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Herzog Contracting Corporation v. McGowen Corporation Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A corporation sued to enforce promissory notes. The issuer claimed the notes were a sham for tax purposes. The court allowed parol evidence of this sham because the plaintiff was not a holder in due course.
Legal Significance: This case affirms that under UCC § 3-306, parol evidence is admissible to prove a promissory note was a sham transaction, not intended to be enforceable, against a party who is not a holder in due course.
Herzog Contracting Corporation v. McGowen Corporation Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
Herzog Contracting Corporation (Herzog) sued McGowen Corporation (McGowen) to enforce two promissory notes. The district court granted summary judgment for Herzog. The initial judgment order did not specify a monetary amount. Herzog filed a Rule 59(e) motion to amend, which the court granted, adding the sum and designating it “nunc pro tunc.” McGowen appealed within 30 days of the amended judgment but not the original. Substantively, McGowen issued the notes after receiving $400,000 from Herzog’s subsidiary, Tru-Flex. Herzog claimed this was a loan. McGowen contended the $400,000 was a prepayment related to an asset purchase agreement and the notes were a sham, created solely to help McGowen defer tax liability, with no intention they be enforced. Tru-Flex later assigned the notes to its parent, Herzog. Herzog, a Missouri corporation, conceded it was not a holder in due course of the notes. Tru-Flex and McGowen were both Indiana corporations. McGowen argued the assignment was collusive to create diversity jurisdiction. The district court found the notes unambiguous and parol evidence of the alleged sham inadmissible.
Court Holding & Legal Precedent
Issue: Is parol evidence admissible to demonstrate that promissory notes, unambiguous on their face, were not intended to create a legally enforceable obligation but were instead a sham transaction, when enforcement is sought by a party who is not a holder in due course?
Yes, parol evidence is admissible to show the promissory notes were a Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo conse
IRAC Legal Analysis
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Legal Issue
Is parol evidence admissible to demonstrate that promissory notes, unambiguous on their face, were not intended to create a legally enforceable obligation but were instead a sham transaction, when enforcement is sought by a party who is not a holder in due course?
Conclusion
This decision clarifies that under UCC Article 3, the parol evidence rule Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.
Legal Rule
A party who is not a holder in due course takes a Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ip
Legal Analysis
The court first addressed appellate jurisdiction, holding the appeal timely. Herzog's Rule Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consecte
Flash-to-Full Case Opinions
Flash Summary
- An appeal was timely because the plaintiff’s Rule 59(e) motion to