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July 1, 1993


The opinion of the court was delivered by: MICHAEL B. MUKASEY


 Plaintiff Indemnity Insurance Company of North America ("IINA") guaranteed as surety in 1985 promissory notes (the "Notes") executed by defendants as limited partners in the proposed syndicated purchase of an Angus bull named High Voltage, and the sale of his semen for cattle reproduction. High Voltage proved less potent than his name, the venture failed, and the partners defaulted on the Notes. IINA paid the Notes, sued defendants, and now moves for summary judgment to collect the amounts it paid on behalf of 12 of them. *fn1" Defendants have argued that they are not liable because they signed the Notes and certain additional documents with blank spaces relating to dollar amounts and other information, and that the Notes and other documents were filled in without defendants' authorization. For the reasons and to the extent set forth below, the motion is granted.


 Leatherstocking High Voltage Limited Partnership was formed as a New York limited partnership to acquire the bull. Leatherstocking and its general partner, Liam Hutchinson, sought to raise capital by soliciting investors to buy limited partnership interests. Defendants were at least the intended if not the actual purchasers of limited partnership interests. Each of the 55 units of the limited partnership was priced at $ 100,000, payable by a $ 6400 cash contribution and a Note for the balance. The Notes were to be assigned to a bank as collateral for a loan to the limited partnership to buy the bull. To induce the bank to accept the Notes as collateral, Leatherstocking hired plaintiff IINA to guarantee payment of the Notes.

 Each of the defendants affected by this motion signed a series of documents in connection with the transaction, with one exception as to defendant Wayne Epple as described below. The first of these was the Leatherstocking High Voltage Partnership Subscription Agreement, which provides in part as follows:

You [the general partner] have also informed the undersigned that limited partnership interests in the Partnership are to be divided into 55 units . . . and the purchase price for each unit . . . is $ 100,000 and that each investor will be required to purchase a minimum of 1 unit, except for the purchase of half-Units which may be accepted at the discretion of the General Partner.
* * *
. . . . Execution of this Subscription Agreement shall constitute an offer by the undersigned to subscribe for the number of Units set forth below on the terms specified herein.
* * *
6. Revocation. The undersigned will not cancel, terminate or revoke this Subscription Agreement or any agreement made by the undersigned hereunder and this Subscription Agreement shall survive the death or disability of the undersigned, except as provided below.

 (Pl. App. Ex. B at 1, 7) The same agreement disclosed that each investor would have to pay $ 6400 in cash per unit, sign a Note for the balance of $ 93,600, and obtain a surety bond to collateralize what was in effect a loan to each investor. The agreement then stated that, "for the convenience of the investor, the General Partner has made arrangements with a Surety Company to issue a Surety Bond to qualified investors." (Id. at p. 2)

 The Note each defendant signed was styled a Security Installment Promissory Note, payable to the partnership Leatherstocking, and provided a payment schedule at an interest rate of 13% per year on the unpaid balance. (Pl. App. Ex. F)

 The Surety Company was IINA, and each defendant signed also an Application Letter for a bond addressed to IINA. That letter recited the signer's understanding that IINA was not authorized to represent the partnership or its principals, was not a party to the "formation, promotion, financing, management or conduct of the Partnership," and had not made any "representations or recommendations to me with respect to the Investment, nor offered or given me any advice with respect to the advantages or disadvantages (financial, tax or otherwise) of the Investment . . . ." (Pl. App. Ex. C at 1) The letter included a broad waiver of the signer's rights in the event IINA made any payment under the bond and sued to recover such payment:

* * *
I have no defense, set-off or counterclaim to the full and prompt payment of all indebtedness owing under my Promissory Note against you or any prior or subsequent holders thereof. In consideration for your issuance of the Bond, I hereby waive any right to assert any defense, set-off or counterclaim in any action or proceeding commenced against me under by Promissory Note or Indemnity Agreement.

 (Id. at 2) The letter ended with the following paragraph:


 (Id. at 3)

 Further, each defendant signed an Indemnification and Pledge Agreement acknowledging his awareness that the bond to be issued by IINA would require payment upon default regardless of whether the defaulting defendant had good defenses against the partnership, and continued:

Accordingly, investor must indemnify Surety under this Agreement for any amount that Surety is required to pay under the Bond, as well as any other amount paid or incurred by Surety as set forth herein.

