Ashley State Bank v. Hood

Citation279 P. 418,47 Idaho 780
Decision Date03 July 1929
Docket Number5116
PartiesASHLEY STATE BANK, a Corporation, Respondent, v. JOHN HOOD and JOSEPHINE MURPHY, Administrators of the Estate of J. ROBB BRADY, Deceased, Appellants
CourtUnited States State Supreme Court of Idaho

BILLS AND NOTES-HOLDER IN DUE COURSE-CONSIDERATION-TITLE-BURDEN OF PROOF-DIRECTED VERDICT.

1. Evidence, in action on promissory note given for stock sold in violation of the Blue Sky Law (C. S., secs. 5305-5324) relative to whether plaintiff was a holder in due course held insufficient to justify directed verdict for plaintiff.

2. Title to note being defective under C. S., sec. 5922 plaintiff in suit thereon had burden of proving that it was a holder in due course under section 5926.

3. Verdict should not be directed in any case where verdict for the opposite party could be sustained regardless of whether evidence was sufficient to sustain judgment entered on verdict of jury or on findings of a judge.

4. Either a total illegality of consideration or a partial illegality thereof avoids note in the hands of one not a holder in due course.

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Action on promissory note. Judgment for plaintiff. Reversed.

Judgment reversed. Costs to appellants. Petition for rehearing denied.

Peterson, Baum & Clark, for Appellants.

Where it is shown that a note was given for stock in a corporation which had not complied with the "Blue Sky Law," the burden is upon the holder to prove that he is a holder in due course. (C. S., sec. 5926; Ashley & Rumelin, Bankers, v. Brady, 41 Idaho 160, 238 P. 314.)

Where different inferences may reasonably be drawn from the evidence, the question whether the plaintiff is a holder in due course is always one for the jury, particularly when the only evidence of the plaintiff's good faith is the testimony of the plaintiff, himself or of his agent. ( Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525; General Motors Acceptance Corp. v. Talbott, 39 Idaho 707, 230 P. 30; First Nat. Bank v. Hall, 31 Idaho 167, 169 P. 936; First Nat. Bank v. Pond, 39 Idaho 770, 230 P. 344; 8 C. J., p. 1061, sec. 1376.)

The decisions, we believe, are in universal accord, and respondent's counsel do not even pretend to cite anything to the contrary, that if any part of the consideration for a negotiable instrument is "illegal," the entire instrument is voidable in the hands of anyone not a holder in due course, even though other parts of the consideration may have been legal. (1 Daniel on Negotiable Instruments, 6th ed., sec. 204, subsec. 3; Hanauer v. Doane, 12 Wall. (U.S.) 342, 20 L.Ed. 439; Standard v. Sampson, 23 Okla. 13, 99 P. 796; Long v. Holley, 177 Ala. 508, 58 So. 254; Johnson v. McMillion, 178 Ky. 707, 199 S.W. 1070, L. R. A. 1918C, 244.)

Finis Bentley and H. B. Thompson, for Respondent.

A directed verdict will not be reversed on a mere technicality for insufficiency of the proof where the record discloses that the matter of fact was established with reasonable certainty. (Oppenheimer v. Radke, 20 Cal.App. 518, 129 P. 798.)

A note may be enforced notwithstanding failure of part of the consideration, if substantial consideration remains. (13 C. J. 368; Farmers' & Miners' State Bank v. Probst, 81 Mont. 248, 263 P. 693; Daniels v. Englehart, 18 Idaho 548, 111 P. 3, 39 L. R. A., N. S., 938.)

A plea of total failure or want of consideration for a note sued on fails if the evidence shows any consideration. (Iowa Nat. Bank v. Sherman, 23 S.D. 8, 119 N.W. 1010, citing Cheney v. Higginbotham, 10 Ark. 273.)

WM. E. LEE, J. Budge, C. J., Varian, J., and Brinck and Baker, D. JJ., concur. Givens, J., did not participate.

OPINION

WM. E. LEE, J.

This is an appeal from a judgment, entered on a directed verdict for plaintiff, in an action on a promissory note, and has been here before. (Ashley & Rumelin, Bankers, v. Brady, 41 Idaho 160, 238 P. 314.) As at the first trial, the answer put in issue the allegation that plaintiff's assignor was a holder in due course. It was also alleged that there was no consideration for the note, and that it was given for stock in the Beaver Film Company in violation of the "Blue Sky" law and, therefore, void.

When the case was here the first time it appeared that stock in the Beaver Film Company was the consideration for the note and that when the note was transferred to the bank, credit therefor was given the film company on the bank's books. The court then held that the note, given in payment of stock in the film company, was voidable in the hands of one not a bona fide holder, and that the burden was on Ashley & Rumelin to show that it was a holder in due course.

On the trial with which we are now concerned it was shown that the film company had not complied with the "Blue Sky" law. In fact, it was the expressed position of the learned trial judge, in directing the verdict, that it was established that the stock was sold Brady in violation of law. The propriety of directing the verdict depends, therefore, on whether plaintiff's assignor was a holder in due course. The trial court thought plaintiff had satisfied the burden in this respect. We do not think so. From a careful examination of the record, we are convinced that the evidence neither shows when the proceeds of the note, placed to the credit of the film company, were checked out or exhausted, nor when the bank had notice of defenses to the note. If the credit was so checked out as to make Ashley & Rumelin a holder in due course, it is not too much to require proof thereof. Title to the note being defective under C. S., sec. 5922, respondent had the burden of proving that it was a holder in due course. (C. S., sec. 5926; Ashley & Rumelin v. Brady, supra.) Proof that it was a holder in due course is lacking in the record before us, and the direction of a verdict for plaintiff was improper.

Plaintiff indirectly admits the lack of evidence but suggests that "a directed verdict will not be reversed on a mere technicality for insufficiency of the proof where the record discloses that the matter of fact was established with reasonable certainty," citing Oppenheimer v. Radke &amp Co., 20 Cal.App. 518, 129 P. 798. The weakness of plaintiff's position is that there is no evidence to show when the credit was withdrawn, whether before or after the maturity of the note, or before or after Ashley &...

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