Chase National Bank v. T. J. Healy

• Decision Date: 06 October 1931
• Citation: 156 A. 396,103 Vt. 495
• Parties: CHASE NATIONAL BANK v. T. J. HEALY
• Court: Vermont Supreme Court

156 A. 396

103 Vt. 495

CHASE NATIONAL BANK v. T. J. HEALY

Supreme Court of Vermont

October 6, 1931

May Term, 1931.

Bills and Notes---Burden as to Showing Good Faith---What Constitutes Bad Faith---Insufficiency of Evidence To Show Bad Faith---Appeal and Error----Point Not Raised Below---Duty of Party Opposing Motion for Directed Verdict To Specify Grounds of Opposition.

1. In action on negotiable promissory note, where defendant claimed fraud in its inception and introduced evidence tending to show such fraud, held that thereby burden upon this issue was cast upon plaintiff, and that it devolved upon latter to disclose facts and circumstances attending transfer by which it took note from which good or bad faith might be inferred.

2. In action on negotiable instrument transferred from payee to a third person, held that defense of fraud in its inception would be available against transferee if facts within its knowledge at time of taking were sufficient to occasion suspicion of wrong doing.

3. In action on negotiable promissory note by bank to whom it had been transferred by payee as collateral security for a loan from bank to payee, evidence as to facts and circumstances attending its transfer, held to disclose nothing that would lead reasonable man to think that note was taken otherwise than in good faith.

4. Point not shown by record to have been made below is not available in Supreme Court to excepting party.

5. Party opposing motion for directed verdict must specify grounds of his opposition to it.

ACTION OF CONTRACT on promissory note. Answer that transferee was not a holder in good faith as required by G. L. 2921. Trial by jury at the December Term, 1930, Bennington County Sherburne, J., presiding. Verdict directed for the plaintiff and judgment thereon. The defendant excepted. The opinion states the case.

Judgment affirmed.

Ruebin Levin and Orrin B. Hughes for the defendant.

Collins M. Graves and Leonard F. Wing for the plaintiff.

Present POWERS, C. J., SLACK, MOULTON, and THOMPSON, JJ.

OPINION

MOULTON

This is an action upon a promissory note, a renewal of one of like amount, signed by the defendant and payable to the order of the Manchester Manufacturing Company, and indorsed by that company while current to the Equitable Trust Company of New York, as a part of the collateral security for a loan from the Trust Company to it. The Equitable Trust Company merged with the Chase National Bank, which became the holder of the note subject to the ownership rights of the Trust Company. At the close of all the evidence the trial court directed a verdict for the plaintiff, and the case is before us on the defendant's exception to this ruling. The execution of the note and the fact that it is unpaid are conceded. The original note was given in payment for certain shares of stock in the Manchester Manufacturing Company. The defendant claimed, and his evidence tended to show, that it was obtained from him by certain false representations made by two of the officers of the Company, upon which he relied, and that he did not discover the fraud that had been practiced upon him until after he had given the renewal note upon which this action is based.

The note was complete and regular upon its face; the Equitable Trust Company became a holder of it before it was overdue and for value; it had not been previously dishonored; and it is not suggested that at the time it was negotiated the Trust Company had notice of any infirmity in the instrument or defect in the title of the Manchester Manufacturing Company. The defense is that the Equitable Trust Company was not a holder in due course, because it did not take the note in good faith as required by the Uniform Negotiable Instruments Act. G. L. 2921. Since the defendant came forward with evidence sufficient for the jury tending to show fraud in the inception of the note, the burden upon this issue was cast upon the plaintiff, and it devolved upon it to disclose the facts and circumstances attending the tranfer by which it took the instrument from which good or bad faith might be inferred. Howard National Bank v. Wilson, 96 Vt. 438, 451, 453, 120 A. 889; Harponola Co. v. Wilson, 96 Vt. 427, 436, 120 A. 895. "To show knowledge of such facts that the taking would amount to bad faith it is not necessary that the representatives of the bank should know the exact fraud that was practiced upon the defendant, but the defense would be available if the facts within their knowledge tended to show that there was something wrong with the transaction. * * * * To support a verdict for the defendant, there would have to be evidence of circumstances attending the taking of the note, known at the time to the representatives of the bank having to do with the taking, at least sufficient to occasion suspicion of wrong doing. Short of this, certainly there would be no reasonable basis of an inference other than of good faith." Howard National Bank v. Wilson, supra, 96 Vt. pages 453, 454, 120 A. 889, 895.

The loan from the Equitable Trust Company to the Manchester Manufacturing Company was in the sum of $ 50,000. The latter company was then recently incorporated and had acquired the plant of the Manchester Lumber Company, at Manchester Depot, Vermont, and was about to start operations. Payment was secured by the deposit of bonds of the Manufacturing Company in the amount of $ 100,000 and by the transfer of several notes payable to the order of the Company, aggregating $ 10,000 of which the note given by the defendant was one. In addition the note given by the Manchester Manufacturing Company was also indorsed and guaranteed by four individuals, Messrs. Colvin, Helitzer Hopes, and Trumbull, all of whom were interested in the company. It has not been paid. The loan was approved by the directors of the Trust...