This section contains the nature of the case and procedural background.

Memory Swift Homes, Inc., contracted with Ds to construct a prefabricated dwelling house for them. Ds executed and delivered to Memory Swift their promissory negotiable note in the sum of $18,224.64 secured by a mortgage on the real property and the improvement to be located thereon. On the same day, the contractor negotiated the note and assigned the mortgage to United (P). P negotiated the note to a bank, which took the instrument with the right of recourse. Before P's negotiation to the bank, Ds delivered written statements to P that the foundation of the house had been properly installed and also certified that all framing members in the house were properly and sufficiently nailed to make it a sound and sturdy structure and that all work had been performed in a workmanlike manner. Ds made several monthly payments but then defaulted. The bank transferred the note back to P, for value, without recourse. P then sued Ds for the collection of the note and foreclosure of the mortgage. Ds defense was that P was not a holder in due course of the note and that the contractor had constructed the house in an unworkmanlike manner by reason of which they had been damaged; they sought to assert their claim against the contractor as a defense against P. The court found P to be a holder in due course. Judgment was entered for the unpaid balance of the note and foreclosure of the mortgage was ordered. Ds appealed.

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