New Bedford Inst. for Sav. v. Calcagni

• Decision Date: 20 May 1996
• Docket Number: No. 94-507-A,94-507-A
• Citation: 676 A.2d 318
• Parties: 29 UCC Rep.Serv.2d 1248 NEW BEDFORD INSTITUTION FOR SAVINGS v. George A. CALCAGNI. ppeal.
• Court: Rhode Island Supreme Court

Page 318

676 A.2d 318

29 UCC Rep.Serv.2d 1248

NEW BEDFORD INSTITUTION FOR SAVINGS v. George A. CALCAGNI.

No. 94-507-Appeal.

Supreme Court of Rhode Island.

May 20, 1996.

Richard L. Gemma, Robert D. Wieck, Providence, for Plaintiff.

Richard E. Fleury, Steven K. Parnagian, Providence, for Defendant.

OPINION

WEISBERGER, Chief Justice.

This case comes before the court on an appeal by George A. Calcagni (Calcagni) from a summary judgment entered in the Superior Court in favor of the plaintiff, New Bedford Institution for Savings (New Bedford). ¹ The judgment was in the sum of $136,998.10, plus post-judgment interest as provided by law, and represented a deficiency on two promissory notes that were in part secured by mortgages on real estate located in the city of Woonsocket. We deny and dismiss Calcagni's appeal and affirm the summary judgment. The facts of the case insofar as pertinent to this appeal are as follows.

On December 27, 1990, Calcagni borrowed the sum of $134,500 from the Attleboro-Pawtucket Savings Bank (Attleboro). In consideration of the loan Calcagni made a promissory note in this identical amount payable to Attleboro and also executed a mortgage as security for the note covering certain real estate located at 71-75 Arnold Street in Woonsocket. Thereafter, on January 9, 1991, Calcagni borrowed an additional sum of $85,500 from Attleboro and made a promissory note for said amount payable to Attleboro and further executed as security for the note a mortgage on real property located at 723 Bernon Street, Woonsocket.

On August 21, 1992, the commissioner of banks of the Commonwealth of Massachusetts petitioned Attleboro into receivership and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver and liquidating agent of Attleboro. On the same date FDIC, desiring to avoid a lengthy liquidation process, entered into a purchase-and-assumption agreement with New Bedford. This agreement contained the following language:

"[T]he Assuming Bank [New Bedford] hereby purchases from the Receiver, and Receiver hereby sells, assigns, transfers, conveys and delivers to the Assuming Bank, all rights, title, and interest of the Receiver in and to all of the following:

Loans, Liens, Credit Documents, remedies, claims, priorities, notes, loan agreements, etc., as more fully described therein."

The effect of this agreement was to transfer all assets from FDIC in its capacity as receiver to New Bedford. It is undisputed that the transfer took place. New Bedford assumed certain liabilities of Attleboro and in consideration thereof acquired its assets in a general transfer. Individual notes, including the notes that are the subject of this litigation, were not endorsed by Attleboro to the FDIC, nor did FDIC endorse the notes to New Bedford. Relying upon the lack of endorsement, Calcagni argues that New Bedford did not become a holder of the notes and certainly did not become a holder in due course. See G.L.1956 §§ 6A-3-202 and 6A-3-302. This assertion may well be true, but it is not controlling.

It is further undisputed that Calcagni defaulted on monthly payments due pursuant to the note for $134,500 and that this default constituted a violation of his obligation under the $85,500 note. In accordance with the terms of the promissory notes, on June 1, 1993, New Bedford, as transferee of the notes, accelerated the entire payments due thereunder and made demand upon Calcagni for payment in full. When Calcagni failed to make payment in accordance with the demand, New Bedford foreclosed on both mortgages and applied the proceeds from said foreclosures to the balance due on the notes. After application of the proceeds of the sale, a deficiency in excess of $133,000 remained to be paid. This action was brought by New Bedford in order to collect that deficiency.

Calcagni has raised no defenses to the notes as against Attleboro. He simply argues that as a transferee New Bedford had no right to recover pursuant to the notes since it was neither a holder nor a holder in due course.

Section 6A-3-201 provides in pertinent part that

"(1) Transfer of an instrument vests in the transferee such rights as the transferor has therein, except that a transferee who has him or herself been a party to any fraud or illegality affecting the instrument or who as a prior holder had notice of a defense or claim against it cannot improve his or her position by taking from a later holder in due course.

"(2) A transfer of a security interest in an instrument vests the foregoing rights in the transferee to the extent of the interest transferred."

The effect of this section of the Uniform Commercial Code as adopted in Rhode Island is to give a transferee of a promissory note all the right that the transferor had to the proceeds thereof, but subject to any defenses which the maker of the note may have had against the transferor. In the case at bar no such defenses have been raised.

It is obvious that a holder who has taken the transfer of a negotiable instrument by endorsement has certain advantages. Included in those advantages is the presumption that the holder has good title to the instrument. The absence of the presumption in this case is of no consequence since New Bedford has proved without contradiction that it took title to these instruments as well as all other assets of the bank by virtue of a valid purchase-and-assumption agreement with FDIC. It is also advantageous to take title to an instrument by negotiation since such negotiation gives to a holder who takes for value the...