GOLDSTEIN v. ENGEL

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Supreme Court, Appellate Division, First Department, New York.

Edwin GOLDSTEIN, et al., Plaintiffs-Appellants, v. Martin ENGEL, et al., Defendants-Respondents.

Martin ENGEL, et al., Plaintiffs on the Counterclaims, v. CONSOLIDATED SOUTHERN INDUSTRIES LTD., Additional Defendants on Counterclaims.

Decided: June 19, 1997

Before MURPHY, P.J., and WALLACH, RUBIN, TOM and ANDRIAS, JJ. Edward R. Dorney, for Plaintiffs-Appellants. Israel Vider, for Defendants-Respondents.

Judgment, Supreme Court, New York County (Alice Schlesinger, J.), entered April 11, 1996, insofar as appealed from, in favor of “plaintiffs on the counterclaim” and against plaintiffs in the principal amount of $50,000, unanimously affirmed, with costs.

 The default judgment granted against the corporate defendant on the counterclaim, with which plaintiffs are in privity, was correctly held to preclude plaintiffs' defense of being holders in due course of the bearer bonds that counterclaim plaintiffs claim the corporation, through plaintiffs, had converted (see, Curiale v. Ardra Ins. Co., 202 A.D.2d 252, 608 N.Y.S.2d 464;  Silverman v. Leucadia Inc., 156 A.D.2d 442, 548 N.Y.S.2d 720).   In any event, plaintiffs' holder in due course claim is without merit, since the bonds at issue, as certificated securities, are governed exclusively by UCC article 8, even though they might qualify as commercial paper under UCC article 3 (UCC 8-102[1][c] ).  Even if the bonds were commercial paper, or plaintiffs were deemed to have raised the defense of bona fide purchasers applicable to certificated securities under article 8, the documentary evidence conclusively demonstrates that plaintiffs purchased the bonds from a third party with notice of counterclaim plaintiffs' adverse claims, and therefore cannot be either holders in due course or bona fide purchasers (UCC 8-302[1];  UCC 3-302[1][c] ).

MEMORANDUM DECISION.