Commercial Bank Of Danville v. Burgwyn

• Decision Date: 23 February 1892
• Citation: 110 N.C. 267,14 S.E. 623
• Parties: Commercial Bank of Danville v. Burgwyn et al.
• Court: North Carolina Supreme Court

14 S.E. 623

110 N.C. 267

Commercial Bank of Danville

v.Burgwyn et al.

Supreme Court of North Carolina.

Feb. 23, 1892.

Negotiable Instruments— Notice —.Burden of Proof.

1. In an action on notes by an indorsee, where, after testimony in support of the plea that they were obtained by the fraudulent representations of the payees, plaintiff shows that it acquired them bona fide, for value, in the usual course of business, and while they were still current, its prima facie ease is restored, in the absence of circumstances attending the purchase amounting to constructive notice, and the burden of proof is on defendant to show actual knowledge on plaintiff's part at the time of its purchase.

2. A bank which discounts a note is not affected with notice of defenses thereto by reason of the fact that the person presenting it, and who has Knowledge of the facts, is vice-president and a director of the bank, and also a member of its discounting committee, besides being president of the payee, It appearing that such person in no way acted for the bank in the transaction.

3. Testimony of the president of a bank that the payee of a note "conferred" with him about the discount of it cannot be considered evidence of actual knowledge on his part that the note was obtained by the payee through fraudulent representations.

Appeal from superior court, Vance county; Spier Whitaker, Judge.

Action by the Commercial Bank of Danville, Va., against W. H. S. Burgwyn and others on promissory notes. Judgment for defendants, and plaintiff appeals. Reversed.

A. W. Graham, Batchelor & Devereux, and J. W. Graham, for appellant.

Battle & Mordecai, for appellees.

Shepherd, J. The defendants having pleaded that the notes sued upon were obtained by the fraudulent representations of the payees, and testimony having been introduced in support of such plea, his honor was correct in holding that the prima facie case of the plaintiff indorsee was so far rebutted as to shift the burden of proof, and to make it necessary for it to show that it was a bona Ode purchaser for value and without notice. Bank v. Burgwyn, 108 N. C. 62, 12 S. E. Rep. 952; Pugh v. Grant, 86 N. C. 39. When, however, the plaintiff responded by showing that it acquired the notes bona tide, for value, in the usual course of business and while they were still current, the prima facie case of the plaintiff was restored; and, unless the circumstances under which the purchase was made were of such a character as to amount to constructive notice, the jury should have been instructed that the burden of proof was upon the defendants to establish knowledge on the part of the plaintiff, at the time of its purchase, of the impeaching facts alleged in the answer. Daniel, Neg. Inst. § 819.

We are of the opinion that there is nothing in the testimony that amounted to such constructive notice. According to the testimony of J. F. Rison, all of the notes were indorsed, in July, 1888, to the Southern Electric Light, Power & Construction Company, and that the said company, through its president, the said J. F. Rison, indorsed them for value to the plaintiff some months before they were due. It is contended that the plaintiff was affected with any notice that could be imputed to the said Rison, because the latter was, at the time of the transaction, the vice-president and a director of the plaintiff, and a member of its discounting committee. It does not appear that Rison had any notice of the claim of the defendants until after the Burgwyn note had been discounted by the plaintiff; but conceding, for the purpose of the argument, that he had such notice at the time of the discounting of all of the notes, it is well established that the plaintiff cannot be affected therewith unless Rison was acting in his official capacity for the plaintiff in the said discounting transactions. The foundation principle upon which rests the doctrine that a party, whether an individual or a corporation, is chargeable with notice impart-ed to his agents in the line of their duty, is that agents are presumed to communicate all such information to their principals because it is their duty so to do. The principal is conclusively presumed to know whatever his agent knows, if the latter knows it as agent. of course no such presumption can exist where the agent is dealing with the corporation in the particular transaction in his own behalf. 6 South. Law Rev. 816. In such transactions the attitude of the agent ie one of hostility to the principal. He is dealing at arnis-length, and it would be absurd to suppose that he would communicate to the principal any facts within his private knowledge, affecting the subject of his dealing, unless it would be his duty to do so if he were wholly unconnected with the principal. As was said by the court in Wiekersham v. Zinc Co., 18 Kan. 481: "Neither the acts nor knowledge of an officer of a corporation will bind it in a matter in which the officer acts for himself and deals with the corporation as if he had no official relations with it, or, as was said in Barnes v. Gas-Light Co., 27 N. J. Eq. 33, his interest is opposed to that of the corporation; and the presumption is, not that he will communicate his knowledge of any secret infirmity of the title to the corporation, but that he will conceal it." This doctrine has been applied to the case of a director procuring the discount of a note...