On March 4, 1996, Southtrust Bank of Georgia, formerly known as Bankers First Savings Bank, appellant, sued Curtis C. Parker and Fannie M. Parker, on an installment sales contract and note in the original amount of $14,995, executed on February 7, 1995 by Curtis C. Parker and Fannie M. Parker. Curtis C. Parker was not found to be served, but Fannie M. Parker was served. The original agreement, and note were made between the Parkers and Southeastern Summit Corporation and assigned to appellant as a holder in due course. A. deed to secure debt was signed Curtis C. Parker and Fannie M. Parker and witnessed by an unofficial witness and another witness who went before a notary public to swear that he had witnessed the parties execute the deed to secure debt as well as the other witness but did not reveal whether or not he was a notary public signing the deed as an official witness.
At the time of the purported loan agreement, Curtis C. Parker and Fannie M. Parker were living together as husband and wife in the subject property. At the time the complaint was filed, the Parkers had separated. Fannie Parker admitted that Curtis Parker signed the instruments without her consent to put siding on the house and cross-claimed against him. Curtis Parker in his answer contended that Fannie Parker was liable since she now has possession of the house.
Fannie M. Parker, appellee, answered and filed a cross-claim against Curtis C. Parker and a third-party action against Southeastern Summit Corporation, raising the issue of forgery of her signature on the installment sales contract, note, and disclosure statement. On June 7, 1996, appellee amended her answer.
On June 7, 1996, appellee filed a motion for summary judgment. In support of such motion, appellee attached her own affidavit in which she states that the deed to secure debt, installment sales contract, note, and disclosure statement all have her forged signature because she never signed these documents. She also denies authorizing anyone to sign for her.
On June 25, 1996, Southeastern Summit Corporation filed an answer, in which it neither admitted nor denied the allegation of forgery.
On July 1,1996, appellant filed its responsive brief in opposition. *293 On August 16, 1996, the trial court granted summary judgment.
On August 27, 1996, Curtis C. Parker answered and admitted by verified answer that he and Fannie M. Parker had entered into and had signed the note.
On September 11, 1996, appellant filed its notice of appeal.
1. Appellant’s first enumeration of error is that the trial court erred in granting summary judgment.
Appellant is a holder in due course within the meaning of OCGA § 11-3-302. (Ga. L. 1962, p. 156, § 1.)
1
Equitable Discount Corp. v. Guest,
Under OCGA § 11-3-304 (1) (a), there existed no visible evidence of forgery or alteration to put the holder in due course on notice of any forgery. Therefore, under OCGA § 11-3-305 (2), the holder in due course takes the note free from most defenses. The defenses that the status of the holder in due course does not cut off are denominated as “real” defenses. “Unlike those ‘personal’ defenses which the holder in due course takes free from, the real defenses are so quintessential to the obligation that even the very status of holder in due course does not freely elude the grasp of the defenses. As a general rule, any defense which would be sufficient to make a simple contract void, such as illegality or duress or incapacity, is likely also to shut off the sheltered privileged status of the holder in due course.” Squillante, A. M., Fonseca, J. R., II The Law of Modern Commercial Practices, pp. 77-78, § 5:29 (hereinafter “Squillante”). Such defenses are set forth in OCGA § 11-3-305 (2). “Subdivision (c) of § 2-305 draws a familiar distinction between fraud in the factum and fraud in the inducement. Fraud in the inducement is no defense to an attempt by a holder in due course to enforce an instrument against a party to it. The comment to § 3-305 emphasizes that the mere existence of fraud in the factum will not here be a defense; rather, the fraud must have been of a sort that is not reasonably preventable by the obligor under the circumstances. Fraud in the factum most often arises where the obligor is asked to sign a document and he does so because he was deceived into believing that the document is something other than a negotiable instrument. The import of § 3-305 (2) (c) is that if, in the light of the circumstances surrounding the deception which occurred in the transaction, the obligor’s ignorance of what was being signed was excusable, then the holder in due course of the instrument so signed must suffer the defenses of fraud being asserted against him.” *294 Squillante, supra at 78-79.
Under OCGA § 11-3-307 (1), “[u]nless specifically denied in the pleadings each signature on an instrument is admitted.” In the case sub judice, appellee in her answer denied signing either document. Under OCGA § 11-3-307 (1) (a) and (b), when the answer denies that the signature is valid, “[t]he burden of establishing [the signature] is on the party claiming under [it]; but. . . [t]he signature is presumed to be genuine or authorized except where the action is to enforce the obligation of a purported signer who has died or become incompetent before proof is required.” See also Squillante, supra at p. 90, § 5:31. However, such presumption may be rebutted where the purported maker denies both knowledge and signature and produces other evidence separate from the sworn denial of execution in support of the defense of forgery, and there exist irregularities on the face of the negotiable instrument that would place a reasonable person on notice under a reasonable commercial standard.
Fabe v. Floyd,
“The only type of fraud assertable against a holder in due course under subsections 2 (c) of the Georgia statute (OCGA § 11-3-305 (2) (c)) is fraud in factum.” Milligan v. Gilmore Meyer, Inc., 775 FSupp. 400 (S. D. Ga. 1991).
Authorization to sign for the spouse where the funds are spent for home improvements is implied from the relationship and can be rebutted by evidence of lack of actual authority; however, the lack of actual, implied, or apparent authority when denied in the pleading is a question of fact for a jury.
Holliday Constr. Co. v. Sandy Springs
*295
Assoc.,
While an unauthorized signature cannot bind a party when forged, if the unauthorized signature is ratified, then the signature becomes binding through ratification of the document. OCGA § 11-3-404 (2). For ratification to be effective, the principal must know of the act of the agent, either at the time of making the declaration deemed to be ratified or at the time of doing acts which indicate the ratification; either action or inaction may be evidence of ratification.
Hendrix v. First Nat. Bank of Savannah,
The installment sales agreement, note, and disclosure statement state on its face that siding and thermal wall insulation were installed on appellee’s home; the complaint sets forth that, from February 7, 1995, until January 24, 1996, nothing had been paid on the note, and the appellee continued to live in such home with the improvements at the time of service on March 11, 1996.
“ ‘If the principal, with full knowledge of all the material facts, accepts and retains the benefits of the unauthorized act, [she] thereby ratifies the act.’ (Citation and punctuation omitted.)
Hyer v. C & S Nat. Bank,
When OCGA §§ 11-3-404 (1) and 11-3-406 are read in para materia with each other and an instrument is forged, in order to estop or preclude such defense, the holder in due course must show that the neglect of the one whose signature appears comes within OCGA § 11-3-406.
Trust Co. of Ga. Bank of Savannah v. Port Terminal &c. Co.,
The trial court erred in granting summary judgment when issues of material fact exist.
2. The issue raised in enumeration of error two is now moot.
Judgment reversed.
Notes
Ga. L. 1996, p. 1306, § 3 amended Part 3 of the UCC, but is inapplicable because the contract date is February 7, 1995.