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Franklin Discount Co. v. Ford

Decided: June 25, 1958.


On appeal from Superior Court, Law Division.

For reversal and remandment -- Justices Heher, Burling, Francis and Proctor. For affirmance -- Justice Wachenfeld. The opinion of the court was delivered by Burling, J. Heher, J. (concurring in reversal). Heher, J., concurring in result.


This is an action based upon ten promissory notes. The plaintiff, Franklin Discount Company, is the payee of each of the notes, the defendant Harold C. Ford is the maker. Each note bears two accommodation endorsements, one by the defendant Margaret Ford, wife of the said Harold C. Ford, and an endorsement by one of the other nine defendants in the suit. The tenth endorser is without this jurisdiction.

The case was tried in the Superior Court, Law Division, by a judge and jury. The jury returned a verdict of $19,401.97 in favor of plaintiff and against the defendants, Harold C. Ford and Margaret Ford, and a verdict of no cause of action in favor of the other nine defendants. Upon motion the trial judge set aside the verdict in favor of the nine defendant-endorsers, and entered judgment in favor of the plaintiff against each of the nine defendants in the amount of $1,933.43, with interest from October 14, 1955. The nine defendant-endorsers appealed. Prior to hearing

in the Superior Court, Appellate Division, we certified the cause on our own motion.

The trial below was the second trial of this case, a previous jury verdict in favor of the defendants having been set aside by the trial court.

The facts are lengthy and the essential ones are in dispute. The defendant Harold C. Ford was a retail automobile dealer. He purchased automobiles for resale from a finance company, Seth Boyden, which was owned by Richard Glassner, an attorney. On or about June 30, 1955 Seth Boyden referred Ford to the plaintiff. The plaintiff's transactions with Ford were of two types, one referred to as a "floor plan scheme" and the other as a "time sales operation." Under the "floor plan scheme" Ford would purchase an automobile, deposit the certificate of title with the plaintiff as security and at the same time sign a chattel mortgage and note securing the payment of the moneys advanced by the plaintiff. When a purchaser for the automobile was found, Ford would return to the plaintiff, tender a check or cash, and receive the certificate of title so that a transfer of title to the purchaser could be effectuated. Under the "time sales operation," when a customer was desirous of financing an automobile, Ford would obtain a credit application from the customer and forward it to plaintiff. Upon approval of the application by plaintiff, Ford would obtain the customer's signature on a note and conditional sales contract for the unpaid balance and assign the contract and note to the plaintiff, receiving a check in return. The president of the plaintiff, one Schwartz, testified that most of the transactions with Ford were of the "floor plan scheme."

In August of 1955 Ford encountered financial difficulties in the operation of his business which in turn gave rise to the instant series of notes. During a period from August 9, 1955 until August 16, 1955 Ford gave a series of checks to the plaintiff and plaintiff turned over to Ford the certificates of title for 18 cars. These checks were all returned for insufficient funds, the total of the checks plus protest fees

being $33,883.50. Immediately upon learning of the fact that there were not sufficient funds to cover the checks the plaintiff dispatched its employees to Ford's premises to pick up any cars upon which it had a lien. Four cars of the 18 were repossessed and later sold by the plaintiff, the amount received being credited to Ford's account. In addition Ford gave the plaintiff $4,000 in cash, which was also credited to his account. According to the figures on the company's account books, which were introduced into evidence, Ford's indebtedness to the plaintiff after subtracting total credits of $14,219.50 amounted to $19,664. While this amount was disputed by Ford, he could introduce no records or other evidence to substantiate his testimony that his total indebtedness was "in the vicinity of $6,300."

Richard Glassner, the owner of Seth Boyden, testified that Ford was also indebted to his company for $20,880.

On August 22, 1955 a meeting was held among Ford, Schwartz representing the plaintiff, and Glassner representing Seth Boyden. A material dispute developed at the trial concerning what occurred at this conference. Glassner testified that Schwartz was adamant about getting his money and that he threatened to prosecute Ford if the money was not immediately forthcoming. He further testified that, after repeated urging, he finally prevailed upon Schwartz to accept a suggestion made by Ford that Ford obtain ten endorsers to lend their credit to a note, payable over a period of five years, if Schwartz would forbear from suit on the indebtedness. Two notes were drawn by Glassner in the face amount of $19,663.20 and $20,880 representing Ford's indebtedness to the plaintiff and Seth Boyden, respectively. According to Glassner an agreement was also drawn up providing, in substance, that Ford was to execute promissory notes to each creditor in exchange for their forbearance from enforcing their claims against Ford. This written agreement, the existence of which was disputed by Ford, was completely unexecuted. In any event, the signatures of the proposed endorsers of the two notes were never secured for the reason

that each endorser did not want to be liable for the large face amount of the notes.

Ford's version of the conference of August 22, 1955 was quite different. His testimony was to the effect that he was told that if he could procure ten endorsers who would lend their credit to promissory notes, that he would be given a new line of credit and that he would be able to remain in business. Ford insisted that the consideration for the notes and endorsements was not a forbearance from suit on the old debt, but the extension of a completely new line of credit by plaintiff.

After the conference Ford and one Freeman, an attorney and associate in Glassner's office, attempted to procure the endorsements on the beforementioned two notes. When that attempt ended in failure Ford and Freeman returned to Glassner's office. Glassner devised a new plan, designed to obviate the reluctance of the endorsers to sign the large notes. Glassner dictated, and his secretary prepared, a series of ten notes payable to the plaintiff in the face amount of $1,966.20 each, and ten notes payable to Seth Boyden in the face amount of $2,088 each. Thus each endorser would only be liable for 1/10th of the face amount of the notes upon which endorsements were originally sought.

Again Ford and Freeman set out to procure the various endorsements. There is some conflict in the testimony as to the authority possessed by Freeman. Freeman testified that his only authority was to witness the signatures of the endorsers in order to assure their genuineness. Ford's testimony was to the effect that Freeman's role was not so passive, but rather that he was authorized by Glassner to secure the signature of the ten guarantors. The ten notes in question are identical in form. All were executed on September 14, 1955, each bearing the signature of Ford as maker, his wife as endorser, and one of the appellants as co-endorser. Ford's wife and the co-endorser signed each note twice, once at the top and once at the bottom of the back. The following is a sample of the notes:


(Printed matter is enclosed in brackets -- remainder is typewritten)

(Date:) September 14, 1955 (In the installments set forth on the

reverse side hereof, I/We promise

(Amount $) 1,966.20 to pay to the order of)


THE SUM OF 1966 DOLS 20 CTS (Dollars)*fn*

(Payable at 1025 Broad Street, Newark 2, N.J.

(If any of the installments is not paid when the same becomes due, the entire unpaid amount of this note shall, without notice, become due and payable forthwith.

(In the event of default, the obligors agree to pay interest at 2% per month from date of default and, if placed with attorney for collection, additional 15% attorney's collection charge.

(Trial by jury and the right thereto are hereby waived.)

The alteration of the foregoing place of payment is O.K.

(Value Received) without interest HARRY FORD AUTO SALES

By Prop.

Harold C. Ford


(Printed matter is enclosed in brackets -- remainder ...

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