Hazard v. Spencer

• Decision Date: 26 December 1891
• Citation: 23 A. 729,17 R.I. 561
• Parties: HAZARD v. SPENCER et al.
• Court: Rhode Island Supreme Court

23 A. 729

17 R.I. 561

HAZARD

v. SPENCER et al.

Supreme Court of Rhode Island.

Dec. 26, 1891.

Action by Frank B. Hazard against Joel M. Spencer and others. Judgment for plaintiff. Defendants petition for a new trial. Petition granted.

Charles Q. Steere and Ezra K. Parker, for plaintiff.

Andrew B. Patton, for defendants.

TILLINGHAST, J. This is an action of assumpsit by the holder of a negotiable promissory note against the maker and indorser thereof. The note is as follows: "$300. Providence, R. I., March 1st, 1890. Four months after date I promise to pay to the order of Orin S. Spencer three hundred dollars, at bank. Value received. No. —. Due—. [Sgd] Joel M. Spencer. [Indorsed] Orin S. Spencer." The case was tried to the court, in the court of common pleas, jury trial having been waived, and judgment was rendered in favor of the plaintiff for the amount of the note, with interest, The case is before us on the defendants' petition for a new trial, on the ground that the verdict was against the law and the evidence. After the trial in the court below, and before the judgment was rendered, the plaintiff discontinued the case as to the defendant Joel M. Spencer. At the trial in the court below the plaintiff produced his note, offered proof of demand and protest, and notice to indorser, and rested his case. The defendants then offered the following proof: Joel M. Spencer, one of the defendants, testified that he made the note; that he gave it to renew a note formerly given for the same amount, and sent it to his brother, the other defendant, to get his indorsement; that a few days thereafter he received a letter from his son Joel M. Spencer, Jr., saying that the party holding the note for which this was to be given in renewal wanted one on shorter time; that witness then made a note, payable in 60 days, which he also sent to his said brother for indorsement; that he heard no more about the matter until he got the notice from the bank, which said notice he supposed was in reference to the 60-days note. He further testified that he supposed his son had destroyed the four-months note, the latter having so informed him. Orin S. Spencer, one of the defendants, testified that he received the note in question, and indorsed it, as he had been in the habit of doing, for his brother; that after he indorsed it he handed it to Joel M. Spencer, Jr., his said brother's son, to be used by him in taking up the note for which it was to be in renewal; that said Joel M. Spencer, Jr., afterwards came back to witness, and said that Mr. Cranston, the holder of the original note, refused to take the said four-months note in renewal, and wanted one on shorter time; that said Joel M. Spencer, Jr., also said that he had written to his father to that effect, and also stated that he had destroyed the said four-months note. Witness afterwards indorsed the 60-days note, and this was used by said Joel M. Spencer, Jr., in renewal of the note held by Mr. Cranston. Witness supposed that the note in suit had been destroyed, until he received notice of the protest thereof. No evidence was offered by the plaintiff in rebuttal, tending to prove that he was a bona fide holder of the note for value without notice. The uncontradicted proof, therefore, was to the effect that the note in suit was fraudulently issued by said Joel M. Spencer, Jr., it having been obtained by him from the defendants for the sole purpose of being used in the renewal of a prior note for the same amount, upon which the defendants were liable, and having been diverted by him to another and entirely different purpose. In other words, the proof shows that he was guilty of the embezzlement of the note. Pub. St. R. I. c. 242, § 16.

Under this state of the proof, was the plaintiff entitled to recover? We think not; for while it is prima facie sufficient in order to entitle the plaintiff to recover in an action against the indorser of a negotiable promissory note, there being no denial of the signature, to produce the note in evidence and prove demand, protest, and notice to indorser, yet where, at the trial, the defendant introduces evidence to show that the note was illegally or fraudulently obtained or put in circulation, it is then incumbent on the plaintiff to prove that he is a bona fide holder for value without notice. In other words, the burden is always upon the party asserting his title as a bona fide holder, in a case where the proof shows that the note has been fraudulently, illegally, or feloniously obtained or put in circulation. In Vallett v. Parker, 6 Wend. 615, it was held that if the note has been lost or stolen, or fraudulently put into circulation, then the plaintiff must show that he came lawfully and fairly by it and paid value for it. In Bank v. Green, 43 N. Y. 298, 300, Rapallo, J., stated the rule of evidence in such cases in these words: "A plaintiff, suing upon a negotiable note or bill, is presumed, in the first instance, to be a bona fide holder. But when the maker has shown that the note was obtained from him under duress, or that he was defrauded of it, the plaintiff will then be required to show under what circumstances and for what value he became the holder." 2 Greenl. Ev. § 172; McClintock v. Cummins, 2 McLean, 98; Munroe v. Cooper, 5 Pick. 412; Holme v. Karsper, 5 Bin. 409; Duncan v. Scott, 1 Camp. 100; Case v. Association, 4 N. Y. 166. "The reason for this rule, given in the later English cases, is that, where there is fraud, the presumption is that he who is guilty will part with the note for the purpose of enabling some third party to recover upon it, and such presumption operates against the holder, and it devolves upon him to show that he gave value for it. Bailey v. Bidwell, 13 Mees. & W. 74: Smith v. Braine, 16 Adol. & E. (N. S.) 244; Harvey v. Towers, 6 Exch. 656." See, also, Vosburgh v. Diefendorf, 119 N. Y. 357, 23 N. E. Rep. 801. The doctrine announced by this court in Millard v. Barton. 13 R. 1. 601. appears to be in harmony with the decisions above quoted from. In that case Mr. Justice Potter, after a careful review of quite a number of the leading cases upon the subject, laid down the rule of evidence applicable thereto as follows, (13 R. I. 610:) "In the order of trial, the plaintiff first produces his note, and, the signature not being denied, may rest his case. If the signature is his, it is prima facie evidence that the whole instrument is genuine. Then the defendant may put in evidence to prove fraud, etc., in the inception of the note. The plaintiff, in all those cases where the note would be valid in the hands of a holder for value, must then show that he is such, and that he took it in good faith. And he may be required to show the circumstances under which he took the note, as bearing upon this point." The case before us, therefore, in so far as the question now under consideration is concerned, is practically ruled by the case last mentioned. See, also, Daniel, Neg. Inst. (4th Ed.) § 166, and cases cited; 2 Pars. Notes & B. 438, and cases cited in notes; Mace v. Kennedy, 68 Mich. 389, 36 N. W. Rep. 187; Gray's Adm'r v. Bank, 29 Pa. St. 367; Sperry v. Spaulding, 45 Cal. 544, 549; Worcester Couuty Bank v. Dorchester & Milton Bank, 10 Cush. 490; Griffith v. Shipley, (Md.) 22 Atl....