Farmers' & Merchants' State Bank v. Shaffer
| Citation | 154 N.W. 485,172 Iowa 173 |
| Decision Date | 19 October 1915 |
| Docket Number | No. 29400.,29400. |
| Parties | FARMERS' & MERCHANTS' STATE BANK v. SHAFFER. |
| Court | United States State Supreme Court of Iowa |
OPINION TEXT STARTS HERE
Appeal from District Court, Hamilton County; C. G. Lee, Judge.
Action at law upon a promissory note. Judgment for defendant. Plaintiff appeals. Affirmed.
For former opinion, see 147 N. W. 851.
Voris & Haas, of Marion, for appellant.
D. C. Chase and Wesley Martin, both of Webster City, for appellee.
The defendant asserts the note in suit was obtained from him by the fraudulent representations of the agent of payee, and that the plaintiff was not an innocent holder of said instrument. The note was given for shares of stock in a corporation known as the Stotts Signal Company, and made payable to E. S. Stotts, who was the promoter, organizer, and principal manager of such company, and the alleged false representations are said to have been made by one Dodge, who negotiated the sale in behalf of Stotts, or of the company. These include representations to the effect that the company owned a large and valuable manufacturing plant in Marion, Iowa, and that the plant was free from incumbrance, and that the company was authorized to do business and to issue stock in Iowa. The defendant asserts that the company did not own nor have any such property or assets, and its stock was entirely worthless, and that by reason of these premises defendant received no consideration for said note, and that said representations were relied on and the purchase of the stock and the giving of said note induced thereby.
The court withdrew from the jury all save the representation as to the ownership of the plant free from incumbrance, that the corporation was authorized to do business in Iowa, and that its stock was issued by proper authority. Upon these issues a verdict was returned for defendant.
I. We must decline to hold that there is no evidence upon which a verdict sustaining the charge of fraud and misrepresentation can be sustained. See Stotts v. Fairfield, 163 Iowa, 726, 145 N. W. 61, which involves an investigation of a similar transaction on part of this corporation. It would serve no useful purpose for us to enlarge upon why we reach this conclusion.
[1][2] II. Appellant contends that as a matter of law plaintiff is a purchaser of the note for value and without notice of the said alleged defenses. In said other Stotts Case, 163 Iowa, 726, 145 N. W. 61, we held, upon substantially the same state of facts, that this was a question for the jury, and are disposed to adhere thereto. This we do, though not unmindful that the officer of the bank, who purchased the note for the bank, testified that he did so without any notice or knowledge of the consideration for which it was given or the sale of the stock to the defendant. Nor do we overlook that under the Negotiable Instruments Act (Acts 29th G. A. c. 130) the purchaser of commercial paper cannot be charged with notice of any defense thereto unless it appear that he had actual knowledge of the infirmity in such paper, “or knowledge of such facts as that his act in taking the instrument amounted to bad faith.” But this is a matter for charging the jury, rather than a rule which compels a holding that under the testimony in this case this burden was not discharged. The court did charge the jury that defendant had this burden, and did so in explicit terms. A rule of law that a defense is not made out unless certain things be proven is one thing, but for the courts to say that as a matter of law some particular effort at proof fails to establish such defense is quite another. The case here, as said, leaves it fairly a question of fact whether the proof required by the law has been made. In view of the circumstances disclosed in the evidence, the denial by the purchasing officer of knowledge or notice was not conclusive on the jury. Surely the intimate knowledge on his part concerning the inside history and condition of this corporation, his official connection with its management, and with the issuance of the very stock sold to defendant, his interest in the result of the trial, and as well other circumstances shown in the record, have sufficient tendency to discredit his denial to make the question so put in issue an appropriate one for the jury. Moreover, when the jury found, as it evidently did, that the note was tainted by fraud in its inception, it put the burden on plaintiff to make an affirmative showing of good faith. On this latter theory it can avail the plaintiff nothing that the evidence for the defendant on this head was weak or wholly lacking. It never discharges a burden of proof that the party who does not have it has failed to establish what it is the duty of his opponent to establish. On the proposition that this was a jury question, see McNight's Case, 136 Iowa, 396, 113 N. W. 858, 125 Am. St. Rep. 265, 22 L. R. A. (N. S.) 718, 15 Ann. Cas. 665;Stotts v. Fairfield, 163 Iowa, 726, 145 N. W. 61;Joy v. Diefendorf, 130 N. Y. 6, 28 N. E. 602, 27 Am. St. Rep. 484.
[3] III. The court charged that no recovery could be had on a note given for stock purchased, if defendant established that the payee falsely represented it had authority to sell stock in Iowa. Appellant concedes that if the note be obtained in consideration of the transfer of shares of stock made in Iowa, and there is no authority given by the state to sell stock, this is a defense to the note,...
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