Thursday, December 26, 2013

Ertel v. Radio Corp. of America case brief

Ertel v. Radio Corp. of America case brief summary
307 N.E.2d 471 (1974)

Plaintiffs appealed from a judgment of the Indiana Court of Appeals, which reversed a summary judgment for plaintiffs entered in the trial court and allowed defendant a right of subrogation as a surety without set-off.

Defendant personally guaranteed a note given by his employer to obtain financing from plaintiff loan company. To secure the financing, the employer assigned its accounts receivable to plaintiff loan company. The employer defaulted on the note. Plaintiff loan company sought and obtained summary judgment against defendant on the note. Defendant paid the amount due on the note and then claimed a right of subrogation as to the receivables. The trial court ruled against defendant.


  • The appellate court reversed, holding that defendant was entitled to subrogation and that plaintiff customer had no right of set-off for defective goods. 
  • The court affirmed the ruling that defendant had a right of subrogation because he was a surety, finding no substantial evidence that defendant had acted in bad faith. 
  • However, the court reversed the denial of set-off, holding that such a defense was permitted by U.C.C. § 9-318. 
  • The court remanded accordingly.
The court affirmed in part and reversed in part, ruling that defendant was entitled to subrogation as a surety because allegations of wrongdoing were unsubstantiated, and remanding to allow plaintiff customer to assert a set-off for defective goods.

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