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Del Priore v. Markota

A-5350-00T1 (N.J. Super. App. Div. 2003) (Unpublished)

NOTES—It is valid consideration for a note to be given to one person for a debt owed to another, but the person making the note must the one who is actually indebted.

An accountant performed a variety of accounting services on behalf of an individual and several corporations of which that individual was the principal. The corporation was in financial straits and at the time it had significant outstanding tax issues. The accountant was aware of that situation. His own bills were not paid promptly and on occasion, were paid from his client’s personal funds. He and his client discussed the advisability of filing bankruptcy. Eventually, the corporation and his client’s wife filed bankruptcy petitions, but the individual client did not. A month after his wife filed for bankruptcy, the client delivered his promissory note to the accountant’s wife. The note was never paid. The client testified that he would routinely sign whatever documents the accountant told him to sign and he did not understand that he was assuming personal responsibility for a corporate debt.

At trial, the accountant testified that the note was subject to negotiation and that it was for work that his wife performed in a bookkeeping capacity, and not for work that he performed as an accountant. The testimony at trial was convoluted and the lower court did not believe that the accountant’s wife actually had a separate bookkeeping business. The client argued that there was no consideration for the note and the accountant’s wife argued that it was sufficient that there be consideration between the client and the accountant himself. There didn’t have to be consideration from the accountant’s wife. “Without doubt, a promissory note made to a payee in return for consideration received by the maker from a third person is binding, despite the fact that the payee has not undergone a detriment in exchange for the promise contained in the note.” Nonetheless, the Court found that principle to be immaterial because the note was not from the corporation. Here, the accountant’s services were to the corporation and under those circumstances, had the note been issued by the corporation, there would have been sufficient consideration even though the note was payable to the accountant’s wife. Here, however, the note was from the corporation’s owner and the Court believed that payment had already been made for whatever personal services were performed. As a consequence, the accountant’s wife was not permitted to collect upon the note.

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