Andrew Liu

Case Name:
U.S West Financial Services Inc,. Plaintiff, v. Robert Cipriano and Nancy Cipriano, Defendants
U.S District Court for the Southern District of New York

Key Facts: 1. May 1988, defendants executed a promissory note in which they promised to pay to New York City Waterfront Associates, L.P. the sum of $88,643 plus interest.

2. Defendants have made no payments required by the promissory note and are default of their obligations under the Note.

3. Defendants stated that they were mislead and fraudulently induced into making the investment by the accountant, Robert Perry Dubin.

4. Defendants argued that the venue is improper in New York based on the fact that they reside, was approached by Dubin, and signed all the documents pertaining to the Note in California.

5. Defendants argued that plaintiff is not the holder of the Note in due course because plaintiff failed to perform due diligence in researching defendants’ finances prior to enabling them to invest. Thus, they were not bound to the Note.

6. Defendants contend that plaintiff is not the holder in due course.

Issue: Is plaintiff liable for participating in the fraudulent activity and if so, should plaintiff be relieved of the title of holder of the Note?

No, debtors failed to show the court that the assignee was guilty of any fraud. Furthermore, evidence clearly stated that plaintiff had no actual knowledge of the alleged fraud. Thus, under N.Y Uniform Commercial Code 3 – 305 and Federal Rules of Civil Procedure Rule 56, unless it could be proven that the holder had actual knowledge of the fraudulent conduct which was used to induce the defendants to execute the Note, the plaintiff is the holder in due course.

Analysis:
The court finds that:

1. Defendants have not asserted any defense that could possibly relieve plaintiff’s title as holder in due course of the Note. 2. Defendant’s own evidence clearly relieves plaintiff of any actual knowledge of Dubin’s alleged fraudulent activities. 3. The claims of frauds are towards Dubin in which the defendant’s presently have a pending action in California. 4. If defendants were indeed defrauded by Dubin, they would be justly compensated within the California court system. 5. In the mean time, it would be unjust to delay plaintiff of its right to enforce the clauses of the Note.

Conclusion:
Defendants’ motion to dismiss the complaint or to transfer the action to California is denied. Plaintiff’s motion for summary judgment granted. Affirmed.