Opinion ID: 1895319
Heading Depth: 2
Heading Rank: 1

Heading: The Guerrettes

Text: [¶ 37] Having failed to persuade the jury that it was a holder in due course, the Credit Union is subject to any defense of the Guerrettes or Sun Life that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract, 11 M.R.S.A. § 3-1305(1)(b), or any claim of a property or possessory right in the instrument or its proceeds. 11 M.R.S.A. § 3-1306. Generally, fraud, such as that perpetrated by Paul Richard and Steven Hall, may be the basis for both a valid defense, see Silber v. Muschel, 190 A.D.2d 727, 593 N.Y.S.2d 306, 307 (1993), and a valid claim to the instrument itself. See generally Bowling Green, Inc. v. State St. Bank & Trust Co., 307 F.Supp. 648, 651-52 (D.Mass.1969), aff'd, 425 F.2d 81 (1st Cir.1970). [¶ 38] Fraud is an affirmative defense to a contract. See M.R. Civ. P. 8(c). To prevail on their fraud defense, the Guerrettes were required to prove, by clear and convincing evidence, that a fraudulent or material misrepresentation induced them to transfer the proceeds of their father's life insurance policy, in the form of the Sun Life checks, to Steven Hall and Paul Richard. In addition, they were required to prove they were justified in relying on the fraudulent misrepresentation. See Kuperman v. Eiras, 586 A.2d 1260, 1261 (Me.1991). The parties' stipulation that Hall and Richard fraudulently induced the Guerrettes to invest the checks in their company, HER, Inc., is sufficient to satisfy the Guerrettes' burden on this issue. The Guerrettes are not liable to the Credit Union for their indorsement of the Sun Life checks.