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Borg-Warner Acceptance Corp. v. Lovett & Tharpe, Inc.
Citations: 190 Ga. App. 556; 379 S.E.2d 530; 9 U.C.C. Rep. Serv. 2d (West) 1252; 1989 Ga. App. LEXIS 286Docket: 77802, 77803
Court: Court of Appeals of Georgia; February 10, 1989; Georgia; State Appellate Court
Borg-Warner Acceptance Corporation filed a lawsuit against Lovett Tharpe, Inc. (L&T) to enforce a commercial instrument designated as a “promissory note,” but also referred to as a “trade acceptance.” L&T denied liability and counterclaimed for actual and punitive damages, alleging Borg-Warner was “wilfully and stubbornly litigious” in its collection efforts, which included obtaining a default judgment in Missouri and attempting to enforce it in Georgia. L&T, engaged in manufacturing farm implements, had executed the trade acceptance related to Borg-Warner financing a shipment of drive belts from Coon Manufacturing Company on October 1, 1980. Following the execution, Borg-Warner paid Coon Manufacturing the purchase price but L&T returned the defective belts and instructed the bank to return the trade acceptance unpaid. Coon Manufacturing credited L&T, but subsequently filed for bankruptcy. Borg-Warner initially sought recovery through bankruptcy proceedings but later sued L&T in Missouri, obtaining a default judgment due to L&T's non-response. Borg-Warner attempted to domesticate this judgment in the Southern District of Georgia, but L&T contested it based on a lack of jurisdiction. The district court initially ruled in favor of Borg-Warner, but the Eleventh Circuit Court reversed this decision, ultimately declaring the Missouri judgment void and unenforceable. Borg-Warner's garnishment efforts to collect on the judgment were put on hold pending the resolution of the domestication case, resulting in no recovery of funds. Borg-Warner claimed that the instrument at issue was a promissory note, payable unconditionally despite any defenses L&T may have regarding defects in goods. The court rejected this characterization, determining that the instrument was a draft drawn by Borg-Warner upon L&T, thus subject to L&T's defenses related to the goods' condition. Even if Borg-Warner qualified as a holder in due course, L&T could still defend against claims based on simple contract principles. The trial court allowed parol evidence on the defect issue and denied Borg-Warner’s motion for a directed verdict, which was upheld. Borg-Warner also argued that the court erred by permitting L&T to present a counterclaim and failing to direct a verdict against it. However, since Borg-Warner prevailed on the counterclaim, this issue was deemed moot. Further, Borg-Warner's objections to the jury instructions were found to be moot or meritless. In L&T's cross-appeal, it claimed the trial court erred by not allowing a claim for malicious use of process related to Borg-Warner's actions in obtaining a default judgment without jurisdiction. The court noted that Borg-Warner's pursuit of jurisdiction in Missouri had substantial merit, leading to the conclusion that L&T's counterclaim was legally unfounded. The judgment was affirmed, with rehearing denied.