First State Bank of Hazen, North Dakota, a Corp. v. Radke

• Decision Date: 24 July 1924
• Court: North Dakota Supreme Court

199 N.W. 930

51 N.D. 246

FIRST STATE BANK OF HAZEN, NORTH DAKOTA, a Corporation, Respondent, v. G. G. RADKE, Appellant

Supreme Court of North Dakota

July 24, 1924

Appeal from District Court, Mercer County, North Dakota, Berry, J.

Affirmed.

David Schwartz, for appellant.

"An instruction was not erroneous which, in a suit on a promissory note, charged that the burden is on the plaintiff in the first instance to show prima facie that there was a consideration. The burden then shifts to the defendant to show that there was no consideration, and if the defendant meets that issue with sufficient evidence to overcome the prima facie showing of the note that it bears a consideration, then the burden returns to the plaintiff to establish upon the entire and on the whole case that there was a consideration for the note." Holbert v Webber, 36 N.D. 106.

It is the law that the knowledge of the officer of the bank is imputed to the bank. Emerado Farmer's Elevator Co. v Farmers Bank, 20 N.D. 270, 127 N.W. 522; McCarty v Kepreta, 24 N.D. 395, 139 N.W. 992; State Bank v. Missia (Minn.) 175 N.W. 614.

Decisions of courts of last resort are to be regarded as law and should be followed by inferior courts, whatever the view of the latter may be as to their correctness, until they have been reversed or overruled, and this rule as applied to inferior state courts is not affected by the fact that the decision of the state court of last resort is contrary to the rule as established by the weight of authority outside of the state. 15 C. J. 920.

John Moses and Berdahl & Hyland, for respondent.

The question of want of consideration is an affirmative defense and the burden of proof is upon the one who seeks to invalidate a written instrument. It is determined by the pleadings and the burden of proof never shifts. Mercer County State Bank v. Hays, 34 N.D. 610; Shoe Co. v. Jackson (S.D.) 115 N.W. 656; South Dakota C. R. Co. v. Smith (S.D.) 116 N.W. 1120, 135 Am. St. Rep. 773, note; Frick v. Hoff (S.D.) 128 N.W. 495; Emerson-Brantingham Co. v. Brenner, 35 N.D. 94; Gould v. Moor, 32 N.D. 432.

"As a matter of defense the burden of proof rests on the defendant who asserts it," and a charge was sustained "That the defendant must show by the greater weight of the evidence, that the note was signed by him without consideration." Pine v. Brittian, 165 N.C. 401, 81 S.E. 462.

A note for a note is a good and sufficient consideration even if the plaintiff was not a bona fide purchaser before maturity and a holder of such note can recover against the maker. American Nat. Bank v. Patterson, 7 A.L.R. 1563, and cases cited. 7 A.L.R. 1569, annotations.

The only defense claimed by appellant being want of consideration and the evidence showing a good and sufficient consideration, a note for a note, and there being no possibility the appellant may have a different defense on a new trial, the respondent is entitled to a judgment notwithstanding the verdict. Shobe v. Smith, 34 N.D. 335; First State Bank v. Kelly, 30 N.D. 84; McVeety v. Harvey Mercantile Co. 24 N.D. 245.

JOHNSON, J. BRONSON, Ch. J., and NUESSLE, J., concur in the determination and the principal expressed in the syllabus, CHRISTIANSON, J. (concurring specially), BIRDZELL, J. (concurring).

OPINION

JOHNSON, J.

This is an appeal from an order of the district court of Mercer county, granting a new trial. Suit was brought on a promissory note by the plaintiff against the defendant as maker. The note was payable to Benjamin Stoelting and was by the payee endorsed "without recourse" to the plaintiff. The trial resulted in a verdict and judgment for the defendant. The plaintiff moved for a new trial upon the ground, among others, that the court had misdirected the jury with respect to the burden of proof. The defendant set up absence of consideration and knowledge thereof by the plaintiff. The court instructed the jury that the plaintiff "must either prove that there was a valuable consideration for this note, as defined to you by the section of the law I have just read to you; or it must prove that it was a holder in due course, as defined by the section of the law which I have just read to you; or it must prove to you that this note was accommodation paper." From the quoted portion of the charge, it appears that the burden was definitely placed upon the plaintiff to prove consideration without regard to the presumption declared by §§ 6909 and 6913, Comp. Laws 1913. This was error in itself sufficient to justify the order granting a new trial. The motion for a new trial was rested principally upon the alleged error in thus placing the burden of proof, plaintiff contending that absence of consideration is an affirmative defense and that the burden of establishing the same, by a preponderance of evidence, rests upon the defendant to the end. The trial court accepted this view of the law and ordered a new trial.

