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March 13, 1981

P P INC., formerly known as Green Mountain Inn, Inc., Plaintiff,
Thomas J. McGUIRE and Sandra A. McGuire, jointly, severally, and in the alternative, Defendants, v. Pascal L. TURSI and Rebecca W. Tursi, jointly, severally, and in the alternative, Third-Party Defendants

The opinion of the court was delivered by: DEBEVOISE

This is a suit upon a $ 65,000 promissory note. Jurisdiction is founded upon diversity of citizenship. Plaintiff, PP Inc., contends that it is a holder in due course and seeks to recover against the purported makers of the note, Thomas J. and Sandra A. McGuire. Defendants, the McGuires, claim that plaintiff is not a holder in due course and holds the note subject to their claims and defenses. In addition, they have initiated a third-party complaint against the payees of the note, Pascal L. and Rebecca W. Tursi, for indemnity should judgment be entered against them.

 Plaintiff now moves for leave to amend its complaint to add a party plaintiff and for summary judgment. No affidavits have been submitted in connection with the motion, however, and the sole factual record consists of the note itself, a set of admissions by defendants, and two depositions with accompanying exhibits. The facts revealed by these sources are substantially undisputed and will be relied upon in deciding the motions now before the Court. In light of the undeveloped state of the record, however, they will not constitute fact findings for purposes of later motions or a trial on the merits.

 In the summer of 1979, Sandra McGuire, a resident of Moorestown, New Jersey, entered into negotiations with Pascal and Rebecca Tursi to purchase the inventory, equipment, accounts receivable and name of "Becca's Boutique", a Moorestown clothing store owned as a sole proprietorship by the Tursis. Mrs. McGuire, a real estate agent, had previously been commissioned by the Tursis to sell the store but had been unable to locate a buyer.

 On August 17, 1979, with help from colleagues in her real estate office, but without the advice of an attorney, Mrs. McGuire drew up a purchase and sale agreement for "Becca's Boutique", utilizing a standard real estate purchase and sale form. Under the agreement, she and her husband promised to purchase the clothing store for $ 75,000, with a down payment of $ 10,000 and the balance of $ 65,000 to be paid at closing on October 5, 1979. To the settlement clause, Mrs. McGuire added the following language:

It is also agreed that this sale is contingent upon the buyer obtaining a Small Business Admin. loan in the amount of $ 65,000.00 the commitment for which shall be received on or before 10-5-79, or this agreement shall become null and void and all monies returned to the buyer, unless the time for the receipt of said commitment is extended by the seller.

 The agreement was apparently signed by Mrs. McGuire and the Tursis in early September, 1979, although the signatures are not dated. Mrs. McGuire alleges that she forged her husband's signature to the document without his prior knowledge or consent.

 At approximately the same time, Mrs. McGuire signed a promissory note which, she alleges, was drawn up by Mr. Tursi. This is the note sued upon in the present case. The note provided, in its entirety, as follows:

FOR VALUE RECEIVED, THOMAS J. MC GUIRE AND SANDRA A. MC GUIRE HUSBAND AND WIFE, DO PROMISE TO PAY TO THE ORDER OF PASCAL L. TURSI AND REBECCA L. TURSI of 110 CURTIS LANE, MOORESTOWN, N.J. AND OF THE GREEN MOUNTAIN INN, STOWE, VT. THE SUM OF SIXTY-FIVE THOUSAND DOLLARS ($ 65,000.00) together with a reasonable sum for attorney's fees if this note is placed in the hands of an attorney for collection. The entire balance of principal, with interest shall become due and payable at the option of the holder, if any installment of principal or interest is not paid according to the following conditions:
Interest payments of $ 541.66 shall be due and payable at a rate of 10% per annum, on the 5th day of October, November, and December, 1979.

 The note bears the signatures of Thomas J. McGuire and Sandra A. McGuire. Mrs. McGuire alleges that she signed the note at the Tursis' home in their presence and that she forged her husband's signature to this document as well as to the purchase and sale agreement.

