Creston Nat. Bank v. Salmon

• Decision Date: 02 April 1906
• Citation: 93 S.W. 288,117 Mo. App. 506
• Parties: CRESTON NAT. BANK v. SALMON.
• Court: Missouri Court of Appeals

93 S.W. 288

117 Mo. App. 506

CRESTON NAT. BANK v. SALMON.

Kansas City Court of Appeals. Missouri.

April 2, 1906.

1. BILLS AND NOTES—BONA FIDE PURCHASER —ACTUAL NOTICE.

The indorsee of negotiable paper is protected unless he had actual knowledge of an infirmity and neither suspicion nor negligence in its purchase is sufficient to destroy his title.

2. SAME—CONSTRUCTION—WHAT LAW GOVERNS.

The Iowa statute providing that if a negotiable note is procured by fraud and indorsed before maturity to an innocent purchaser, he can only recover of the maker the sum that the purchaser paid, is applicable in an action in Missouri on a note made in Iowa and payable there.

Appeal from Circuit Court, Worth County; W. C. Ellison, Judge.

Action by the Creston National Bank against Ellsworth W. Salmon. From a judgment in favor of plaintiff, defendant appeals. Affirmed.

Hudson, DuBois & Engle, for appellant. L. M. Phipps and Kelso & Kelso, for respondent.

ELLISON, J.

This was an action on a promissory note given by defendant to E. N. Dewitt and by him assigned in writing on the back thereof to the plaintiff. The judgment in the trial court was for the plaintiff.

The note provided for an attorney's fee, which in this state would destroy its negotiability. But it was executed in Iowa, where by statute such notes are negotiable. This statute is pleaded by plaintiff and the defendent admits the note to be negotiable. An attorney's fee was not asked to be allowed in the judgment. The note is for $200, due two years after date, and was given in part payment for a stallion purchased by defendant of Dewitt. The defendant set up in his answer that the note was procured from him by false and fraudulent representations made by Dewitt as to the horse being "a full-blooded, pedigreed" animal and as to his breeding qualities, etc. He also pleaded a statute of Iowa, reading as follows: "The want or failure in whole or in part of the consideration of a written contract may be shown as a defense, total or partial, except to negotiable paper, transferred in good faith, and for a valuable consideration before maturity; but if such paper has been procured by fraud upon the maker, no holder thereof shall recover thereon of the maker a greater sum than he paid therefor with interest and costs." The trial court of its own motion gave some instructions wherein the entire defense was submitted to the jury. Instructions were offered by defendant and refused. Many of the propositions therein asserted are correct statements of the law, but as, in our opinion, everything to which defendant was entitled had been incorporated in the other instructions, it was not error to refuse them. Taking the admissions of the parties, with the undisputed face of the record, there was very little of affirmative facts upon which to base hypotheses for the jury. The execution of the note and that it is negotiable was conceded; and that it was purchased by plaintiff before due for a valuable consideration is shown without any semblance of substantial dispute. But defendant does insist that plaintiff had notice of the fraudulent inception of the note, and therefore that it should not be taken as an innocent purchaser. The instructions given plainly submit that issue of fact to the jury. The policy of the law is to encourage commercial affairs and to facilitate the transaction of that class of business. To that end, it protects indorsees of negotiable paper, unless they have actual knowledge of its infirmity. Neither suspicion nor negligence in its purchase, will destroy the purchaser's title. There must be actual knowledge on his part. Hamilton v. Marks, 63 Mo. 167; Mayes v. Robinson, 93 Mo. 114, 5 S. W. 611; Borgess Investment Co. v. Vette, 142 Mo. 560, 573, 44 S. W. 754, 64 Am. St. Rep. 567. In such state of the law, it is at least questionable, if the court did not go too far in submitting defendant's theory of plaintiff's knowledge of the fraud charged. Certainly there is nothing in the record showing that plaintiff had knowledge of any representations made by Dewitt to defendant before the time when he purchased the note. So we conclude that, under the law and the state of the evidence, defendant is without any ground of complaint except for the following reason.

2. As already stated, it appears by the pleading that there is a statute in Iowa providing that if a negotiable note is procured of the maker by fraud, and is afterwards indorsed before maturity, for value, to an...