UNIVERSAL C. I. T. CREDIT CORP. vs. ALBERT T. INGEL & another.

SPIEGEL, J. This is an action of contract on a promissory note by the assignee of the payee against the makers.

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The case was first tried in the District Court of Fitchburg, to which it had been remanded by the Superior Court. There was a finding for the plaintiff in the sum of $1,630.12. At the request of the defendants, the case was retransferred to the Superior Court for trial by jury. Upon conclusion of the evidence the court allowed a motion by the plaintiff for a directed verdict to which the defendants excepted. They also excepted to the exclusion of certain evidence.

At the trial the plaintiff introduced in evidence the note, [Note 1]

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a completion certificate signed by the defendants, and the District Court's finding for the plaintiff. The defendants admitted the authenticity of the signatures on the note and the completion certificate. As a witness for the defendants, one Charles D. Fahey testified that he was the plaintiff's Boston branch manager at the time the defendants' note was purchased, and that the plaintiff purchases instalment contracts regarding automobile and property improvement purchases. He described the procedures by which purchases of commercial paper are arranged by the plaintiff; these procedures included a credit check on the "customer," i.e., the maker of the note which the plaintiff is planning to purchase. The defendants attempted to introduce through Fahey a credit report obtained by the plaintiff on Allied Aluminum Associates, Inc. (Allied), the payee of the note. The defendants excepted to the exclusion of this evidence. They offered to prove that the excluded report, which was dated "3-31-59," contained the following statement: "The subject firm is engaged in the sale of storm windows, doors, roofing, siding, and bathroom and kitchen remodeling work. The firm engages a crew of commission salesmen and it is reported they have been doing a good volume of business. They are reported to employ high pressure sales methods for the most part. They have done considerable advertising in newspapers, on radio, and have done soliciting by telephone. They have been criticized for their advertising methods, and have been accused of using bait advertising, and using false and misleading statements. The Boston Better Business Bureau has had numerous complaints regarding their advertising methods, and have reported same to the Attorney General. FHA has had no complaints other than report of this from Better Business Bureau and have warned the firm to stop their practice."

The defendants excepted to the exclusion of testimony by the defendant Dora Ingel concerning certain of her negotiations with Allied. An offer of proof was made which indicates that this testimony might have been evidence of fraud or breach of warranty on the part of Allied. They also excepted

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to the exclusion of a letter [Note 2] from the plaintiff to the defendant Albert.

I.

The defendants contend that the note was nonnegotiable as a matter of law and, therefore, any defence which could be raised against Allied may also be raised against the plaintiff. They argue that the note contained a promise other than the promise to pay, failed to state a sum certain, and had been materially altered.

It appears that the note was a form note drafted by the plaintiff. The meaning of Fahey's general testimony that the note and the completion certificate were "together" when given by the plaintiff to Allied is unclear. However, we see nothing in this testimony to justify the inference urged upon us by the defendants that in this case the note and completion certificate were "part of the same instrument" and that an additional obligation in the completion certificate rendered the note nonnegotiable under G. L. c. 106, Section 3-104 (1) (b). [Note 3] Similarly, we are not concerned

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with any variance between the written contract (entered into by Allied and the defendants) and the note, since there is nothing in the note to indicate that it is subject to the terms of the contract. We are equally satisfied that the insurance clause in the note does not affect negotiability under Section 3-104 (1) (b) since it is clear that the "no other promise" provision refers only to promises by the maker.

The provision in the note for "interest after maturity at the highest lawful" rate does not render the note nonnegotiable for failure to state a sum certain as required by Section 3-104 (1) (b). We are of opinion that after maturity the interest rate is that indicated in G. L. c. 107, Section 3, [Note 4] since in this case there is no agreement in writing for any other rate after default. This being the case, we do not treat this note differently from one payable "with interest." The latter note would clearly be negotiable under G. L. c. 106, Section 3-118 (d). [Note 5]

The note in question provides that payment shall be made "commencing the 25 day of July, 1959." It appears that there is an alteration on the face of the note in that "July" was substituted for "June," the "ly" in the former word being written over the "ne" in the latter. The alteration has no effect in this case, where the defendants admitted that they had paid a particular sum on the note and where the sum still owing (assuming the note to be enforceable on its face) is not in dispute. See Mindell v. Goldman, 309 Mass. 472, 473-474.

We thus conclude that the note in question is a negotiable instrument. [Note 6]

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II.

The finding of the District Court which the plaintiff offered in evidence is, under G. L. c. 231, Section 102C, prima facie evidence upon such matters as are put in issue by the pleading at the trial in the Superior Court. Lubell v. First Natl. Stores, Inc. 342 Mass. 161, 164. The defendants' answer denies that the plaintiff is "a holder in due course" of the note on which the action is brought; accordingly, this must be regarded as a matter "put in issue by the pleadings." We are satisfied that the finding of the District Court was prima facie evidence that the plaintiff took the note for value and without notice, and notwithstanding the provisions of G. L. c. 106, Section 3-307 (3), [Note 7] the burden was on the defendants to rebut the plaintiff's prima facie case. See Cook v. Farm Serv. Stores, Inc. 301 Mass. 564, 566.

III.

The trial judge correctly excluded the evidence offered by the defendants to show that the plaintiff and Allied had worked together on various aspects of the financing and that the plaintiff was aware of complaints against Allied by previous customers. We are of opinion that there was nothing in this evidence by which the plaintiff had "reason to know" of any fraud. [Note 8] The letter of October 27, 1959, from the plaintiff to the defendant Albert was also properly excluded; it is immaterial that the plaintiff may have found out about Allied's allegedly fraudulent representations after the note had been purchased.

Exceptions overruled.