The sole question is upon the correctness of the instruction quoted. The trial court, in giving this charge, probably relied, to some extent, upon an instruction approved in Holbert v. Weber, 36 N.D. 106, 161 N.W. 560. In that case, the portion of the charge challenged on appeal was in the following language:

"The burden is on the plaintiff in the first instance to show prima facie that there was a consideration. The burden then shifts to the defendant to show that there was no consideration, and if the defendant meets that issue with sufficient evidence to overcome the prima facie showing of the note that it bears a consideration, then the burden returns to the plaintiff in this case to establish upon the entire and on the whole case that there was a consideration for the note, so that in this case, gentlemen of the jury, the burden is on the plaintiff in this case, upon the whole evidence, to show that there was a consideration for the note in question."

This instruction was held correct and 8 C. J. 997, and Jones, Ev. § 179, are cited in support of that conclusion. The trial court, however, in a carefully prepared memorandum opinion, concluded, that, inasmuch as no reference to § 5882, Comp. Laws 1913, or to §§ 6909 and 6913, Comp. Laws 1913, being §§ 24 and 28 of the Negotiable Instruments Law, had been made in the case cited, these sections were never called to the attention of this court. The trial court, therefore, concluded that the burden was not upon the plaintiff to prove consideration upon the entire case, but that it devolved on the defendant to prove absence of consideration, and that this must necessarily follow by reason of §§ 5882, 6909 and 6913, supra. See also Mercer County State Bank v. Hayes, 34 N.D. 601, 610, 159 N.W. 74.

There is, therefore, but one question involved on this appeal. When want or failure of consideration is alleged as a defense to a suit on a negotiable promissory note, in an action between the original parties, or between the maker and a transferee with knowledge, is the burden, under the Negotiable Instruments Law, thrown upon the defendant, who relies on that defense, not only to offer evidence tending to show lack of consideration, but of establishing absence of consideration as an ultimate fact, by the greater weight of evidence; or is it proper to tell the jury that when evidence tending to show lack of consideration has been introduced, the burden is on the plaintiff to prove, by preponderance of evidence, on the whole case, that there was consideration for the note?

Upon this subject this court has spoken in two cases, Holbert v. Weber, supra, and Stubbins Hotel Co. v. Beissbarth, 43 N.D. 191, 174 N.W. 217. We have quoted, supra, the instruction approved in Holbert v. Weber. That instruction placed the burden of proof in accordance with the rule which, it must be conceded, has been approved by an abundance of judicial authority in this country. See 8 C. J. 994-997; 3 R. C. L. 928. In Daniel, Neg. Inst. 5th ed. § 164, this is said to be the better rule under the law merchant. An examination of the authorities, however, shows that there was some conflict on this point prior to the Negotiable Instruments Law. Kearney v. Whitehead, 34 La.Ann. 530 (1882); Lipsmeier v. Vehslage (C. C.) 29 F. 175; Hathaway v. Hagan, 59 Vt. 75, 8 A. 678. See also Shaffer v. Bond, 129 Md. 648, 99 A. 973. It is very likely that the authors of the Negotiable Instruments Law intended to settle this conflict when the act was drawn, particularly by §§ 24 and 28 thereof (§§ 6909 and 6913, supra). In the case of Holbert v. Weber, no reference whatever is made to § 5882, supra; or to any provision of the Negotiable Instruments Law. Nor was any reference made to these sections in the briefs of counsel in that case. The opinion seems to have been written and the case decided under the influence of the authorities as they existed prior to the adoption of the act. In Stubbins Hotel Co. v. Beissbarth, § 5882, Comp. Laws 1913 is invoked, but no reference is made to §§ 6909 and 6913, Comp. Laws 1913, being §§ 24 and 28 of the Negotiable Instruments Law. In that case the defendant set up, among other so-called affirmative defenses, the defense of lack of consideration. This court approved an instruction in the following language:

"Gentlemen of the jury, I charge you it is incumbent upon the defendant to prove all of the facts set up as an affirmative defense in avoidance of the facts set up by the plaintiff, by a preponderance of the evidence." (Italics are ours.)

Having in mind the distinction between burden of proof and the burden of proceeding with the evidence at different stages of the trial, (see Guild v. More, 32 N.D. 432, 155 N.W 44) we think that these two decisions cannot be reconciled and that they lay down conflicting rules with respect to the burden of...