Court Opinion

ID: 9721826
Source: CourtListenerOpinion
Date Created: 2023-08-26 09:10:34.075978+00
Date Added: 2024-06-11T18:24:28.849230
License: Public Domain

STATON, Judge,
concurring.
I have great difficulty in characterizing the instrument in question as an “alleged promissory note.” It is, in fact, a negotiable instrument in the form of a promissory note. IC 1971, 26-1-3-104 provides:
“(1) Any writing to be a negotiable instrument within this article [chapter] must
“(a) be signed by the maker or drawer; and
“(b) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this article [chapter]; and
“(c) be payable on demand or at a definite time; and
“(d) be payable to order or to bearer.
“(2) A writing which complies with the requirements of this section is
* * * * * *
“(d) a ‘note’ if it is a promise other than a certificate of deposit.” (Emphasis added.).
There can be little doubt that it is a written instrument, signed by Crates in the capacity of “maker,” containing an unconditional promise to pay, upon demand, a sum certain in money to the order of Brames. The fact that the note describes some property as security for the payment of the instrument does not make it conditional, thereby affecting its negotiability. IC 1971, 26-1-3-105(l)(e). Brames, unquestionably, is a “holder” as defined by IC 1971, 26-1-1-201(20). As such, he should be able to re*443cover on the note, barring the establishment of any defenses to the note by Crates. IC 1971, 26-1-3-307(2).
As Brames did not attempt holder in due course status, he took the instrument subject to all defenses available to Crates in an action on a simple contract. IC 1971, 26-1-3-306. The defenses argued by Crates included failure or want of consideration, lack of delivery and mutual mistake.
The want or failure of consideration defense is untenable in this situation as the promissory note was given as security for the grain which Brames had previously stored in Crates’ elevator. No consideration is necessary where an instrument is given as security for an antecedent obligation of any kind. IC 1971, 26-1-3-408.
Concerning the defense of lack of delivery, IC 1971, 26-1-1-201(14) defines “delivery” with respect to instruments as the “voluntary transfer of possession.” The transfer of an instrument vests the rights possessed by the transferor in the person of the transferee. IC 1971, 26-1-3-201. Negotiation occurs when the transferee becomes a “holder” through the transfer of an instrument. If an instrument is payable to order, it is negotiated by delivery with any necessary indorsement. IC 1971, 26-1-3-202(1). The instrument in question stated that the maker promised to pay to the order of Byron L. Brames and Joanne E. Brames, $73,224.00 (less $15,000.00 advance); it was signed by Crates, as maker. This note, made payable to the order of Brames, was prepared at the bank by both men and given by the note’s maker, Crates, to Brames. Brames subsequently became the “holder” of the note. The Indiana Comment to IC 1971, 26-1-3-202 explains that the definition of “holder” includes the payee of “payable to order” paper so that “it is now certain that a payee of such paper may take by negotiation.” Clearly, Crates effectively delivered the note to Brames.
As one who is not a holder in due course, Brames’ recovery on the note is subject to the contract defense of mutual mistake. Here, as the majority noted, the parol evidence rule will not operate to bar extrinsic evidence as to the parties’ intent and true agreement. Fort Wayne Bank Bldg., Inc. v. Bank Bldg, and Eq. Corp. (1974), 160 Ind.App. 26, 309 N.E.2d 464. The note must fail as it was based upon inaccurate data, unknown to both parties at the time of writing. The mistake made went to the essence of the contract. Accordingly, the court’s remedy of allowing Brames to recover the reasonable value of the debt, which the note was given to secure, was, in this situation, appropriate.