 In addition to signing the $ 65,000 promissory note, Mrs. McGuire gave the Tursis the $ 10,000 cash down payment called for in the purchase and sale agreement. She has no explanation why she signed the promissory note prior to the closing other than that Mr. Tursi asked her to and that she "guessed (she) should sign it, because if the S.B.A. loan didn't go through, the note would not be any good anyway".

 Immediately after the promissory note had been signed, the Tursis departed for Stowe, Vermont, where, since the previous spring, they had been negotiating with Parker Perry for the purchase of the Green Mountain Inn. A closing on the Inn was scheduled for September 7, 1979. According to Perry, the terms of the transaction were to be $ 700,000 in cash for the entire hotel and all of its contents. Two days before the closing, however, Perry learned that the Tursis, despite their acquisition of a Small Business Administration Loan for $ 500,000, would not be able to produce more than $ 635,000 in cash. With the advice of his attorney, therefore, Perry agreed to accept a promissory note from the Tursis to cover the remaining "small balance" of $ 65,000.

 At the closing on September 7, 1979, the Tursis signed and delivered to Parker Perry a promissory note in the amount of $ 65,000, interest at 10% per annum, payable to the order of Green Mountain Inn, Inc., a corporation of which Parker Perry was President and principal shareholder. The typed instrument was dated September 7, 1979 and signed by both Mr. and Mrs. Tursi. It also contained the following language:

This note is given for an actual loan of the above amount and is secured by an assignment of a note dated September 4, 1979 from Thomas J. McGuire and Sandra A. McGuire to the makers hereof in the principal amount of $ 65,000 and a mortgage on the former homestead premises of the makers located at 110 Center Lane, Moorestown, New Jersey.

 In accordance with the security clause, the Tursis indorsed the McGuire promissory note with the following language: "Pay to the order of Green Mountain, Inc. with recourse." Both Mr. and Mrs. Tursi's signatures appear beneath the indorsement, as well as the date, September 7, 1979. Parker Perry states that he recalls receiving the Tursis' promissory note at the closing but has no recollection of also receiving the McGuires' note as security. His attorney, he claims, handled all the financial arrangements in connection with the sale of the Green Mountain Inn. Perry also claims that he had never met the McGuires prior to receiving their note but was aware before the closing that the Tursis were attempting to sell two clothing stores which they owned in New Jersey. Perry was unable to say, in his September 25th, 1980 deposition, whether his attorney or the real estate agent who handled the sale of the Inn were acquainted with the McGuires prior to the September 7th, 1979 closing.

 In the meantime, in New Jersey, Sandra McGuire took possession of and began to operate "Becca's Boutique". She claims that she had the Tursis' permission to run the store in their absence despite the fact that the McGuires and Tursis had yet to close on its purchase. After she had been in the store for about two weeks, Mrs. McGuire learned that her Small Business Administration loan had been disapproved, allegedly because the Administration had investigated the business and discovered that it was subject to $ 40,000 of outstanding debt. She then packed up the Tursis' merchandise and equipment, stored it in the basement, credited the Tursis for the portion of the merchandise which she had already sold, and notified the Tursis that they should come remove the remaining items in the store. She also spoke with the owner of the building, learned that the Tursis were in arrears in their rent, and negotiated a new lease naming her as the tenant. Finally, she ordered new merchandise and reopened the shop a week later under the name, "McGuire Girl". At no time, Mrs. McGuire alleges, did she ever close with the Tursis on their purchase and sale agreement, nor has she been returned the $ 10,000 which she delivered as a down payment in September, 1979.

 When their promissory note to the Green Mountain Inn, Inc. came due on December 5, 1979, the Tursis defaulted. Although the record contains no evidence of demand on the note, plaintiff contends, in its reply brief, that payment was demanded on January 21, 1980 and refused on February 14, 1980. On June 11, 1980, plaintiff instituted this action against Thomas J. McGuire and Sandra A. McGuire to recover on the note which it held as security for the Tursis' promissory note. The McGuires filed an answer denying ...

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