Bank of Polk v. Wood

• Decision Date: 01 March 1915
• Docket Number: No. 1400.,1400.
• Citation: 173 S.W. 1093
• Parties: BANK OF POLK v. WOOD.
• Court: Missouri Court of Appeals

173 S.W. 1093

BANK OF POLK v. WOOD.

No. 1400.

Springfield Court of Appeals. Missouri.

March 1, 1915.

Appeal from Circuit Court, Dallas County; C. H. Skinker, Judge.

Action by the Bank of Polk against W. B. Wood. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

D. M. Rush, of Buffalo, and Argus Cox, of Springfield, for appellant. John S. Haymes, of Buffalo, for respondent.

STURGIS, J.

This is a suit by plaintiff, as owner of a promissory note payable to one Foote, given in part payment of a certain stallion. The defendant is the purchaser of the horse and maker of the note. The defense is failure of consideration, and that the note was obtained by misrepresentations amounting to fraud. In reply the plaintiff asserts that it purchased the note for value and in good faith before maturity and without any knowledge of any fraud in its procurement or failure of consideration. The fraudulent representations relied on are that the horse was sound and a sure producer, which were untrue, and that the payee in the note, in selling the horse, knew such representations to be false, or made same without any knowledge on the subject. The fact of the horse being unsound and not a producer also constitutes the failure of consideration.

The evidence shows that, in selling the horse, the following written warranty, dated March 25, 1912, was given and accepted:

"I hereby guarantee the above-named horse to be a producer, provided he shall have plenty of exercise and proper feeding and grooming, care and handling; and in case he should not so prove we agree to replace him with another of the same breed and price, upon the delivery to us of the above-named horse in as good and sound condition as he is at present; and the purchaser of said horse hereby agrees to accept said second horse so furnished in full satisfaction of any claim for damages on account of said warranty. This guaranty expires January 1, 1914."

The evidence tends strongly to show that the horse in question was not a good producer. It also shows that the horse died in about seven months after the sale, of Bright's disease — a disease affecting the kidneys. Symptoms which veterinaries attributed to this disease began to develop soon after the sale of the horse. The real nature of the animal's ailments was not known to the defendant, and perhaps to no one, until the post mortem examination.

The evidence tends to show that the plaintiff purchased this note the next day after it was given, paying full value therefor. The note was indorsed to it without recourse.

Assuming that there was evidence tending to show a failure of consideration, we find that the court instructed the jury that, such fact being found, it then devolved on plaintiff to prove, by the greater weight of the evidence, that it had no knowledge of such want of consideration at the time of purchasing the note. It is conceded by learned counsel for defendant that this instruction, placing the burden of proof in case of failure of consideration on the holder of the note to show his innocence, is in conflict with the ruling of this court in the case of Hill v. Dillon, 176 Mo. App. 192, 205, 161 S. W. 881. Defendant challenges the correctness of that ruling, but a reconsideration of same leads us to affirm it. The conclusion reached in that case that section 10029, R. S. 1909, of the Negotiable Instrument Act, did not place the burden of proof on the holder of a note to prove himself a holder in due course, as defined by section 10022, in case of proof of failure of consideration, was based on the provisions of the Negotiable Instrument Act itself as well as the decisions in other states. Section 10029, supra, makes every holder of a note prima facie a holder in due course, and casts the burden of proving to the contrary on the other party, except in case it be shown that the title of the person negotiating it is defective. Defective title is defined by section 10025 to include obtaining "the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud." All these terms have been defined by the courts, if, indeed, their plain import need any defining, and are held not to include a failure of consideration, as shown by the citations in Hill v. Dillon, supra. Defendant insists that the term "negotiates it * * * under such circumstances as amount to a fraud" is broad enough to require no other proof than the negotiation of a note, the consideration of which has failed. No case is cited as so holding. Defendant's reasoning is that, so long as the payee holds a note given without consideration, the maker can set up such defense; but, if the payee negotiates it so as to cut off the defense, it "amounts to a fraud" on the maker by depriving him of such defense. Such reasoning, however, would apply to any and all defenses cut off by negotiating the instrument, and would cast the burden on the holder in all cases. To hold that a negotiation of a note amounts to a fraud because it has the effect of cutting off a defense is in effect holding that the holder is never prima facie an innocent purchaser without notice, while section 10029, supra, says that such holder is attended with such presumption in all cases, except where defective title is shown. To so hold makes the exception coextensive with the rule, and thereby destroys it.

We have examined the cases cited by defendant as sustaining the rule that the burden of proof is shifted to the holder of a note on proof of failure of consideration the same as on proof of fraud, but do not find them so holding, unless it be the case of Pierson v. Huntington, 82 Vt. 482, 74 Atl. 88, 29 L. R. A. (N. S.) 695, 137 Am. St. Rep. 1029, which seems to have been decided without any reference to the Negotiable Instrument Law, and follows old cases of that state. The case of Gottstein v. Simmons, 59 Wash. 178, 109 Pac. 596, is a case involving fraud, though the fraud caused a failure of consideration. That case cites Ireland v. Scharpenberg, 54 Wash. 558, 103 Pac. 801, where the court, speaking of this section of the Negotiable Instrument Law fixing the burden of proof, said:

"This is but a statement of the general rule fixing the burden of proof, and which has special force when applied to a case where fraud is involved in the procuring of the note."

The case of Alexander & Co. v. Hazelrigg, 123 Ky. 677, 97 S. W. 353, involves an illegal consideration declared by statute to make the note void.

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