Hamilton v. Marks

• Citation: 63 Mo. 167
• Parties: N. B. HAMILTON, Appellant, v. ABE. MARKS, et al., Respondents.
• Decision Date: 31 October 1876
• Court: United States State Supreme Court of Missouri

63 Mo. 167

N. B. HAMILTON, Appellant,

v.ABE. MARKS, et al., Respondents.

Supreme Court of Missouri.

October Term, 1876.

Appeal from Linn Circuit Court.

George W. Easley, for Appellant.

I. The holder of a negotiable note, who bought for value, before maturity, and without notice, can recover it, although he took the same under circumstances that would have excited the suspicion of a prudent man. Nothing short of mala fides in the holder can defeat his recovery. (Goodman vs. Harvey, 4 Ad. & Ell. 470; Bank of Bengal vs. Fagan, 7 E. F. Moore, P. C. 61, 72; Raphael vs. Bank of Eng. 33 Eng. Law & Eq. R. 276; Stephens vs. Foster, 1 Cromp. Mees. & Rosc. 849; Arbouin vs. Anderson, 1 Ad. & Ell. 498; Bank of Bengal vs. Macleod, 7 E. F. Moore, P. C. 35; Crook vs. Jadis, 5 Barn. & Ad. 909; Backhouse vs. Harrison, 5 Barn. & Ad. 1098; Arthur vs. Rich, 10 Ad. & Ell. 784--all of which are later cases than Gill vs. Cubitt, and re-establish the old doctrine of Lawson vs. Weston, 4 Esp. 56--4 Camb. Lives of Com. Just. 315; Welsh vs. Sage, 47 N. Y. 143; Hall vs. Wilson, 16 Bush. 548; Magee vs. Badger, 34 N. Y. 247; Belmont Branch Bk. vs. Hodge, 35 N. Y. 65; Seybel vs. National Currency Bank, 54 N. Y. 288; S. C. 13 Am. R. 583; all of which overrule and expressly disaffirm Pringle vs. Phillips, 5 Sand. p. 2157; Brush vs. Scribner, 11 Conn. 388, which overrules Hale vs. Hall, 8 Conn. 336; Worcester Bk. vs. Milton Bk., 10 Cush. 488, a later case than Cone vs. Baldwin, 12 Pick. 545, and approving Goodman vs. Harney; Goodmman vs. Lineaus, 20 How. [U. S.] 343; Bank vs. Neal, 22 How. 108; Murray vs. Lander, 2 Wall. 110; Matthews vs. Poythress, 4 Ga. 287; Hamilton vs. Vought, 34 N. J. 18; Lake vs. Reed, 29 Ia. 258; S. C. 4 Am. R. 209; Gage vs. Sharpe, 24 Ia. 15; Phelan vs. Moss, 67 Pa. 59; Sto. Bills, §§ 194, 416; Edw. Bills, 506; 2 Pars. N. & B. 277, 278, 279; Sto. Prom. Notes, §§ 197, 382; Redf. Lead. Cas. N. & B. 257.)

II. The authorities above quoted fully sustain the position that even gross negligence will not defeat such holder's title.

III. The burden of proof was upon the defendant, to show both the fraud and that the plaintiff had notice of the same. (Uther vs. Rich, 10 H. & E. R. 784; 1 Smith Lead. Cas. s. p. 263 a, s. p. 523; Swift vs. Tyson, 16 Pet. [U. S.] 1, 16; Corby vs. Butler, 55 Mo. 398; Greer vs. Yosti, 56 Mo. 307, 308.)

“The assignment of a note under due raises the presumption of the want of notice, and this presumption stands until it is overcome by sufficient proof.” (Carpenter vs. Longan, 12 Wall. [U. S.] 271, 273.)S. P. Huston, with R. W. Mullins, for Respondents.

I. If the maker prove that the note had been obtained from him by fraud, or was fraudulently put in circulation by the payee, then the burden of proof is upon the holder to show that he took it honestly, without knowledge of the fraud, and that he gave value for it. (Sto. Prom. Notes [5 ed.], § 196, and n. 3; Smith vs. Sac County, 11 Wall. [U. S.] 139; Bailey vs. Bidwell, 13 Mees. & W. 73; McKesson vs. Stanberry, 3 Ohio St. 156; Munroe vs. Cooper, 5 Pick. [[[Mass.] 412; Small vs. Smith, 1 Den. 583; Catlin vs. Hansen, 1 Duer. [N. Y.] 325, 326; 1 Smith Lead. Cas. part 2, p. 752.)

