## Facts

- Michael McCranie borrowed money from Brooke Credit Corporation to buy and operate an insurance franchise.
- In 2000, McCranie executed an “Agreement for Advancement of Loan” governing loan administration and related rights and obligations.
- In 2002, McCranie refinanced and executed a new promissory note to Brooke Credit; under “additional terms,” it stated: “See Agreement for Advancement of Loan dated October 30, 2000.”
- Brooke Credit later pledged a portfolio of franchise loans, including McCranie’s note, as collateral to DZ Bank AG Deutsche Zentral-Genossenschaftsbank.
- McCranie defaulted, and DZ Bank sued to collect, asserting the note was a negotiable instrument and that DZ Bank was a holder in due course under Kansas UCC law designated by the note.
- McCranie argued the cross-reference made the promise to pay conditional by incorporating the 2000 agreement, defeating negotiability and allowing him to assert defenses tied to Brooke’s alleged franchise-related misconduct.

## Issues

1. Whether the 2002 promissory note was a negotiable instrument under Kansas UCC Article 3 despite the statement “See Agreement for Advancement of Loan dated October 30, 2000.”
2. If the note was negotiable, whether DZ Bank qualified as a holder in due course (taken for value, in good faith, without notice of defenses).
3. Whether McCranie’s defenses and counterclaims arising from the underlying franchise relationship could be asserted against DZ Bank.

## Decision

- The Eleventh Circuit affirmed judgment for DZ Bank.
- The court held the note was negotiable because the “See Agreement” language did not make the promise to pay conditional.
- The court held DZ Bank was a holder in due course based on undisputed evidence that it took the note for value, in good faith, and without notice of defenses.
- The court held McCranie’s franchise-related defenses were ineffective against DZ Bank as a holder in due course because McCranie did not establish a “real” defense that would survive against an HDC.

## Legal Principles

- Under UCC §§ 3-104 and 3-106 (as adopted in Kansas), an instrument remains negotiable if it contains an unconditional promise to pay a fixed amount of money and does not condition payment on another writing.
- A generic reference to another agreement (e.g., “See [agreement]”) does not, by itself, make a note “subject to” or “governed by” that agreement or otherwise render the payment promise conditional.
- A promise is not conditional merely because it refers to another writing for statements of rights concerning collateral, prepayment, or acceleration.
- A holder in due course under UCC § 3-302 takes the instrument free of most “personal” defenses; only limited “real” defenses may be asserted against an HDC.

## Conclusion

The court enforced the note for DZ Bank, holding that a bare cross-reference to a prior loan agreement did not defeat negotiability and that DZ Bank’s holder-in-due-course status barred McCranie’s franchise-based defenses.


DZ Bank AG Deutsche Zentral-Genossenschaftsbank v. McCranie, 720 F. App’x 576 (11th Cir. 2018)