Opinion ID: 683516
Heading Depth: 2
Heading Rank: 3

Heading: The Present Lawsuit and the District Court's Ruling

Text: 13 When further efforts to collect proved unsuccessful, AITF commenced the present action against Laminaciones and Altos Hornos to enforce the notes. Defendants took the position, inter alia, that no payments were due on the promissory notes (1) because Banco Bilbao had not followed Laminaciones's instructions to make the first maturity date 182 days after Delta's last  shipment, and (2) because Delta had submitted fraudulent shipping documents in order to procure the notes. Both sides moved for summary judgment. 14 AITF, in support of summary judgment in its favor, contended that as a good-faith purchaser of the notes from Delta, AITF was a holder in due course under NYUCC Sec. 3-302(1) and was entitled to payment from the maker and guarantor of the notes notwithstanding any defenses the maker and guarantor might have against Delta. Defendants contended that they were entitled to summary judgment in their favor principally on the grounds (1) that the notes were not negotiable instruments, and (2) that even if they were negotiable and AITF were a holder in due course, AITF was subject to the defenses defendants could assert against Delta because AITF had been involved in negotiating the transaction with defendants, and NYUCC Sec. 3-305(2) does not immunize a holder in due course against the defenses of a party to the instrument with whom the holder has dealt. 15 In an Opinion and Order dated December 27, 1993, published at 840 F.Supp. 271, the district court denied defendants' motion and granted that of AITF, holding that AITF was a holder in due course within the meaning of NYUCC Sec. 3-302(1) and was therefore not subject to any defenses defendants might have against Delta. The court concluded that the limiting language of NYUCC Sec. 3-305(2) does not apply to a party that was involved only in the financing aspects of a commercial transaction. It further noted that the present case concerned a transnational a forfait  transaction, in which a trade finance company commonly  'become[s] involved ... shortly after the commercial terms are worked out'  between the importer and the exporter, and thereafter negotiates the credit terms with the maker and guarantor of the documents evidencing the debt. 840 F.Supp. at 274 (quoting A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 78 (2d Cir.1993)). The court concluded that a rule limiting the scope of AITF's rights as a holder-in-due-course would force forfaiters generally to alter their established practices, thereby reducing the availability of commercial credit, contrary to the underlying objectives of the UCC. 16 In sum, the district court held that, because AITF had not participated in negotiating the terms of the underlying commercial transaction between Delta and Laminaciones and Altos Hornos, and because AITF had satisfied the other requirements for holder-in-due-course status, Laminaciones and Altos Hornos must make payment on those notes that had matured. This appeal followed.