1. Do you agree with the court’s conclusion that Nancy Clardy did not ratify the note? Why or why not?

2. Why did the court determine that the note was not commercial paper and that, consequently, Means and Barry could not recover?

3. Could Means and Barry recover on any other theory?

Rick Means and Fred Barry owned an apartment building which they wished to sell. On July 18, 1980, they entered into a contract for deed with respondents, Joan and Gary Doerhoff. The agreement provided that the Doerhoffs would receive the apartment building and would give in exchange 6.81 acres of land in Maries County, Missouri, and a note purportedly executed almost a year earlier by Nancy Clardy, respondent Bruce Clardy’s mother. At the time Means and Barry took the note in partial payment for the apartment building a required $5,000 payment had been made but several of the monthly installments were in arrears. Nonetheless the note’s balance had been reduced to approximately $22,000 from its original $31,000. Curiously, the monthly payments according to the terms of the note had been and were to be in cabinets made in the Clardy cabinet shop with value “figured at the prevailing builders price for Jefferson City . . . until October 12, 1981, at which time the entire balance thereof is due and payable in cash . . .” When the note was not paid by Oct. 12, Means and Barry brought this lawsuit to collect the $22,000 still due plus interest and charges.

During the lower court trial, Nancy Clardy testified that she did not sign either the note or the bill of sale accompanying it. She alleged that her son, Bruce, had done so and had drawn $5,000 from a “remodeling” fund to make the initial payment on the note thereafter making payments in cabinets. Bruce took the Fifth Amendment (protection against self-incrimination) when asked about this at the trial.

Nancy Clardy’s signature on the documents was notarized by John Gross. Gross later testified that Nancy Clardy had not signed any documents in his presence but that as a favor to Bruce he notarized them after Bruce told him that Nancy Clardy had signed them.

Under oath, Nancy Clardy stated that her son, Bruce, told her that he had signed her name to the documents. She did not remember exactly when he told her this. Mrs. Clardy testified that she did not contact Mr. Doerhoff or plaintiffs when she learned that Mr. Clardy had signed her name. She also testified that she had learned, after the fact, that Bruce Clardy used $5,000 from a remodeling fund in order to pay the initial $5,000 due on the note. Mrs. Clardy had authorized Mr. Clardy to draw upon the fund to remodel an investment property which she owned. She did not authorize him to use the money to pay the note for the cabinet shop.

The trial court held that Bruce Clardy had indeed signed the note for both parties. As a consequence, the trial court held that Nancy Clardy was not liable. Means and Barry then brought this appeal.

Means and Barry ask that the decision of the lower court be overturned and they be allowed to recover from Nancy Clardy because she had ratified her signature on the commercial paper by doing nothing to correct the situation. Means and Barry also ask that they be allowed to collect against the Doerhoffs as well because, on commercial paper, the UCC holds that “(2) Any person who transfers an instrument and receives consideration warrants to his transferee . . . that (b) all signatures are genuine or authorized.” Therefore the Doerhoffs had breached the warranty and Means and Barry should be able to collect for the loss they suffered as a consequence. 

The appellate court ruled that Nancy Clardy did not ratify her signature and was not liable on the instrument. The court also determined that the note was not commercial paper and that, therefore, the UCC section upon which Means and Barry relied in their appeal did not apply. As a consequence they could not collect.

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