Connelly v. Greenfield Sav. Bank
| Decision Date | 15 December 1921 |
| Docket Number | No. 34085.,34085. |
| Citation | 192 Iowa 876,185 N.W. 887 |
| Parties | CONNELLY v. GREENFIELD SAV. BANK (COMMERCIAL SAV. BANK, INTERVENER). |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Adair County; H. S. Dugan, Judge.
Plaintiff brought action in replevin against the Greenfield Savings Bank to recover possession of a written instrument in the form of a promissory note, which he alleges was obtained from him by fraud and without consideration. Writ of replevin was issued, and the writing was taken thereunder and delivered to plaintiff. Before the cause came on for trial, the Commercial Savings Bank of Des Moines intervened, alleging itself to be the real owner and holder of said instrument in due course, having purchased the same before due in good faith without knowledge or notice of any defect in the title thereto or any defense on part of the maker. On these allegations the intervener demands that it be adjudged the owner and entitled to the possession of the note, and that the same be surrendered, or that it have judgment against plaintiff for the full amount thereof, principal and interest.
The Greenfield Bank answers that the time this suit was begun it held the alleged note for collection only on account of the intervener, from whom it had been received for that purpose, and disclaims all other interest in the subject-matter of the controversy. Answering the petition of intervention, plaintiff denies the same, and denies that intervener is a holder of the alleged note in due course. He further alleges that in January, 1919, one Coughlin fraudulently induced plaintiff to give his notes to the amount of $20,000 in two subscriptions of $10,000 each for 200 shares of the stock of a certain company, and in connection therewith, and as an inducement to the first subscription, said Coughlin, as such agent, made and delivered to plaintiff a written agreement to resell said shares of stock for plaintiff within one year at a net profit of $27.50 per share, and to make such sale before any of the notes given therefor by plaintiff should become due. Said writing also represented the said company was solvent, and would sell the full amount of $2,000,000 stock of the packing company. This paper was signed by the “Associated Finance Company, by T. H. Coughlin.” Soon after the first subscription, plaintiff further alleges that he was, by the like representations of said Coughlin, induced to subscribe for a second block of 100 shares of said stock, with the verbal agreement that the terms of the written agreement above described should apply to the second subscription, and that the notes given by plaintiff therefore should be held and retained by said company, and not be sold or negotiated, and that upon demand by plaintiff within 60 days said notes would be redelivered to him and the stock subscription canceled. In witness of this agreement Coughlin made and delivered to plaintiff a receipt for the notes thus obtained, upon which receipt was written the words “this application held by T. H. Coughlin until option of the purchaser, namely.” One of the notes thus receipted was for $2,500, payable in one year, and is the same note now in litigation. Plaintiff further alleges that within the period of 60 days he elected to cancel his said subscription and demanded a return of his notes. He further alleges that Coughlin's statements and representations inducing him to sign said papers were false and known to be false by said Coughlin, and made for the purpose of deceiving him, and plaintiff was thereby deluded and induced to enter into the deal; that he has never received said shares of stock or any consideration whatever for the giving of said notes; that said packing company is bankrupt, and its affairs are now being wound up by a receiver; that the note in controversy was delivered by Coughlin to the intervener in breach of faith, and contrary to the agreement upon which he received it, and that the same was taken over by the intervener not in good faith and subject to the intervener's defense thereto. The issues were tried to a jury, which returned a verdict for the plaintiff for the possession of the note, and the intervener appeals. Affirmed.
De Graff, J., dissenting.Stipp, Perry, Bannister & Starzinger, of Des Moines, and Lynch & Byers, of Adair, for appellant.
Wilson & Crowley, of Greenfield, for appellee.
