Submitted November 3, 1960.
Decided November 30, 1960.
1. Summary judgment proceedings are not designed for the trial of disputed issues of fact but rather expedition of the litigation when it appears that no such issues exist.
2. The Uniform Negotiable Instruments Law (RSA 337:52-59) charges the holder of trade acceptance with the burden of establishing that he is a holder in due course if the title of any prior holder is shown to be defective.
3. The entry of summary judgment (RSA 491:8-a (supp)) on certain trade acceptances on motion supported by affidavit advancing a claim that they were bought without notice and in good faith but stating no facts which would establish that they were so acquired was improper where a "genuine issue of material fact" was presented by affidavit of the defendant that the drawer of the instruments had practiced fraud upon him to induce their execution.
4. In such case, the plaintiff holders of the instruments had the burden of showing that they were holders in due course by uncontroverted evidence, in the form prescribed by the summary judgment statute (RSA 491:8-a (supp)), establishing that they took the instruments in good faith and for value without notice of any defect in the title of the person negotiating them (RSA 337:52-59).
5. Under the Uniform Negotiable Instruments Law (RSA 337:56) "notice" of defect in title consists either of actual knowledge of the defect or of knowledge of such facts that the action in taking the instruments amounted to bad faith.
ACTION, upon three trade acceptances payable to the order of the drawer Sterling Materials Co., Inc. and endorsed by it to the plaintiffs who are general partners in a limited partnership established under the laws of New York, alleging that they are bona fide holders in due course for value.
The acceptances were dated April 24, 1957 and accepted on that date by the defendant at Pelham, New Hampshire. They are uniformly payable at Indian Head National Bank in Nashua, in the sum of $170 each, on August 1, September 1, and October 1, 1957, respectively. Each is endorsed in blank by the drawer company "by Jacob Nadler." Each acceptance recites that the transaction giving rise to the instrument was "the purchase of goods by the acceptor from the drawer."
The plaintiffs moved for summary judgment, supporting their motion by affidavit of the named plaintiff as general partner. The affidavit stated that the partnership purchased the acceptances from the drawer on April 26, 1957 for "a valuable consideration" and "before maturity, without notice and in good faith." It further stated that the partnership "knows of no set-off, credit or counterclaim to which the defendant is entitled," and that the acceptances are unpaid.
The defendant thereafter filed his own affidavit that the drawer of the acceptances had defrauded him by promising him an exclusive franchise to distribute materials and by subsequently failing to appoint him exclusive distributor and by failing to ship him materials then ordered in connection with the promised distributorship; and that the defendant is not obligated to pay any moneys to the plaintiffs. In support of this affidavit the defendant filed a "memorandum of law" asserting that the plaintiffs' title is defective, and the burden upon them to establish that they are holders in due course; and requesting a trial by jury of the latter issue.
Reserved and transferred by the Presiding Justice (Grimes, J.) upon the defendant's exception to the entry of summary judgment.
Harkaway Ryan for the plaintiffs.
Leonard Leonard for the defendant.
The entry of summary judgment by the Trial Court implied a finding that "no genuine issue of material fact exists." RSA 491:8-a (supp). See Nashua Trust Co. v. Sardonis, 101 N.H. 166, 170. The statute contemplates that such a finding may be made upon affidavit, and requires the moving party to file "affidavits based upon personal knowledge of admissible facts as to which it appears affirmatively that the affiants will be competent to testify."
The substantive rights of the parties are controlled by provisions of the Uniform Negotiable Instruments Law appearing in RSA 337:52-59. Section 59 provides in part: "Every holder is deemed prima facie to be a holder in due course; but, when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course." Section 55 provides that the title of any person who negotiates an instrument is "defective" when he "obtained [it] by fraud," among other means.
The issue presented by the exception is whether the record establishes the plaintiffs' right to summary judgment. The office of the proceeding is not the trial of disputed issues of fact, but expedition of the litigation when it appears that no such issues exist. Norwood Morris Plan Co. v. McCarthy, 295 Mass. 597, 603; 10 Cyc. of Federal Procedure (3d ed.) s. 35. 19; 49 C.J.S. Judgments, s. 220 (c). Under our statute the precise issue is whether a "genuine issue of material fact exists." RSA 491:8-a (supp) supra.
This was an issue which could not properly be determined in favor of the plaintiff upon the affidavits and instruments filed with the court. The negotiable instrument law (RSA 337:59, supra) charged the plaintiffs with the burden of establishing that they were holders in due course if the title of any prior holder could be found defective. As moving parties, the plaintiffs likewise had the burden of establishing their right to enforce the acceptances by affidavits complying with the summary judgment statute. RSA 491:8-a (supp) supra. They were entitled to prevail only upon the strength of the affidavit which they filed. See 6 Moore's Federal Practice (2d ed.) s. 56.15.
The affidavit of the defendant was sufficient to raise the issue that the drawer of the instruments had practiced fraud upon him to induce their execution. See Sonabend v. Charron, 86 N.H. 386. This placed upon the plaintiffs the burden of showing that they were holders in due course by uncontroverted evidence, in the form prescribed by the summary judgment statute, establishing that they "took [the instruments] in good faith and for value," and "that at the time [they were] negotiated [they] had no notice of any . . . defect in the title of the person negotiating" them. RSA 337:52 III, IV. By RSA 337:56, "notice" of a defect in title consists either of actual knowledge of the, defect or of knowledge "of such facts that [the] action in taking the instrument[s] amounted to bad faith." See Honigman, Proof of Good Faith, 23 Mich. L. Rev. 870; note 80 U. of Pa. L. Rev. 717.
In addition to failing to state "admissible facts as to which it appears affirmatively that the affiants will be competent to testify," the plaintiffs' affidavit is defective in other respects. While it states that the instruments were acquired for "a valuable consideration," this falls short of establishing that they were not purchased at a discount suggestive of bad faith. See Mechanics Say. Bank v. Feeney, 79 N.H. 267. The affidavit states that the plaintiffs bought the acceptances "without notice and in good faith," which is a legal conclusion rather than a statement of any facts which would warrant such a conclusion. Budget Charge Accounts v. Petrowski, 155 N.Y.S. 2d 681.
Moreover statements attached to the original instruments, in the form of "advice" from the collecting agent, indicate that none of the instruments was protested. By inference, this was upon instruction of the holder, a circumstance considered in Security Nat. Bank v. Porter, 79 N.H. 344, to support a conclusion that the holder was not a bona fide owner. In short, while the affidavit advanced a claim of no notice and of good faith, it disclosed no facts which would establish that the instruments were so acquired. See Dube v. Cromwell Drug Co., 284 App. Div. (N.Y.) 1040.
Upon this record it could not properly be determined that there was no genuine issue of fact as to whether the plaintiffs became holders in due course. See Hallock v. Young, 72 N.H. 416; Ensign v. Christiansen, 79 N.H. 353; Land Finance Corp'n v. Company, 83 N.H. 518. Cf. National Radiator Co. v. Holden, 91 N.H. 88.
We hold that the affidavit filed by the plaintiffs did not satisfy the requirements of the summary judgment statute as to form, and did not afford a basis for finding that no genuine issue of material fact existed. Accordingly the order of the Trial Court is vacated, and the action is remanded for trial.
Exception sustained; remanded.