First State Bank v. Hammond

• Decision Date: 16 February 1904
• Parties: FIRST STATE BANK OF CORWITH v. HAMMOND.
• Court: Missouri Court of Appeals

79 S.W. 493

104 Mo. App. 403

FIRST STATE BANK OF CORWITH v. HAMMOND.

St. Louis Court of Appeals. Missouri.

February 16, 1904.

BILLS AND NOTES—FRAUD—BONA FIDE PURCHASER—KNOWLEDGE OF FACTS—EVIDENCE —BURDEN OF PROOF—QUESTION FOR JURY.

1. In an action by an indorsee of certain notes before maturity, evidence held to justify submission of the question whether plaintiff was a bona fide holder for value.

2. Where, in an action on certain notes by an indorsee before maturity, defendant introduced evidence that the notes were procured by fraud, the burden shifted to plaintiff to show, by a preponderance of evidence, that it was a bona fide holder for value.

3. Mere knowledge of facts sufficient to put a prudent man on inquiry without actual knowledge or bad faith, is insufficient to affect the title of an indorsee of a negotiable note before maturity.

Appeal from Circuit Court, Howell County; W. N. Evans, Judge.

Action by the First State Bank of Corwith, Iowa, against S. R. Hammond. From a judgment in favor of defendant, plaintiff appeals. Reversed.

Jas. Orchard, for appellant. H. D. Green, for respondent.

BLAND, P. J.

On January 21, 1901, defendant executed and delivered to the Corwith Nursery Company, of Corwith, Iowa, his two negotiable promissory notes for $500 each, payable one year after date. Plaintiff claimed to have purchased these notes of the Corwith Nursery Company, February 1, 1901. As the legal holder of the notes, plaintiff brought this suit thereon against the defendant in the Howell circuit court.

The answer of the defendant alleged that the notes were procured by false and fraudulent representations, and that the consideration for them had wholly failed. After proving the indorsement and transfer of the notes to it on February 1, 1901, plaintiff offered them, with the indorsements, in evidence. Defendant offered evidence tending to prove that the notes were obtained by false and fraudulent representations made to him by Uecke, secretary and manager of the Corwith Nursery Company, and that the consideration for which the notes were given had wholly failed. Defendant testified that about February 27, 1901, he wrote to plaintiff asking for information as to the standing of the nursery company; that he thereafter received the following reply, written at the bottom of his letter: "We do not have their account, and cannot say how they are. Respt., J. H. Standring, Chr. 3/1/1901." J. H. Standring testified that he was cashier of the plaintiff bank; that he, as such cashier, bought the notes of the nursery company about February 1, 1901, paying $1,000 in cash for them; that the purchase was made in good faith, without knowledge of any fraud or failure of consideration of the notes; that the nursery company had ceased to do business. It appears from the testimony that the defendant, at the time he gave the notes and thereafter, was a resident of Howell county. Plaintiff moved for a peremptory instruction to the jury to find for it, which the court refused.

The court gave the following instructions for the plaintiff: "(2) The court instructs the jury that the plaintiff sues on two promissory notes for five hundred dollars each, executed by the defendant to the Corwith Nursery Company, on the twenty-first day of January, 1901, each payable one year after date, bearing interest from date at the rate of eight per cent. per annum; that the plaintiff, the First State Bank of Corwith, Iowa, claims to have bought said notes for value, before maturity, in good faith, without knowledge of any fraud or false representation made by the nursery company to the defendant; that defendant admits the execution of said notes, but claims that said notes were executed by false and fraudulent representations, and that he was induced to sign the same by said false and fraudulent representations by the Corwith Nursery Company; and he claims that plaintiff had full knowledge of said false and fraudulent representations, and that the plaintiff, the First State Bank of Corwith, Iowa, denies said charges, and says it was a purchaser for value, before maturity, in good faith, without knowledge of any fraud. The jury is therefore instructed that if you find from the evidence that the plaintiff purchased said notes before...