First Nat. Bank of Shenandoah, Iowa v. Hall

• Decision Date: 29 December 1917
• Citation: 169 P. 936,31 Idaho 167
• Parties: FIRST NATIONAL BANK OF SHENANDOAH, IOWA, Appellant, v. O. S. HALL et al., Respondents
• Court: Idaho Supreme Court

169 P. 936

31 Idaho 167

FIRST NATIONAL BANK OF SHENANDOAH, IOWA, Appellant, v. O. S. HALL et al., Respondents

Supreme Court of Idaho

December 29, 1917

BILLS AND NOTES - FRAUD - BURDEN OF PROOF - WEIGHT AND CREDIBILITY OF EVIDENCE-CONFLICTING EVIDENCE.

1. In an action upon a negotiable promissory note where the defendant pleads and proves that the note was procured by fraud, it is then incumbent upon the plaintiff to show affirmatively that it was the holder in due course.

2. In an action upon a negotiable promissory note procured by fraud, brought by an indorsee, a banking corporation, where the only evidence introduced to show that the plaintiff took the note in good faith and without notice was the testimony of the vice-president and general manager of the bank, the credibility of his testimony is addressed to the jury and not to the court as a matter of law.

[As to the principle that fraud in the inception of a negotiable instrument does not prejudice a bona fide holder, see note in 11 Am.St. 309]

APPEAL from the District Court of the Fourth Judicial District, for Minidoka County. Hon. Chas. O. Stockslager, Judge.

Action on a promissory note. Judgment for the defendants. Affirmed.

Judgment affirmed. Costs awarded to respondents.

Babcock & Graham and E. M. Wolfe, for Appellant.

There is no question but that these notes are complete and regular upon their face; that plaintiff became the holder of them before they were overdue and without notice that they had been previously dishonored; that it took them in good faith and for value; that at the time they were negotiated to it it had no notice of any infirmity in the instrument or defects in the title of Mr. Ayres.

There is absolutely no evidence to sustain or prove fraud in its acquirement, but, on the contrary, there is positive evidence that they were purchased in good faith. (South-west Nat Bank v. Baker, 23 Idaho 428, 130 P. 799.)

Paul S Haddock, for Respondents.

It is incumbent upon the appellant in this case to prove by preponderance of the evidence to the satisfaction of the jury that the sale and transfer of the note by the indorser to the indorsee was made in the usual course of business and in good faith. (Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525.)

"Whether plaintiff in such case has satisfactorily met the burden of proof to make good his claim to be an innocent purchaser is a question of fact for the jury, and is subject to the same rule as to its weight and sufficiency as any other fact in the case." (Vaughan v. Brandt, 21 Idaho 628, 123 P. 591; Park v. Johnson, 20 Idaho 548, 119 P. 52.)

RICE, J. Morgan, J., concurs. Budge, C. J., sat at the hearing but takes no part in the decision.

OPINION

RICE, J.

This is an action upon two promissory notes, in the sum of $ 1,000 each, dated April 1, 1910, executed by the respondents herein in favor of one M. L. Ayres. Ayres, the payee, indorsed and delivered the notes to the appellant herein. The defendants alleged that the notes were procured from them by means of fraud and misrepresentations. The case was tried upon the theory that the pleadings presented the issue as to whether the appellant was a holder of the notes in due course.

Appellant concedes that because of conflict in the evidence the court would not be justified in reversing the verdict of the jury on the question of fraud and misrepresentations. Under the provisions of sec. 3516, Rev. Codes, the burden was on appellant to prove that it acquired the title as a holder in due course.

The question involved in this appeal has been before this court many times. (See Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525; Vaughn v. Johnson, 20 Idaho 669, 119 P. 879, 37 L. R. A., N. S., 816; Park v. Brandt, 20 Idaho 660, 119 P. 877; Park v. Johnson, 20 Idaho 548, 119 P. 52; Vaughan v. Brandt, 21 Idaho 628, 123 P. 591; Southwest Nat. Bank v. Baker, 23 Idaho 428, 130 P. 799; Burdell v. Nereson, 28 Idaho 129, 152 P. 576; Southwest Nat. Bank v. Lindsley, 29 Idaho 343, 158 P. 1082.)

