Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 16

FACTS Supreme Radio, Inc., issued to Southern New England Distributing Corporation (Southern) two notes worth $1,900. The two notes and others, all of a total face value of about $15,000, were transferred to Korzenik, an attorney, by his client Southern ''as a retainer for services to be performed'' by Korzenik. Although Korzenik was unaware of the fact, Southern had obtained the notes by fraud. Southern retained Korzenik on October 25 in connection with certain antitrust litigation, and the notes were transferred on October 31. The value of the services Korzenik performed during that time is unclear. Korzenik brought this action against Supreme Radio to recover $1,900 on the notes.
DECISION Judgment for Supreme Radio affirmed.
OPINION Whittemore, J. Decisive of the case, as the Appellate Division held, is the correct ruling that the plaintiffs are not holders in due course under *** § 3-302; they have not shown to what extent they took for value under § 3-303. That section provides: ''A holder takes the instrument for value (a) to the extent that the agreed consideration has been performed or that he acquires a security interest in or a lien on the instrument otherwise than by legal process; ***.
Under clause (a) of § 3-303 the ''agreed consideration'' was the performance of legal services. It is often said that a lawyer is ''retained'' when he is engaged to perform services, and we hold that the judge spoke of ''retainer'' in this sense. The phrase that the judge used, ''retainer for services'' shows his meaning as does the finding as to services already performed by Korzenik at the time of the assignments. Even if the retainer had been only a fee to insure the attorney's availability to perform future services [citation] there is no basis in the record for determining the value of this commitment for one week.
The [Official] Comment to § 3-303 points out that in this article
value is divorced from consideration'' and that except as provided in paragraph (c) ''[a]n executory promise to give value is not *** value. *** The underlying reason for policy is that when the purchaser learns of a defense *** he is not required to enforce the instrument, but is free to rescind the transaction for breach of the transferor's warranty.
§ 3-307(3), provides: ''After it is shown that a defense exists a person claiming the rights of a holder in due course has the burden of establishing that he or some person under whom he claims is in all respects a holder in due course.'' The defense of fraud having been established, this section puts the burden on the plaintiffs. The plaintiffs have failed to show ''the extent *** [to which] the agreed consideration *** [had] been performed.''
INTERPRETATION A holder takes an instrument for value to the extent that the agreed consideration has been given, provided the consideration was given prior to the holder's learning of any defense or claim to the instrument.
CRITICAL THINKING QUESTION Should executory promises be considered value for holder in due course purposes? Explain.