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LUMBERMEN ASSOCS. v. PALMER

July 26, 1972

LUMBERMEN ASSOCIATES, INC., Plaintiff,
v.
Richard PALMER, Defendant


Newcomer, District Judge.


The opinion of the court was delivered by: NEWCOMER

NEWCOMER, District Judge.

 This is an action on a note made by Nyce Industries, Inc. to plaintiff's order and endorsed individually by defendant. Defendant was then an officer of Nyce Industries and held substantial ownership interest in it.

 This case is now before the Court on cross motions by both plaintiff and defendant for summary judgment.

 There is no merit in defendant's Motion for Summary Judgment, and it was in fact virtually abandoned at the oral argument held on these motions before this Court on July 14, 1972.

 Plaintiff claims that the note in question is validly endorsed and speaks for itself. (No question of dishonor or protest by Nyce Industries is here presented, Nyce Industries being now admittedly insolvent).

 Defendant makes three claims. First, he claims that the signature on the back of the note was made only in his capacity as agent for Nyce Industries. This does not appear to be the case. Defendant signed the front of the note specifically as agent for Nyce, and the signature on the back is unqualified. Further, Pa. Stat. Title 12A, § 3-402 clearly states that

 
"[unless] the instrument clearly indicates that a signature is made in some other capacity it is an endorsement.".

 Second, defendant claims that there was no consideration for the endorsement, and that it was given as an accommodation to plaintiff. Defendant's deposition clearly establishes that the endorsement was made so that the notes would be accepted as security for Nyce's outstanding and overdue accounts. Pa. Stat. Title 12A, § 3-408 clearly states that

 
"[want] or failure of consideration is a defense as against any person not having the rights of a holder in due course (Section 3-305), except that no consideration is necessary for an instrument or obligation thereon given in payment of or as security for an antecedent obligation of any kind."

 and Note 2, explaining the "except" clause, states that

 
"[the] 'except' clause is intended to remove the difficulties which have arisen where a note or a draft, or an endorsement of either, is given as payment or as security for a debt already owed by the party giving it, or by a third person. (emphasis supplied)".

 Here, the endorsement was given, by defendant's own testimony, as security for a previously existing obligation of Nyce. There is no ...


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