The principle of law which should guide the jury in its consideration of the facts is well stated in the case of Winter v. Nobs, supra. The opinion in that case, after quoting sec. 3513, Rev. Codes, states: "We think it is only actual knowledge of the defect or infirmity, or notice of such facts and circumstances as would put a man on inquiry and would charge him with bad faith or the imputation of dishonest dealing, that was intended by the statute to defeat a recovery."

In applying this principle in the determination of the question of fact involved, the following citations are illustrative of facts and circumstances which the jury is entitled to take into consideration, and which, when disclosed by the evidence produced at the trial, renders the question involved one exclusively for the jury.

In the case Commercial Bank of Essex v. Paddick, 90 Iowa 63, 57 N.W. 687, the court said: "It is contended by counsel for appellant that the evidence that the plaintiff was a bona fide purchaser of the note is so conclusive that the court should have directed a verdict for the plaintiff. In our opinion the court rightly submitted the question of the good faith of the plaintiff to the jury. It has been held by this court that in the case of the purchase of a note by a partnership the burden is upon it to show that all members of the partnership were, at the time of the purchase, ignorant of the fraudulent character of the note. (Frank v. Blake, 58 Iowa 750, 13 N.W. 50.) The court instructed the jury in accord with the rule announced in the cited case. It is not denied that the plaintiff is a partnership. The witness Nye testified that it is a private bank. It is claimed, however, that the evidence shows that no officer of the bank had notice of the fraud. It is true that Nye so testified. But it is apparent that he was testifying to a fact either from hearsay or which he did not know to be true. In either case it was for the jury to determine that question. This failure of proof is sufficient to sustain this verdict."

McNight v. Parsons, 136 Iowa 390, 125 Am. St. 265, 15 Ann. Cas. 665, 113 N.W. 858, 22 L. R. A., N. S., 718, contains the following: "The testimony of the cashier of the bank that he or the bank purchased the note for value before maturity, even though he be not disputed by any other witnesses to the transaction, is not necessarily sufficient to enable the court to say as a matter of law that he received it in good faith. Such evidence does not negative notice or knowledge on part of other officers of the bank. Moreover, the bank being an interested party, the credibility of the testimony of the cashier was a matter for the jury to pass upon in the light of all the facts and circumstances surrounding the matter under inquiry."

The case of Arnd v. Aylesworth, 145 Iowa 185, 123 N.W. 1000, 29 L. R. A., N. S., 638, contains the following: "It is ordinarily to be expected, in these cases, that the purchaser will testify to his good faith and want of notice, and that defendant is compelled to rely upon circumstantial evidence to rebut such showing. Whether plaintiff has sufficiently satisfied the burden resting upon him and made good his claim to be an innocent purchaser is therefore a question for the jury, save in those instances where the testimony is not only consistent with the good faith of such purchase, but is such that no fair-minded person can draw any other inference therefrom. A categorical denial of notice or knowledge is something which in many, if not in most, instances cannot be opposed by direct proof; and the credibility of the witnesses, their interest in the case, the reasonableness or unreasonableness of their statements, the time, place and manner of the transaction, its conformity to or its departure from the ordinary methods of business, and all the other facts and circumstances which, though of slight moment themselves, yet, when taken together, give character and color to the purchase under inquiry, constitute a showing which the court cannot properly pass upon as a matter of law."

The supreme court of Massachusetts, in the case of Anthony v. Mercantile Mutual Accident Assn., 162 Mass. 354, 44 Am. St. 367, 38 N.E. 973, 26 L. R. A. 406, said: "It is not often, where a party has the burden of proving a fact by the testimony of witnesses, that the jury can be required by the court to say that the fact is proved. They may disbelieve the witnesses. If the conclusion is to be reached by drawing inferences of fact from other facts agreed, ordinarily the jury alone can draw these inferences; it is only when no inferences are possible except those which lead to one conclusion that the jury can be required to find a proposition affirmatively established."

In Skillern v. Baker, 82 Ark. 86, 118 Am. St. 52, 12 Ann. Cas. 243...