 (Pl. App. Ex. D at 1-2)

 Finally, each defendant executed an Estoppel Letter "intended to be for the benefit of any commercial bank or lending institution that may at any time hereafter become the holder of [the investor's] note." (Def. App. Ex. E) The letter also acknowledged that the signer's obligation to repay the Note "shall be absolute and unconditional." (Id.)

 As explained more fully below, defendants contend that the blanks in these documents were filled in at the closing of the transaction on August 30, 1985. Leatherstocking, the original payee, endorsed the Notes to Interdiscount Limited, which in turn endorsed them to Barclays Bank. IINA executed bonds which guaranteed payment of the Notes to the holder thereof if defendants defaulted. Those bonds included the following provision:

This bond constitutes a primary obligation of the Surety [IINA], is irrevocable, absolute and continuing and as to any Permitted Assignee will remain in full force and effect until the Notes have been paid in full regardless of any illegality, invalidity, unenforceability of or and [sic] defect in any provision of the Notes or accompanying loan documents.

 (Pl. App. Ex. G at 5) When defendants defaulted, Barclays, the holder of the Notes, notified IINA of each default and IINA made the payments as required by the bonds. (Pl. App. Ex. H) In January 1989, after this action was filed, IINA prepaid the balance on the Notes and received an assignment of the Notes from Barclays. (Id.)


 Plaintiff moved initially for summary judgment in 1989. After numerous delays to accommodate the schedule of defendants and their counsel, that motion was denied on December 27, 1990. However, a Rule 43(e) *fn2" hearing was scheduled for December 4, 1991 to evaluate defendants' claims that the Notes were materially altered. Three defendants attended and testified at the hearing; five others have been deposed either before or since. The scheduling order that directed the hearing, dated October 8, 1991, provided in part: "Judgment will be entered against any party failing to appear." The substance of the testimony of those defendants who appeared, and the facts relating to the other four defendants to the extent they are of record, based on pleadings and answers to interrogatories, are set forth below.

 1. American Deseret Limited Partnership

 This defendant did not appear at the hearing nor was a representative of this defendant deposed. From interrogatory answers submitted in behalf of this defendant, it appears that on August 21, 1985, the directors of this defendant's corporate general partner, American Deseret Corporation, passed a resolution in part as follows:

RESOLVED, that American Deseret Limited Partnership subscribe for limited partnerships in the Leatherstocking High Voltage Partnership of American Cattle Management Corporation.
IT IS FURTHER RESOLVED, that Glen V. Bingham, Vice President be empowered to sign on behalf of American Deseret Limited Partnership and to submit all of the necessary documents required to complete the arrangement for the limited partnership.

 (Pl. App. Ex. I) Bingham then signed the Note in the amount of $ 93,600, and the Indemnification Agreement, in behalf of the partnership. (Id.) In his answers to interrogatories, Bingham claimed that there were blanks in the documents he signed, including as to dollar amount. He suggested as well that the phrase "Pay to the order of" did not appear in the Note, and therefore that it was not a valid negotiable promissory note. Alternatively, if the phrase did appear in the Note, he claimed that because he is not a lawyer he did not know that that phrase made the Note negotiable. He does not deny, however, that language in the Note provided for liability of later endorsers. (Id.) That language would notify a reader that the instrument was subject to further negotiation -- i.e., that it was negotiable.

 2. Wayne Epple

 Wayne Epple conceded at his deposition that he had signed the Note (Pl. App. Ex. K at 51), the Indemnification Agreement (Id. at 48-49), the Application Letter (Id. at 50) and the Estoppel Letter (Id. at 52), all with blanks. He denied that the signature on the Subscription Agreement was his (Id. at 63), but said he recalled seeing that agreement in a package of executed documents he received on September 25, 1985. (Id.) The amount of his Note was $ 46,800. (Pl. App. Ex. J) He testified that he thought the documents would be returned to him for his approval, or there would be no investment, although he testified also that he had decided to invest or ...

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