Atlas Nat. Bank v. Holm

• Decision Date: 06 January 1896
• Docket Number: 246.
• Citation: 71 F. 489
• Parties: ATLAS NAT. BANK v. HOLM et al.
• Court: U.S. Court of Appeals — Seventh Circuit

71 F. 489

ATLAS NAT. BANK v. HOLM et al.

No. 246.

United States Court of Appeals, Seventh Circuit.

January 6, 1896

H. M Lewis and H. E. Briggs, for plaintiff in error.

James Wickham and F. R. Farr (R. M. Bashford, of counsel), for defendants in error.

Before WOODS, JENKINS, and SHOWALTER, Circuit Judges.

WOODS Circuit Judge.

The brief of the plaintiff in error does not, as required by our rule 24, contain (1) a concise abstract or statement of the case; (2) a specification of the errors relied on; and (3) a brief of the argument. The statement, instead of being concise, is made up largely of quotations of testimony from the bill of exceptions, and extends over 44 of the 56 pages which the brief contains. A specification of errors, distinct from the argument, is entirely wanting.

The action was brought by the plaintiff in error, the Atlas National Bank of Chicago, against Andrew Holm, Gunder Thompson, Nils Holm, and W. W. Winterbotham, of Eau Claire Wis., the defendants in error, upon a promissory note executed February 18, 1893, for the sum of $4,000, payable six months after date, at the Bank of Eau Claire, to the order of the John V. Farwell Company, a corporation organized under the laws of Illinois, and, as it is alleged, indorsed by that company to the plaintiff in error before maturity and for value. The defendants Holm and Winterbotham joined in an answer to the effect that Andrew Holm and Gunder Thompson, who had been doing business at Eau Claire as partners prior to February 18, 1893, had made an assignment for the benefit of creditors; that their property, consisting of a stock of dry goods, was about to be sold by the assignee at public auction; and that the consideration of the note was an agreement by the John V. Farwell Company not to bid at the sale, to discourage others from bidding, and to assign to Nils Holm a claim of that company against Holm & Thompson; that the company, failing to assign, collected and applied to its own use the dividends upon its claim; and, further, that the plaintiff was not a good-faith purchaser, and was attempting to collect the note for the benefit of the John V. Farwell Company, which, it was also alleged, had repaid to the bank, before suit, whatever interest the latter had had in the note. The proof shows that contemporaneously with the making of the note the following agreement was executed:

'Eau Claire, Wis., February 18, 1893.

'For value received, I hereby guaranty the payment of the accounts and notes of the John V. Farwell Company against Holm & Thompson, of Eau Claire, Wisconsin. It is also agreed that the same shall be placed in notes running three and six months, the same to be signed, guarantied, or indorsed by me. Said notes to be dated this 18th day of February, 1893. The John V. Farwell Company, in consideration thereof, withdraws from bidding at the sale of said stock, and assigns its claim to the undersigned against Holm & Thompson, now ready to be filed against their insolvent estate.

'(Signed) Nils Holm.

'John V. Farwell Company, Harding.'

The error first assigned might be disregarded, because it embraces in a single specification the refusal of a number of requests for instruction (Vider v. O'Brien, 10 C.C.A. 385, 18 U.S.App. 711, and 62 F. 326); but it is clear that each of the requests was properly denied, the first and second because irrelevant, and the third because embraced substantially in the charge given.

The note upon which the action was brought, it is undisputed, was given in part consideration of the agreement of the Farwell Company to refrain from bidding at a public sale of goods by a statutory assignee, and, for that reason, as the court properly told the jury, was invalid, except in the hands of an innocent purchaser. Story, Eq. Jur. Sec. 293; Doolin v. Ward, 6 Johns. 194; Thompson v. Davies, 13 Johns. 112; Phippen v. Stickney, 3 Metc. (Mass.) 384; Gibbs v. Smith, 115 Mass. 592. It was therefore unnecessary that the jury should be instructed, as set firth in the first and second requests, concerning other and lawful plans for bidding, without competition between themselves, which the parties to that agreement may have considered before reaching an understanding. The agreement as finally made being essentially illegal, any inquiry into the preliminary negotiations or intentions of the parties was necessarily irrelevant.

At the request of the defendants in error, the court gave two special instructions, upon each of which error is assigned. They are as follows: 'The consideration of the note being illegal, in whole or in part, for the reason already stated, the note was void not only in the hands of the John V. Farwell Company, the payee therein named, but the note is also invalid in the hands of the Atlas National Bank, the plaintiff in this action, if the Atlas National Bank purchased the note with knowledge of the illegal or fraudulent character of the consideration, or with such knowledge of existing facts and circumstances as ought to have put an ordinarily prudent man upon inquiry. If the circumstances disclosed by the testimony lead you to believe that the officers of the Atlas National Bank, at the time the note was discounted, refrained from making inquiry in respect to the consideration thereof, lest they thereby become acquainted with the transaction out of which the note originated, the plaintiff herein cannot occupy the attitude of a holder in good faith without notice.'

'Where there is illegality in the transaction out of which the note originated, the presumption is that the payee therein named, who has been a party to the wrongful act, will part with the note thereby acquired for the purpose of enabling some third party to enforce payment of the same. This presumption operates against the holder of the note, and suspicion follows the paper in his hands, and fastens upon his title; and it is for this reason that the burden is cast upon the plaintiff to show that he purchased the note before maturity, in good faith, in the usual course of business, for a valuable consideration, and without knowledge of existing defenses.'

The point is made that the first of these instructions contains three distinct propositions, each of which, if claimed to be erroneous, should have been separately specified in the assignment of errors. The defendants in error are not in a position to insist upon so strict an application of the rule. They requested the instruction, as a single one, for the single purpose, clearly, of declaring the rule by which the jury should determine the good faith of the bank in purchasing the note. But it does not state the rule correctly, and is perhaps objectionable in other respects. The last clause, which presents the theory of bad faith on the part of the officers in refraining from inquiry into the consideration of the note, should not have been given...