Northside Bank of Tampa v. Investors Acceptance Corp.

• Decision Date: 11 January 1968
• Docket Number: Civ. A. No. 67-199.
• Citation: 278 F. Supp. 191
• Parties: NORTHSIDE BANK OF TAMPA, a Florida banking corporation, Plaintiff, v. INVESTORS ACCEPTANCE CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

278 F. Supp. 191

NORTHSIDE BANK OF TAMPA, a Florida banking corporation, Plaintiff, v. INVESTORS ACCEPTANCE CORPORATION, Defendant.

Civ. A. No. 67-199.

United States District Court W. D. Pennsylvania.

January 11, 1968.

Michael Stabile, of McArdle & McLaughlin, Pittsburgh, Pa., for plaintiff.

Allen S. Gordon, Pittsburgh, Pa., for defendant.

MEMORANDUM AND ORDER

MARSH, District Judge.

In this diversity action, plaintiff, a bank, sues the defendant as the drawer of three checks, each dated August 22, 1966, and drawn to the order of Style-Rite, Inc., a corporation, having its checking account in plaintiff's bank in Tampa, Florida. Each check was drawn on the Western Pennsylvania National Bank, Pittsburgh, Pennsylvania.

On August 25th, the plaintiff bank cashed one check and on August 24th and 25th accepted the other two for deposit, crediting Style-Rite's account; the plaintiff thereupon applied a part of this credit to Style-Rite's overdrawn balance in the sum of $2,046.13, and permitted Style-Rite to withdraw a substantial part of the remaining credit before it received notice that the defendant had ordered the drawee bank in Pittsburgh to stop payment.

Defendant admits to the issuance of the three checks and to the deposit of two, while pleading no knowledge as to the truth of plaintiff's averment that it cashed the third. The genuineness of the signatures is not denied. In paragraphs 13 and 14 of a verified Answer, defendant avers that it was induced to draw those checks by Style-Rite's false and fraudulent representation as to its financial ability to perform certain home improvement contracts and to fulfill certain other promises which were the bargained consideration for which defendant issued the checks involved.

Seeking to cut off this defense, the plaintiff bank has moved for summary judgment, averring that the affdavits attached demonstrate that the plaintiff bank is a holder in due course; that the defenses alleged are not defenses against a holder in due course; and that there is no genuine issue of material fact. We think that plaintiff's motion should be denied.

The parties agree that plaintiff's right to enforce payment of these checks against the defendant drawer is governed by Pennsylvania law as expressed in the relevant provisions of the Uniform Commercial Code, 12A Purdon's Pa.Stat. Ann. § 1-101 et seq.

Under the Code a holder of a check is entitled to recover on its unless the defendant establishes a defense. When a defense exists, the plaintiff holder has the burden of establishing that it is in all respects a holder in due course, if it claims such rights. See: 12A Purdon's Pa.Stat.Ann. § 3-307(2) (3).

Unquestionably, the defendant's verified Answer and affidavit show that it has a defense against the payee, Style-Rite, which defense is not controverted by the plaintiff bank. Thus the bank has the burden of establishing by credible evidence to the satisfaction of the jury that it is "in all respects" a holder in due course.

A holder in due course is a holder who takes the instrument (a) for value; and (b) in good faith; and (c) 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. 12A Purdon's Pa.StatAnn. § 3-302, as amended.

It is our opinion that unless the circumstances of the holder's taking the checks were free of all doubt, the court would not be in a position to direct a verdict in favor of the plaintiff bank because the elements constituting a holder in due...