Kemppainen v. Suomi Temperance Soc.

• Citation: 128 Or. 643,275 P. 680
• Parties: KEMPPAINEN v. SUOMI TEMPERANCE SOCIETY.
• Decision Date: 19 March 1929
• Court: Supreme Court of Oregon

275 P. 680

128 Or. 643

KEMPPAINEN v. SUOMI TEMPERANCE SOCIETY.

Supreme Court of Oregon

March 19, 1929

Appeal from Circuit Court, Clatsop County; J. A. Eakin, Judge.

Action by Matti Kemppainen against the Suomi Temperance Society. Judgment for plaintiff, and defendant appeals. Affirmed.

A. C Fulton, of Astoria (G. C. Fulton, of Astoria, on the brief) for appellant.

Nicholas Jaureguy, of Portland (Jaureguy & Tooze, of Portland, and Green & Wold, of Astoria, on the brief), for respondent.

BELT J.

This is an action on a promissory note, the complaint being in the usual form. In view of the questions presented on appeal the defenses may thus be summarized: (1) Fraud; (2) absence of consideration; (3) want of authority on the part of the plaintiff, as president of defendant corporation, to execute the note on behalf of the corporation. Verdict and judgment were had in favor of the plaintiff. Defendant appeals.

It is urged that the trial court erred in admitting in evidence the promissory note which is the basis of plaintiff's cause of action, without proof of its execution. Ordinarily, it would be incumbent upon the plaintiff to show the execution of the note by the corporation; but there is no need of proof, where its execution is admitted in the pleadings. In the answer defendant first denied the allegations of the complaint as to the execution of the note, but, as a further defense, alleged affirmatively, after setting forth the facts upon which fraud is predicated, that it was executed and delivered to him. This precise question was here in Cunning v. Locke, 122 Or. 225, 258 P. 192, and decided adversely to the contention of the defendant. It was inconsistent for the defendant to deny the execution of the note, and then affirmatively allege that its execution was obtained through fraud. As between the denial of an allegation in the complaint and the direct and specific admission of such fact, the latter controls. Baines v. Coos Bay Navigation Co., 41 Or. 135, 68 P 397.

Error is assigned because the plaintiff was permitted in rebuttal to introduce evidence relative to consideration, and also because objection was sustained to cross-examination of plaintiff during case in chief as to what was the consideration for the note. These assignments involve the question: In an action on a promissory note, between the payee and the maker, does the burden of proof relative to consideration rest upon the payee? There is some reason for the assertion of counsel for appellant that the decisions of this court relative to such question cannot be reconciled.

In Flint v. Phipps, 16 Or. 437, 19 P. 543, it was said "A promissory note imports a consideration. Whoever alleges" the contrary "has the burden of proof."

In Sayre v. Mohney, 35 Or. 141, 56 P. 526, we find: "An issue * * * having been made as to the consideration for the note, the execution of which is admitted in the answer, the burden was cast upon the defendants of showing that such instrument was, either wholly or pro tanto, without consideration. * * *"

Without reference to prior decisions, and citing only Bringman v. Von Glahn, 71 A.D. 537, 75 N.Y.S. 845, this court apparently adopted the "Massachusetts rule," in Bank of Gresham v. Walch, 76 Or. 272, 147 P. 534, as it was therein said: "Under the statute the burden of showing that there was a want of consideration rests upon the defendant, and, if he offers any evidence that shows or tends to show a want of consideration, then it is incumbent upon the plaintiff to prove by a fair preponderance of the evidence upon the whole case that there was a consideration."

Although the question at bar was not before the court in American National Bank v. Kerley et al., 109 Or. 155, 220 P. 116, 32 A. L. R. 262, attention was directed, with apparent approval, to the case of Bank of Gresham v. Walch, supra.

Prior to the enactment of the Negotiable Instruments Law, the authorities were in hopeless conflict on this question; but since its adoption the decided trend of modern authority places the burden of proof to show absence or failure of consideration upon the maker of the note: Piner v. Brittain, 165 N.C. 401, 81 S.E. 462 (citing Flint v. Phipps, supra); Shaffer v. Bond, 129 Md. 648, 99 A. 973; Carter v. Butler, 264 Mo. 306, 174 S.W. 399, Ann. Cas. 1917A, 483; First Presbyterian Church v. Dennis, 178 Iowa, 1352, 161 N.W. 183, L. R. A. 1917C, 1005; Harponola Co. v. Wilson, 96 Vt. 427, 120 A. 895; Gleason v. Brown, 129 Wash. 196, 224 P. 930; First State Bank of Hazen v. Radke, 51 N.D. 246, 199 N.W. 930, 35 A. L. R. 1355 (extensive note); Hickman-Lunbeck Grocery Co. v. Hager, 75 Colo. 554, 227 P. 829; James Conforti Const. Co. v. Neek Realty Corporation, 125 Misc. 876, 212 N.Y.S. 393; Jones v. Bates, 161 Ill.App. 194; Kessler v. Valerio, 102 Conn. 620, 129 A. 788; Portuguese American Bank v. Schultz, 49 Cal.App. 508, 193 P. 806.

Such holding is in keeping with the plain and specific language of section 28 of the act (section 7820, Or. L.): "Absence or failure of consideration is matter of defense as against any person not a holder in due course. * * *"

Section 24 (section 7816, Or. L.) provides: "Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration. * * *"

There is good reason to hold that absence or failure of consideration is an affirmative defense. There is not much value to a note as evidence of indebtedness, if, after a lapse of years and when other evidence to establish the debt is unavailable, the maker can offer some proof tending to show want of consideration, and thereby place the burden upon the payee of establishing, by a preponderance of the evidence, that the note was given for a consideration. As was said in Shaffer v. Bond, supra: "In business transactions notes are often taken in order to settle all questions about the amount of liability, etc., and to put them in such shape that they will speak for themselves in case of the death of debtor or creditor, and yet, if the burden is put upon the payee to sustain the consideration, simply because the maker denies it, they are in fact of little more use between the parties than an open account would be."

The statute having made absence or...