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Commercial Law Keyed to Whaley
Sullivan v. United Dealers Corp.
Citation:
486 S.W.2d 699 (1972)Facts
On March 26, 1963, the Sullivans contracted with Memory Swift Homes, Inc. (“Memory Swift”), to purchase the construction of a prefabricated dwelling house. On April 9, 1963, the Sullivans executed and delivered to Memory Swift the promissory note, secured by a mortgage on the real property and the improvement to be located thereon. On that same day, Memory Swift negotiated the note and assigned the mortgage to United Dealers. The Sullivans delivered written statements asserting that all work on the property had been done in a workmanlike manner. On June 25, 1963, United Dealers negotiated the note to a bank which took the instrument with right of recourse. On April 25, 1966, after the Sullivans had defaulted on payments, the bank transferred the note back to United Dealers, for value, without recourse. United Dealers then sued the Sullivans to collect on the unpaid amount due on the note. The Sullivans argued that because United Dealers knew at the time the note was executed that Memory Swift had not begun any work on the house, that they had notice there might be a defense to the note because of faulty construction and thus United Dealers was not a holder in due course.
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