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Sullivan v. United Dealers Corp.

486 S.W.2d 699 (1972)

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Sullivan v. United Dealers Corp.

Court of Appeals of Kentucky

486 S.W.2d 699 (1972)

Facts

James and Norma Sullivan (defendants) hired Memory Swift Homes, Inc. (Memory Swift) to build a house. The Sullivans executed a promissory note secured by a mortgage. Memory Swift negotiated the note and assigned the mortgage to United Dealers Corporation (United) (plaintiff). The Sullivans provided United with written statements, asserting that the house foundation and framing had been properly installed and that all work had been done in a workmanlike manner. The Sullivans defaulted on the note. United brought an action for collection on the note and foreclosure of the mortgage. The Sullivans raised claims against Memory Swift as a defense against United’s action. The circuit court held that United was a holder in due course and that the Sullivans could not assert defenses against United that arose from alleged breaches of contract by Memory Swift. The circuit court entered judgment for United. The Sullivans appealed, arguing that United frequently did business with Memory Swift, that United knew at the time of purchasing the note that no work had yet been performed on the house, and that United was therefore on notice of defenses or claims against the note.

Rule of Law

Issue

Holding and Reasoning (Reed, J.)

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