McKirgan v. American Hospital Supply Corp.

Thompson, J., delivered the opinion of the Court. Clarence M. Plitt, since deceased, filed suit in the Circuit Court for Baltimore County against the American Hospital Supply Corporation alleging that the latter on August 10, 1972, issued its check No. 712080, in the amount of Eight Thousand Five Hundred Thirty-Five Dollars and Sixty-One Cents ($8,535.61), to the order of Haemo-Sol, Inc., which, after endorsing the check in blank, delivered same to the plaintiff. The plaintiff accepted the check for value and in good faith without notice of any defense and duly presented the check for payment, but the defendant dishonored the check by stopping payment thereon. In its answer, the American Hospital Supply Corporation alleged that the payment of the check was stopped by the defendant at the request of the payee thereof, Haemo-Sol, Inc. who advised that the check in question had been stolen from its mail.

Subsequently, a second check in the same amount was forwarded to Haemo-Sol, Inc. and said check was paid shortly thereafter. Haemo-Sol, Inc. further advised the defendant that the endorsement purporting to be that of Haemo-Sol, Inc. on the back of the check was a forgery. The principal evidence offered at trial was the deposition of the late Clarence M. Plitt in which he stated that a Mr. ⁸⁷ Banks, who was known by Plitt to be the sole owner of Haemo-Sol, Inc., endorsed to him a check payable to Haemo-Sol, Inc. and issued by American Hospital Supply Corporation, in payment of a personal debt. The dishonored check was not placed into evidence.

The trial judge found that Plitt was not a holder in due course and found for the appellee. The appellant alleges error in this finding. The initial step in an action to enforce an obligation of a purported signer of an instrument is to establish the existence of the instrument and signature. Md. Code, Commercial Law Article § 3-307 provides: “(1) Unless specifically denied in the pleadings each signature on an instrument is admitted.

When the effectiveness of a signature is put in issue “(a) The burden of establishing it is on the party claiming under the signature; but “(b) The signature is presumed to be genuine or authorized except where the action is to enforce the obligation of a purported signer who has died or become incompetent before proof is required. “(2) When signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense. “(3) 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 appellee specifically raised the issue of the effectiveness of the signatures. Under § 3-307 (1) the burden of establishing that the signature