402 So. 2d 992 | Ala. Civ. App. | 1981
This case is governed by Article III of Alabama's Uniform Commercial Code, §§
The First Alabama Bank of Guntersville sued Hunt on a promissory note. The trial court found that on the basis of pertinent uncontroverted evidence, First Alabama Bank was barred from holder in due course status by §
The dispositive issue is whether §
The record reveals the following facts:
In August of 1974, Hunt pursuant to a contract for the sale and purchase of two residential lots executed a promissory note payable to Fitts and Rodgers. Fitts and Rodgers were real estate developers who, in addition to selling two lots to Hunt, sold residential subdivision lots to several individuals. Like Hunt, these individuals paid for their lots by giving Fitts and Rodgers promissory notes.
In December of 1974, Fitts and Rodgers sold the Hunt note and nine to thirteen other notes to First Alabama Bank. At trial the president of First Alabama Bank testified to the effect that, while the bank had dealt with Fitts and Rodgers in the past, this was the only time the bank had purchased promissory notes from them. There was no evidence as to whether Fitts and Rodgers had sold notes to other purchasers.
At the outset, we note that the question of whether a plaintiff is a holder in due course only arises where the defendant has established a defense to liability on the note.Patterson v. First National Bank of Huntsville,
As indicated above, the trial court found that First Alabama Bank was barred from holder in due course status by §
First Alabama Bank contends through counsel that the trial court erred in its interpretation of §
Section
A holder does not become a holder in due course of an instrument;
. . . .
(c) By purchasing it as part of a bulk transaction not in regular course of business of the transferor.
Since the key phrase "bulk transaction not in regular course of business of the transferor" is not defined by the Uniform Commercial Code, the scope of §
Subsection (3) is intended to state existing case law. It covers a few situations in which the purchaser takes the instrument under unusual circumstances which indicate that he is merely a successor in interest to the prior holder and can acquire no better rights. . . .
Subsection (3)(c) applies to bulk purchases lying outside of the ordinary course of business of the seller. It applies, for example, when a new partnership takes over for value all of the assets of an old one after a new member has entered the firm, or to a reorganized or consolidated corporation taking over in bulk the assets of a predecessor. It has particular application to the purchase by one bank of a substantial part of the paper held by another bank which is threatened with insolvency and seeking to liquidate its assets.
From Comment 3 we find that §
In the instant case there is no evidence indicating that the sale of the notes to First Alabama Bank was incident to the cessation, liquidation, or reorganization of Fitts and Rodgers' real estate development business, nor is there evidence of circumstances indicating that First Alabama Bank is a mere successor in interest to Fitts and Rodgers.
As stated above, the fact that the sale of the notes to First Alabama Bank was a one time occurrence is not dispositive of the question of whether or not the transaction was in the ordinary course of business. We find that the learned trial judge misinterpreted §
However, by so deciding we do not find that First Alabama Bank is a holder in due course under §
The case is due to be reversed.
REVERSED AND REMANDED.
WRIGHT, P.J., and BRADLEY, J., concur. *995