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Yin V. Society National Bank Indiana

665 N.E.2d 58

Facts

Society National Bank (Society), the plaintiff, agreed in a promissory note to lend U.S.A Diversified Products, Inc. (USAD) up to $2,000,000.00 in the form of an operating line of credit. Sam Yin (Yin), the defendant, who jointly owns USAD with Davis, also signed the note. Yin’s then-wife, Sophia Kung (Kung), also signed the note personally. Society only dealt directly with Davis and once negotiation was finalized, Davis took the note which Yin’s and Kung’s signature, forged it and returned it to Society. The trial court granted summary judgment in favor of Society and against Yin and Kung in the amount of $2,160,331, including interest and attorney fee and expenses.

Issue

Yin and Kung responsible for the document which contains forged signatures?

Holding:

Trial Court – Summary Judgment in favor of Society

Court of Appeals– Judgment was reversed and remanded.

Reason

The parties do not dispute that the agreement in this case is a line of credit upon which USDA could make draws of varying amounts. Therefore they cannot be bound by a document which does not bear their signatures. Accordingly, the extension note effect on their liability.

The Rule of law is that an instrument must contain its “four corners” all the information required to determine whether it is negotiable.

NationsBank of Virginia, N.A V. Barnes