II. The general rule in regard to notice, is, that whatever is notice enough to excite attention, and put a party on his guard and call for inquiry, is notice of everything to which such inquiry might have led. And actual or express notice to the assignee of a negotiable note, transferred before maturity, of fraud on the part of the payee in procuring its execution, or want or failure of consideration, or other infirmity, is not indispensable; but it is sufficient if the circumstances are such as ought to put an ordinarily prudent man on inquiry. Such was the opinion of this court when this case was here before. (Hamilton vs. Marks and Black 52 Mo. 78.) And this decision has been followed by this court in a number of subsequent cases. (Horton vs. Bayne, 52 Mo. 531; Greer vs. Yosti, 56 Mo. 307; Bennett vs. Torlina, 56 Mo. 309; Merrick vs. Phillips, 58 Mo. 436.) And the same rule of law in cases on commercial paper had, prior to the decision in this case, been recognized by this court. (Goodman vs. Simonds, 19 Mo. 106; Renshaw vs. Wills, 38 Mo. 201.) And generally, on the question of notice, see Hamilton vs. Marks (52 Mo. 78) and cases cited in appellant's brief, and in that opinion of the court.

This court, when this case was here before, having passed on the question as to what notice is sufficient to affect the plaintiff, as the assignee of the note from the payee, with the fraud of the payee in procuring the note, that question is not now open to dispute, but will be deemed res adjudicata. (Overall vs. Ellis, 38 Mo. 209.) What is notice? (Speck vs. Riggin, 40 Mo. 405.)

WAGNER, Judge, delivered the opinion of the court.

Plaintiff brought his action on a negotiable promissory note executed by the defendant to one T. H. Cooley, and by Cooley assigned to plaintiff before maturity. Black was a mere surety, and made a formal answer of denial. The separate answer of the defendant, Marks, set up a conditional sale of a farm to him by Cooley; that the conveyance was made to him for the purpose of making the sale to one Walker, and that the note was executed to secure Cooley in the faithful discharge by Marks of the trust; and that, in case no sale should be made to Walker before the note became due, the same was to be void.

Marks' answer also set up a fraudulent conspiracy between Walker and Cooley, to sell the farm to him, and charged the plaintiff with notice of the fraud. It was also averred that no value was given in consideration of the assignment, etc.

There was a replication filed by the plaintiff, denying all the material allegations in the answer, and upon the issues thus formed the trial was had. Both parties gave evidence tending to establish their respective sides of the case. There was a verdict for the defendants, upon which judgment was rendered, and the plaintiff appealed.

In order to understand and determine upon what theory the case was tried, it will be necessary briefly to recur to the material instructions given by the court. The nine propositions given on the request of the plaintiff, and the first two for the defendants cannot be subject to any contest, as they merely assert what has long been established as the law in reference to the rights and liabilities of parties to negotiable paper. But the remaining instructions given for the defendants constitute the principal matter of contention in the case, and are the ones to which plaintiff strenuously objects. By the third instruction the jury are told, that if they believe from the evidence that the note in suit was obtained by Cooley, the payee therein, by fraud practiced by him upon the defendant, Marks, or, if the circumstances appearing in proof tend to show that the transfer of the note by Cooley to Hamilton was made by Cooley and accepted by Hamilton for the purpose of thereby gaining an advantage over defendants, then the burden of proof rests upon the plaintiff in the case, to show, before he can recover, that he purchased said note of Cooley in good faith, without notice or knowledge of such fraud, before the maturity of the note, and paid a valuable consideration therefor. The fourth instruction declares that if the jury believe from the evidence that the note sued on was obtained by Cooley from the defendant Marks by fraud, or fraudulent means used by Cooley, then in order to affect the plaintiff with notice of such fraud and render the note invalid in his hands, it is not necessary that he should have actual and positive knowledge of such fraud, before the assignment of said note to him, but that it is sufficient notice if it be such as ordinarily prudent men usually act upon in the common affairs of life. The fifth instruction says, that if from all the facts and circumstances given in evidence, the jury believe that the note in suit was procured from Marks by fraud, and they further believe that the plaintiff, Hamilton, before or at the time of the actual assignment, transfer and delivery of the note to him, and the actual payment of a valuable consideration therefor, knew of the existence of such fraud in the procurement of the note, or was then conscious of having the means of knowing, and failed to use them, or failed or declined to use that ordinary care and diligence which a prudent man usually acts upon in the ordinary affairs of life, then the plaintiff is not a purchaser of said note in good faith, without notice, and the jury should find for the defendants, although they may believe that plaintiff, Hamilton, paid Cooley a valuable consideration for the note. The sixth instruction asserts essentially the same proposition as embodied in the above, framed in different language.

The main questions for inquiry arising on the record, according to the foregoing instructions, are, first, whether circumstances of suspicion sufficient to put a prudent man on inquiry, constitute notice in regard to negotiable paper, and whether negligence or want of care in the investigation of such circumstances can be imputed as notice; and further, upon whom is the burden of proof, when it is charged and proved that the note was founded in fraud so as to destroy its validity between the original parties, when it is in the hands of an assignee having been transferred before due.

This case was previously in this court, on appeal from the Linn county court of common pleas (52 Mo. 78), and the doctrine then announced was, that, in order to let in equitable defenses against a note assigned before maturity, express notice of the consideration before the assignment was made, was not indispensable; but that it would be sufficient if the circumstances were of such a character as necessarily to cast a shade upon the transaction, and to put the holder upon inquiry. The instructions upon this point followed the rule laid down...