Summary
In Bankers Trust Co. v. Javeri, 105 A.D.2d 638, 481 N.Y.S.2d 362 (1st Dep't 1984), the Appellate Division stated unequivocally that in the case of a holder in due course, the suit is not between the "immediate parties" to the negotiable instrument, and that extrinsic evidence cannot be introduced to release the signatory from his personal obligation.
Summary of this case from Finnish Fur Sales Co. v. Juliette Shulof Furs, Inc.Opinion
November 15, 1984
Appeal from the Supreme Court, New York County (B. McM. Wright, J.).
Plaintiff Bankers discounted three promissory notes for the payee and credited the payee's account therefor. The notes not having been paid at maturity, plaintiff sues defendant Javeri individually. The notes are all signed in the corporate name K J Diamond Imports, Inc., and on the next line appears defendant Javeri's signature. Javeri says that he signed only in a representative capacity and is thus not personally obligated on the notes.
Subdivision (2) of section 3-403 of the Uniform Commercial Code provides: "(2) An authorized representative [Javeri] who signs his own name to an instrument * * * (b) except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented [the corporation] but does not show that the representative signed in a representative capacity".
Each note here sued on "names the person represented [the corporation] but does not show that the representative [Javeri] signed in a representative capacity". Thus, Javeri is personally obligated unless he can come within the clause "except as otherwise established between the immediate parties". But that clause is inapplicable because this lawsuit is not "between the immediate parties". Plaintiff Bankers is not an immediate party but a transferee, indeed a holder in due course.
The affidavits establish that Bankers is a holder in due course having discounted the notes for a customer and credited the customer's account. There is no evidence that Bankers had any notice of any defense or of any claim that defendant Javeri was signing only in a representative capacity. (See Uniform Commercial Code, § 3-302.) Even as between immediate parties, the "undisclosed intention" of a signer that he is not to be individually responsible is insufficient to defeat liability under section 3-403 (subd [2], par [b]) of the Uniform Commercial Code. ( Rotuba Extruders v Ceppos, 46 N.Y.2d 223, 230.)
Furthermore, in two previous actions by Bankers against the corporate signer, it was adjudicated that Bankers was a holder in due course of these notes. Defendant is collaterally estopped, precluded, to question the determination in those actions that Bankers was a holder in due course. Although not nominally a party to the earlier actions, defendant was in privity with the corporate defendant in those actions within the meaning of the res judicata rules because defendant was the president of the corporation and actively participated in the defense of those actions, and thus had a full and fair opportunity to contest the issue. ( Matter of Shea, 309 N.Y. 605, 617; Heller Co. v Cox, 343 F. Supp. 519, 524 [SDNY], aff'd. sub nom. Heller Co. v Ocean Air Tradeways, 486 F.2d 1398; North Fork Housing Guild v Mackay, 97 A.D.2d 433, 434.)
Concur — Sandler, J.P., Ross, Carro, Silverman and Kassal, JJ.