Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 26

FACTS Tonya Bass signed a note with Mortgage Lenders Network USA, Inc., to borrow $139,988-repayable with interest in monthly installments of $810.75-to buy a house in Durham County, North Carolina. The note was transferred by rubber stamp indorsements to Emax Financial Group, LLC, then to Residential Funding Corporation, and finally, to U.S. Bank, N.A. (A rubber stamp makes an imprint of a payee's signature.)
When Bass stopped paying on the note, U.S. Bank filed an action in a North Carolina state court to foreclose. From an order permitting the foreclosure to proceed, Bass appealed. She argued that the stamp transferring the note from Mortgage Lenders to Emax was invalid because it was not accompanied by a signature. A state intermediate appellate court issued a decision in Bass's favor based on the lack of a "proper indorsement." U.S. Bank appealed.
ISSUE Can an indorsement that does not include a handwritten signature effectively transfer a negotiable instrument?
DECISION Yes. The North Carolina Supreme Court reversed the decision of the lower court, holding that U.S. Bank was the holder of the note.
REASON The UCC defines "signature" as "any symbol executed or adopted with present intention to adopt or accept a writing." Under this definition, a handwritten signature is not necessary. A "symbol" can be written, but it may also be printed or stamped. "The question always is whether the symbol was executed or adopted by the party with present intention to adopt or accept the writing."
In this case, the stamped indorsement indicates that intent on its face-"Pay to the order of: Emax Financial Group, LLC without recourse By: Mortgage Lenders Network USA, Inc." This indorsement is on the same page of the note as the other "uncontested" indorsements. The stamp's language shows that the indorsement "was executed or adopted by the party with present intention to adopt or accept the writing." Thus, the stamp constitutes a signature and as an indorsement effectively transferred the note.
FOR CRITICAL ANALYSIS-Economic Consideration How does presuming that an indorsement is legitimate "without unambiguous evidence to the contrary" protect the transferability of a negotiable instrument?