Park v. Johnson

• Decision Date: 11 November 1911
• Citation: 20 Idaho 548,119 P. 52
• Parties: HOWARD C. PARK, Appellant, v. J. T. JOHNSON et al., Respondents
• Court: Idaho Supreme Court

119 P. 52

20 Idaho 548

HOWARD C. PARK, Appellant, v. J. T. JOHNSON et al., Respondents

Supreme Court of Idaho

November 11, 1911

NEGOTIABLE INSTRUMENT - EXAMINATION OF PLAINTIFF - BURDEN OF PROOF-SUSPICIOUS CIRCUMSTANCES.

(Syllabus by the court.)

1. The case of Winter v. Nobs, 19 Idaho 18, 112 P. 525, approved and followed.

2. Evidence in this case examined and held sufficient to support the judgment.

3. In an action upon a promissory note where the plaintiff testifies in chief and in support of his complaint that he purchased the note before maturity and paid therefor a consideration, and that the plaintiff was well acquainted with the payee of the note and had been for many years, and that the note purchased was one of a number of the same kind it is proper on cross-examination to interrogate the plaintiff fully as to all facts connected with the transaction involved in the purchase of said note in order to aid the jury in determining whether the note was in fact purchased in good faith before maturity and for value.

4. Where action is brought upon a promissory note, and it is alleged that the plaintiff purchased the note before maturity in due course of business and paid therefor a consideration and an answer is made denying the transfer before maturity or at all, for value or otherwise, and that the note was fraudulent from its inception, the jury may take into consideration all the circumstances surrounding the transaction in determining whether the purchase was made in good faith, and whether such circumstances were sufficient to give notice to the plaintiff or to lead an ordinarily prudent man to make inquiry as to whether the note possessed any infirmities which would affect its collection, and if the jury conclude that the circumstances surrounding the purchase of the note were sufficient to cause an ordinarily prudent man to make inquiry or investigate the circumstances under which the note was executed and the plaintiff refrained from making such inquiry, then and in such case such facts were sufficient to authorize a jury to find that such holder was not a holder in good faith and without notice.

5. An instruction which covers the provisions of sec. 3509, Rev Codes, and adds thereto, "And the court instructs the jury that if you find from the evidence in this action that the title of McLaughlin Bros. in controversy was defective by reason of fraud, illegal consideration or for any reason, then it becomes incumbent upon the plaintiff to show that he was a holder in due course, and in order for him to do so he must prove sufficient to show that he is a holder within the meaning of the definition above given," is erroneous by reason of including the words, "or for any reason."

6. An instruction which directs the jury that the presence of suspicious circumstances means bad faith is erroneous. The existence of suspicious circumstances alone will not destroy the good faith of a transaction, but it is such circumstances as would charge the purchaser of a note, as an ordinarily prudent man, with bad faith or notice of the infirmity in the instrument, or defect in the title of the person from whom he makes the purchase. This error, however, taken in connection with other instructions covering the same subject and the strong and conclusive evidence, was not of such prejudicial character as to warrant a reversal.

APPEAL from the District Court of the Eighth Judicial District for Kootenai County. Hon. Robert N. Dunn, Judge.

Action upon a promissory note. Judgment for defendants. Plaintiff appeals. Affirmed.

Judgment affirmed; costs awarded to respondent.

Elder & Elder, and Reed & Boughton, for Appellant.

"Constructive notice from extrinsic circumstances must be clear, and it must appear that the indorsee was apprised of such circumstances as would have avoided the note in the hands of the indorser." (1 Daniels, Neg. Inst., p. 799; Horton v. Bayne, 52 Mo. 533; Wildsmith v. Tracey, 80 Ala. 262; Lee v. Whitney, 149 Mass. 447, 21 N.E. 948; Goetz v. Bank of Kansas City, 119 U.S. 551, 7 S.Ct. 318, 30 L.Ed. 515.)

It is only actual knowledge of the defect or infirmity or notice of such facts and circumstances as would put a man on inquiry and would charge him with bad faith or the imputation of dishonest dealings that was intended by the statute to defeat a recovery. (Wright Investment Co. v. Fillingham, 85 Mo.App. 534; Goodrich v. McDonald, 77 Mich. 486, 43 N.W. 1019; Norton, Bills and Notes, p. 303.)

Unless the evidence makes out a case upon which the jury would be authorized to find fraud or bad faith in the purchaser, it is the duty of the court to direct a verdict for the holder. (Armstrong v. Stearns, 156 Mich. 597, 121 N.W. 312; Bothwell v. Corum (Ky.), 123 S.W. 291.)

Mere information tending to arouse suspicion is not sufficient. (Brown v. Hoffelmeyer, 74 Mo.App. 385; Merchants & Mfgrs. Nat. Bank v. Furniture Co., 57 W.Va. 625, 50 S.E. 880, 70 L. R. A. 312; Leavitt v. Taylor, 163 Mo. 158, 63 S.W. 385; Valley Sav. Bank v. Mercer, 97 Md. 458, 55 A. 435; Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N.E. 959; Miller v. Finley, 26 Mich. 249, 12 Am. Rep. 306.)

