German-American Nat. Bank v. Lewis

• Decision Date: 20 November 1913
• Citation: 9 Ala.App. 352,63 So. 741
• Parties: GERMAN-AMERICAN NAT. BANK v. LEWIS.
• Court: Alabama Court of Appeals

63 So. 741

9 Ala.App. 352

GERMAN-AMERICAN NAT. BANK v. LEWIS.

Court of Appeals of Alabama

November 20, 1913

Rehearing Denied Dec. 9, 1913

Appeal from Law and Equity Court, Mobile County; Saffold Berney Judge.

Action by the German-American National Bank against James A. Lewis. From a judgment for defendant, plaintiff appeals. Affirmed.

McMillan & Grayson, of Mobile, for appellant.

Hamilton & Thornton, of Mobile, for appellee.

THOMAS J.

It is elementary, of course, that the indorsee of a negotiable promissory note who seeks protection as a bona fide purchaser against secret defenses set up by the maker, in a suit on the note by the former against the latter, is required to plead it. Of course, it is allowable, when not objected to ( Com. Bank v. King, 107 Ala. 484, 18 So. 243), though certainly it is not proper, and is neither wise nor logical, for the plaintiff to do this in the declaration or complaint whose legitimate function is merely to set forth plaintiff's cause of action. To do so is but "crossing a bridge before one gets to it"--anticipating and attempting to forestall a defense that may never arise, by assuming a burden of proof that otherwise might not have been necessary.

Hence the orderly way, and the way which the law recognizes as the proper one, for the plaintiff in such case to claim protection as a bona fide purchaser, is to allege the facts which constitute him such, in a special replication to defendant's special pleas, should any be filed. Of course, he may also file a general replication, which would put on defendant the burden of proving his special pleas (Code, § 5338); but the special replication mentioned is in confession and avoidance, and the plaintiff succeeds if he proves it, notwithstanding the defendant may have also proved his special pleas upon which issue was joined, unless he also proves that plaintiff had knowledge or notice of such defenses at the time of his purchase or payment. Such a replication, in order to be legally sufficient, must aver that the plaintiff purchased the note in good faith, for value, before maturity, in the ordinary course of trade, and without notice of any defenses existing against it; and it must appear from the allegations of the replication, either by setting out the note in haec verba or by proper descriptive averments, unless it has already so appeared in the declaration, that the note is a negotiable note--that is, one governed by the commercial law--and that the plaintiff is the indorsee of the note, if it be one payable to order, and that he is the bearer or holder, if it be one payable to bearer. 14 Ency.Pl. & Pr. 518, 525.

The rule as to the order and burden of proof with respect to the bona fide purchaser is that, after the defendant proves or offers proof tending to establish his special pleas, the plaintiff must then prove that he purchased the note in the ordinary course of trade and paid value therefor, before its maturity. This done, he need go no further, and need not prove, though he was required to allege, the negative, that he made such purchase and payment without notice. The burden here shifts, and, if it be desired to avoid the effect of such purchase and payment, the defendant must prove that before the payment the plaintiff had knowledge of the defenses existing against the note, or notice of such facts or circumstances as were sufficient to put him on inquiry that, if followed up, would have discovered the existence of such defenses. Slaughter v. First Nat. Bank, 109 Ala. 162, 19 So. 430; Alabama Nat. Bank v. Halsey, 109 Ala. 208, 19 So. 522; First Nat. Bank of Gadsden v. Sproull, 105 Ala. 280, 16 So. 879; First Nat. Bank v. Dawson, 78 Ala. 67; Johnson v. Hanover Nat. Bank, 88 Ala. 271, 6 So. 909.

These rules as to pleading and as to the order and burden of proof, established by the authorities cited, are as applicable now as before the enactment of the uniform negotiable instrument law as found in sections 4958 to 5138, inclusive, of the Code. Section 5014 of that statute, contrary to plaintiff's insistence, is in entire harmony with these decisions as to the burden of proof of a bona fide purchaser, and is merely declaratory, in that particular, of the law existing on the subject, not only in this state at the time of the passage of the act, but obtaining generally throughout the states as a rule of commercial law. The section mentioned (5014) provides: "Every holder is deemed prima facie to be a holder in due course, but, when it is shown that the title of any person who has negotiated the instrument is defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course," etc. The American & English Encyclopedia of Law (volume 4, pp. 318-320), where the authorities are collated, thus states the same rule and its application, which latter is in complete accord with the decisions of this state cited, to wit: "Possession of a negotiable bill or note payable to bearer, or indorsed in blank or to the holder specially [if payable to order], is prima facie evidence of title; and the holder of such instrument is presumed to have taken it in good faith, for value, before maturity, in the usual course of business, and without notice. *** This presumption in favor of the holder's title to negotiable paper throws the burden of proving it defective upon the party who attacks the title; and therefore, if the defense be fraud, illegality, or duress in the inception or transfer of the instrument, or that it has been stolen from or lost by the true owner, or that it was given without consideration, or for a consideration that has failed, the onus is upon the person making such defense. When, however, either of these defenses has been shown, the presumptions in favor of the holder's title are overcome, and it devolves upon him then to show that he is a bona fide holder for value; that is, he must show that he or some prior holder took the paper in good faith for value, before maturity, in the usual course of trade," etc. Am. & Eng.Ency.Law, supra, and cases cited in notes; Ross v. Drinkard, 35 Ala. 434.

In the present case, which was a suit on such a note by the indorsee of the payee against the maker, the complaint, being brief we set out here, as follows: "Plaintiff claims of the defendant $100 due by promissory note made by him on, to wit, January 28, 1911, and payable 90 days after date to Wayne Oil Tank & Pump Company, with interest. And plaintiff avers that the note herein sued on was, before maturity and for a valuable consideration, transferred to and is now the property of plaintiff." To this complaint the defendant pleaded the general issue and a special plea to the effect that the note was void for want of consideration to support it. The plaintiff demurred to the special plea on the ground that it set forth no defense to the action inasmuch as it appeared (he claims) from the complaint that the note was a commercial paper and that the plaintiff was a bona fide purchaser, or holder in due course, thereof. One of the errors here assigned by the plaintiff is the overruling of this demurrer by the court. Clearly, for the reasons hereinbefore adverted to, the action of the court in this particular was free from error. In the first place, the description of the note as contained in the complaint is probably not sufficient to show that the paper sued on is one governed by the uniform negotiable instrument law (Code, § 5131; Blackman v. Lehman Durr, 63 Ala. 547, 35 Am.Rep. 57); since pleadings are construed most strongly against the pleader. However, we refrain from a decision upon this question, as it is not necessary to the disposition of the case Furthermore, it does not appear whether the note is payable "to order" or "to bearer." If it...