The somewhat extended preliminary statement sufficiently discloses the nature of plaintiff's claim, as well as the opposing claims of the intervener. That the note in controversy had its origin in gross fraud and breach of faith on part of those who procured its making is not a matter of doubt, and the central issue in the case is whether the intervener is a holder of the note in due course without notice of the defectstherein, and therefore entitled to recover without regard to the equities between the original parties thereto. In his evidence in chief, the plaintiff having offered his testimony as indicated in the preliminary statement and rested, the intervener assumed the burden to establish the regularity and good faith of its holding and ownership of the paper. In support of this claim, the president of the bank, Mr. Elliott, testified that he alone represented the bank in that purchase, and that he and the cashier, Mr. Frazier, were the only officers of the bank actively engaged in the transaction of its daily business. He testifies quite positively that the note was purchased in the regular course of business, and without any notice whatever of the nature of the consideration for which it was given or of the transaction in which it had its origin. The cashier also affirms that he had no part in the purchase, and was wholly without notice or knowledge of any defect therein or defense thereto. It appears from the president's testimony that when the note was offered to him he wrote letters of inquiry, to three different banks in Adair county, where plaintiff resides, asking only if Mr. Connelly was financially good for a note of $2,500, also made similar inquiries of one or more individuals whom he thought might be able to give the desired information, and, the replies received being satisfactory, he bought the note, paying $2,300 for it. Being more closely questioned, the witness said Coughlin had been temporarily at least a depositor in the bank, but to what extent is not stated. He further testified:
There is no direct evidence rebutting the testimony of the bank's witnesses upon this question, and the argument most strenuously urged by counsel in its behalf on this appeal is that its status as a holder of the note in due course and in good faith is established as a matter of law, and that the trial court erred in denying the intervener's motion for a directed verdict.
[1] Assuming, as we must for the purposes of this appeal, that the note in controversy was fraudulent in its origin, or at least that it was put in circulation by a breach of good faith on part of Coughlin or his principal, we think it must be held that the question whether the intervener is a holder in due course and in good faith is a jury question. The statute (Code Supp. § 3060a59) imposes on the holder in such case the burden to prove affirmatively that he or some person under whom he claims acquired the title in due course. While it may be conceded that in the various jurisdictions where this rule of law prevails there is more or less variance in the strictness of its application to decided cases, and that some courts are more inclined than others to dispose of the issue so raised as a matter of law, it is comparatively well settled in this court that, unless it be in a very exceptional case the question whether the burden so placed upon the alleged holder has been met and overcome is one for the jury. McNight v. Parsons, 136 Iowa, 390, 113 N. W. 858, 22 L. R. A. (N. S.) 718, 125 Am. St. Rep. 265, 15 Ann. Cas. 665;Bank v. Jordan, 139 Iowa, 510, 117 N. W. 758;Bank v. Fitzgerald, 167 Iowa, 453, 149 N. W. 497;Robertson v. Stock Co., 164 Iowa, 230, 145 N. W. 535;Bank v. Green, 138 Iowa, 160, 115 N. W. 893;Arnd v. Aylesworth, 145 Iowa, 190, 123 N. W. 1000, 29 Am. St. Rep. 638;Bank v. Carter, 144 Iowa, 715, 123 N. W. 237;Bank v. Paddick, 90 Iowa, 63, 57 N. W. 687;Stotts v. Fairfield, 163 Iowa, 739, 145 N. W. 61;Bank v. Buck, 161 Iowa, 370, 142 N. W. 1004;Bank v. Grigsby, 170 Iowa, 676, 149 N. W. 626;Bank v. Jones, 179 Iowa, 261, 159 N. W. 691;Lewis v. Stock Remedy Co., 178 N. W. 536; Frank v. Blake, 58 Iowa, 750, 13 N. W. 50;Bank v. Kelley, 183 Iowa, 269, 166 N. W. 1053;Bank v. Shaffer, 172 Iowa, 175, 154 N. W. 485.
[2][3] Generally speaking, the mere fact that the holder of a note testifies that he received it without knowledge or notice of any defect in the title thereto or of any defense on part of the maker is not sufficient to establish the bona fides of his possession, as a matter of law. The issue so presented is one of fact upon which the holder must assume the burden of an affirmative showing. That showing is ordinarily sought to be made by the spoken word of witnesses. In every trial of a fact issue in a law action the court instructs the jury that they, and not the court, are the judges of the credibility of the witnesses and of the weight and value of their testimony and in...
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