American Exchange Nat. Bank v. Oregon Pottery Co.

• Decision Date: 10 June 1892
• Docket Number: 1,930.
• Citation: 55 F. 265
• Parties: AMERICAN EXCHANGE NAT. BANK v. OREGON POTTERY CO.
• Court: U.S. District Court — District of Oregon

55 F. 265

AMERICAN EXCHANGE NAT. BANK v. OREGON POTTERY CO.

No. 1,930.

United States Circuit Court, D. Oregon.

June 10, 1892

Milton W. Smith, for plaintiff.

Albert H. Tanner, for defendant.

GILBERT Circuit Judge.

This action is brought to recover upon a promissory note made by the defendant, by its president and secretary, to the order of one C. C. Gilman, and by him indorsed to the plaintiff before maturity. The answer sets up two defenses, each of which is demurred to: First, that the note was procured by fraud, and was without consideration; second, that the president and secretary of the defendant had no authority from the defendant, either by by-law or resolution, to execute the note, and that the defendant received no benefit therefrom, and did not ratify the same.

It is admitted that the first defense contains allegations of fraud sufficient to defeat the note as between the original parties to the same, but it is contended that the demurrer should be sustained for the reason that the answer contains no averment that the plaintiff had notice of the fraud or acquired the note otherwise than as a bona fide indorsee for value. The doctrine seems well established that where a promissory note had its inception in fraud or duress, or is fraudulently put in circulation, an exception arises to the general rule, and the burden of proof falls upon a subsequent indorsee to show that he took the note before maturity, and for value, and without notice. Kellogg v. Curtis, 69 Me. 212; Smith v. Livingston, 111 Mass. 342; Vosburgh v Diefendorf, 119 N.Y. 357, 23 N.E. 111 Mass. 342; Vosburgh v. Diefendorf, 119 N.Y. 357, 23 N.E. 801; Stewart v. Lansing, 104 U.S. 505. The reason generally assigned for this exception to the rule is that a presumption exists that a fraudulent payee will place the note out of his hands, to have suit brought in the name of another, and such presumption operates against the holder. The demurrer to the first defense is overruled.

The demurrer to the second defense, however, is well taken. The payee or indorsee of a negotiable promissory note, signed by the officers of a corporation as the note of the corporation is nto required to ascertain whether the officers have authority to make the note. A corporation formed under the general incorporation laws, for the purpose of conducting business, has, so far as the law is concerned, the same power that an individual has to contract debts...