Chesney v. Bodily

• Citation: 50 Idaho 597,298 P. 937
• Decision Date: 25 April 1931
• Docket Number: 5669
• Parties: E. L. CHESNEY, Appellant, v. HERBERT N. BODILY, Administrator of the Estate of CHARLES B. FIFIELD, Deceased, and NINA D. FIFIELD, Respondents
• Court: United States State Supreme Court of Idaho

298 P. 937

50 Idaho 597

E. L. CHESNEY, Appellant, v. HERBERT N. BODILY, Administrator of the Estate of CHARLES B. FIFIELD, Deceased, and NINA D. FIFIELD, Respondents

No. 5669

Supreme Court of Idaho

April 25, 1931

BILLS AND NOTES-HOLDER IN DUE COURSE.

1. Defenses of noncompliance with Foreign Corporation and Blue Sky Laws by corporate payee of note sued on held not sham irrelevant and redundant (C. S., secs. 4772-4779, 5305-5324).

2. Supreme court presumes that trial court, denying appellant's motion for directed verdict, overruled objections to matters stipulated, where ruling does not appear from record.

3. Allegation charging plaintiff with notice of defects in payee's title to note sued on held not essential (C. S secs. 5919, 5926).

4. Evidence of corporate payee's noncompliance with Foreign Corporation Law and Blue Sky Laws held admissible in action on note (C. S., secs. 4772-4779, 5305-5324).

5. Transferee of note, fair and regular on face, was not bound to inquire whether payee complied with state laws, unless he knew facts putting him on inquiry (C. S., secs. 5919, 5926).

6. Plaintiff's uncontradicted testimony that he had no notice of payee's noncompliance with state laws when he bought note sued on discharged burden of proving himself holder in due course (C. S., secs. 5919, 5926).

7. Presumption is that plaintiff bought note sued on before maturity, in absence of contrary evidence (C. S., sec. 5926).

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

Action on promissory note. Judgment for defendant. Reversed.

Judgment reversed with instructions; costs to appellant. Petition for rehearing denied.

Gustin & Pence and P. M. Condie, for Appellant.

The violation of the foreign corporation law by the payee is not a defense to the note nor does it shift the burden to the holder to prove his bona fides. (Ashley State Bank v Hood, 47 Idaho 780, 279 P. 419; Moody v. Morris Roberts Co., 38 Idaho 414, 226 P. 278; Butte Machinery Co. v. Jeppesen, 41 Idaho 642, 241 P. 36; First Nat. Bank v. Utterback, 177 Ky. 76, 197 S.W. 534, L. R. A. 1918B, 838; Press Co. v. City Bank of Hartford, 58 F. 321, 7 C. C. A. 248; McMann v. Walker, 31 Colo. 261, 72 P. 1055.)

L. R. Morgan, for Respondents.

The violation of C. S., chap. 206, commonly known as the Blue Sky Laws, by the payee in a note constitutes a defect in title and shifts the burden to the holder to prove that he is a holder in due course. (Ashley State Bank v. Hood, supra.)

The court did not err in denying appellant's motion for a directed verdict, in his favor, and the evidence is sufficient to support the verdict. (Winters v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525; Ashley & Rumelin Bankers v. Brady, 41 Idaho 160, 238 P. 314; 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; Ashley State Bank v. Hood, supra.)

LEE, C. J. Givens, Varian and McNaughton, JJ., concur. Budge, J., took no part in the decision.

OPINION

LEE, C. J.

Plaintiff and appellant, E. L. Chesney, sued defendants and respondents, Herbert N. Bodily, as administrator of the estate of Charles B. Fifield, deceased, and Nina D. Fifield, the widow, upon a promissory note theretofore made and delivered the Pioneer Sugar Company, a Utah corporation, by deceased, and later by that company indorsed in blank and transferred to one E. R. Wooley who thereafter transferred and delivered it to appellant: it was alleged that both transfers had been made for value and before maturity. Respondents denied each and every allegation of the complaint, and affirmatively plead that the Sugar Company, at all times mentioned in the complaint, was not and never had been entitled to do business within the state of Idaho by reason of noncompliance with the provisions of chap. 187 of the Idaho Compiled Statutes of 1919, relating to foreign corporations, and was not and never had been entitled "to do business of the character alleged in the complaint," not having complied with the provisions of chap. 206 of the same compilation, known as the Blue Sky Law: the particular business alluded to was the selling of the Sugar Company's stock.

Basing his motion upon the ground that both these affirmative defenses were sham, irrelevant and redundant, appellant interposed a motion to strike them: the court denied the motion. It was stipulated, for the purposes of the trial, that proof by deposition or witnesses would show that on the date of the execution of the note and also its negotiation to appellant the payee, Sugar Company, had not complied with the Idaho Foreign Corporation Law or the Blue Sky Law, and that the note was given for stock in the Sugar Company. The stipulation, however, was made subject to appellant's objection that such proof would be incompetent, irrelevant and immaterial, and that the affirmative defenses by respondent plead did not state facts sufficient to constitute a defense. At the conclusion of the evidence, appellant moved for a directed verdict, which was denied. Upon the ensuing verdict in respondents' favor, judgment was entered, this appeal resulting.

Appellant first complains that the court erred in denying his motion to strike the affirmative defenses. In that motion, as heretofore noted, he took the position that the defenses were sham, irrelevant and redundant. In his brief, his position is that the defenses lacked "the substantial and fundamental allegation of fact that appellant took the note with knowledge of the defects relied on or in some other respect was a mala fide purchaser of the note." However insufficient the pleading may have been, it was neither sham, irrelevant, nor redundant; and the court's ruling was without error.

The next contention is that the court erred in denying appellant's motion for a directed verdict. All evidence of the Sugar Company's failure to comply with the state laws consisted of matter stipulated into the case subject to appellant's detailed objections. From the record, it does not appear what was the court's ruling on these objections: he did not in term sustain them; and we will therefore indulge the presumption that by allowing such matter to go to the jury he deemed the objections overruled.

C. S sec. 5919, defining a holder in due course declares that such a holder is one who has taken the instrument without notice of any infirmity therein or defect in the title of the person negotiating it. Under C. S., sec. 5926, every holder is deemed prima facie to be a holder in due course, but there is a proviso that, "When it is shown that the title of any person who has negotiated...