A purchaser of negotiable paper, though he may have had cause for suspicions sufficient to put a prudent man on inquiry or be negligent, will, in the absence of a showing of bad faith, acquire good title. (Wilson v. Riddler, 92 Mo.App. 335; First State Bank v. Hammond, 104 Mo.App. 453, 79 S.W. 493; Creston Nat. Bank v. Salmon, 117 Mo.App. 506, 93 S.W. 288; Second Nat. Bank v. Weston, 161 N.Y. 520, 76 Am. St. 283, 55 N.E. 1080; First Nat. Bank v. Flath, 10 N.D. 281, 86 N.W. 867; Merritt v. Boyden, 191 Ill. 136, 85 Am. St. 246, 60 N.E. 907; Goetz v. Bank of Kansas City, 119 U.S. 551, 7 S.Ct. 318, 30 L.Ed. 515; Doe v. N.W. Coal Trans. Co., 78 F. 62; Sinkler v. Siljan, 136 Cal. 356, 68 P. 1024; Metcalf v. Draper, 98 Ill.App. 399; Mann v. Merchants' Loan & Trust Co., 100 Ill.App. 224.)

Whitla & Nelson, for Respondents.

Wilful refusal or neglect to learn of a state of facts which are readily at command, for the purpose of attempting to claim bona fides, as is shown in this case to be the fact, is just as conclusive evidence of "bad faith" as absolute knowledge would have been. (Schmueckle v. Waters, 125 Ind. 265, 25 N.E. 281; State Nat. Bank v. Bennett, 8 Ind.App. 679, 36 N.E. 551; 2 Ency. of Ev. 526.)

McLaughlin Brothers' reputation has become so widely known by every person acquainted with them, or who knows of their transactions, that anyone who takes their paper is charged with notice of their fraudulent transactions, as a number of courts of last resort have held that their dealings were fraudulent. (City Nat. Bank v. Jordan, 139 Iowa 499, 117 N.W. 758; Union Nat. Bank v. Windsor, 101 Minn. 470, 118 Am. St. 641, 112 N.W. 999, 11 Ann. Cas. 204; Union Investment Co. v. Wells, 39 Can. S.Ct. 625, 11 Ann. Cas. 33; Winter v. Nobs, 19 Idaho 18, 112 P. 525.)

"The term 'good faith' means not only honesty of intention, but the absence of suspicious circumstances, or, if such circumstances exist, then such inquiry as will satisfy a prudent man of the validity of the transaction." (Pennington County Bank v. First State Bank, 110 Minn. 263, 136 Am. St. 496, 125 N.W. 119, 26 L. R. A., N. S., 849; Ward v. Doane, 77 Mich. 328, 43 N.W. 980; City Nat. Bank v. Jordan, 139 Iowa 499, 117 N.W. 758; Union Nat. Bank v. Windsor, 101 Minn. 470, 118 Am. St. 641, 112 N.W. 999, 11 Ann. Cas. 204; Arnd v. Aylesworth, 145 Iowa 185, 123 N.W. 1000.)

"Whatever the circumstances may have been, the question of good faith of the purchaser of the note was one of fact instead of law, and the jury had a right to determine it in the light of all the facts and circumstances presented in the case." (Winter v. Nobs, 19 Idaho 18, 112 P. 525; Merchants' Nat. Bank v. Sullivan, 63 Minn. 468, 65 N.W. 924; Schultheis v. Sellers, 223 Pa. 513, 72 A. 887, 22 L. R. A., N. S., 1210; Cedar Rapids Nat. Bank v. Myhre Bros., 57 Wash. 596, 107 P. 518; McKnight v. Parsons, 136 Iowa 390, 125 Am. St. 265, 113 N.W. 858, 22 L. R. A., N. S., 718, 15 Ann. Cas. 665; Tredick v. Waters, 81 Kan. 828, 106 P. 1067.)

STEWART, C. J. Ailshie and Sullivan, JJ., concur.

OPINION

STEWART, C. J.

This is an action to recover upon a promissory note for $ 1,125, dated Coeur d'Alene. Idaho, March 26, 1906, and due three years from date, and executed jointly and severally by respondents to McLaughlin Bros. and by McLaughlin Bros. indorsed and transferred before maturity for value received, to the plaintiff, appellant herein, who claims to be the owner of the same. The answer admits the execution of the note sued on and puts in issue the plaintiff's ownership of said note and the transfer to plaintiff by McLaughlin Bros, before its maturity, and alleges that the note was originally obtained through fraud and deception at the time the note was executed, and that there was a breach of a warranty. The cause was tried to a jury and a verdict rendered for the respondents. Judgment was entered accordingly. This appeal is from the judgment and also from the order overruling a motion for a new trial.

The appellant assigns fifty-two errors, many of which have been discussed and passed on by this court in the case of Winter v. Nobs et al., 19 Idaho 18, 112 P. 525, a case almost identical with the one now under consideration. In fact, the Winter-Nobs case was upon one of four promissory notes given by the respondents to McLaughlin Bros. in the same transaction in which the note sued upon in this action was given, and the only material difference between the facts of the two cases is that in the Winter case McLaughlin Bros indorsed and transferred the note to Winter, and in the present case McLaughlin Bros. indorsed and...