and reputable contractor is being used by the borrower and for other reasons that we need not discuss here.

A holder in due course is defined in R.S. 7:52 (The law in effect at the time of these transactions.)

'A holder in due course is a holder who has taken the instrument under the following conditions:

(1) That it is complete and regular upon its face;

(2) That he became the holder of it before it was overdue and without notice that it had been previously dishonored, if such was the fact;

(3) That he took it in good faith and for value;

(4) That at the time that it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.'

The record reflects that all of the conditions are met by Securities Investment.

We are of the opinion...