Parsons v. Utica Cement Co.

• Decision Date: 20 July 1909
• Citation: 82 Conn. 333,73 A. 785
• Court: Connecticut Supreme Court
• Parties: PARSONS v. UTICA CEMENT CO.

73 A. 785

82 Conn. 333

PARSONS

v. UTICA CEMENT CO.

Supreme Court of Errors of Connecticut.

July 20, 1909.

Appeal from Superior Court, Hartford County; Silas A. Robinson, Judge.

Action on two negotiable bonds by Hannah G. Parsons against the Utica Cement Manufacturing Company. From a judgment for defendant, plaintiff appeals. Affirmed.

See, also, 80 Conn. 58, 60 Atl. 1024.

Henry T. Richardson, for appellant.

John R. Buck and John H. Buck, for appellee.

BALDWIN, C. J. The result of a former trial of this cause, in which a verdict was rendered for the plaintiff, is reported in 80 Conn. 58, 66 Atl. 1024. On a second trial there has been a verdict for the defendant, and error is claimed in respect to the charge to the jury.

The complaint contained two counts, each alleging (as in Practice Book, form 334) that $2,000 is due to the plaintiff from the defendant on an instrument under seal, of which a copy is annexed and marked as an exhibit. The first defense to each count was a general denial. A second defense to each was that the bonds, which were payable to bearer and matured January 1, 1800, more than 16 years before the suit was brought, were owned, in 1887, by the Continental Life Insurance Company, and were then fraudulently taken from its possession by the plaintiff's husband, who was its president, without any consideration moving to the company, and came into her possession with notice of that fact, without any consideration moving from her, and that she was never a bona fide holder. These allegations were denied by the reply. On the first trial the jury were instructed that, as the plaintiff had possession of the bonds, the burden of proof was on the defendant to show that she was not a bona fide holder, and that to do this it must satisfy them, by a fair preponderance of evidence, that she acquired the bonds, either without paying any value, or knowing that her husband had taken them from the insurance company improperly and fraudulently. It having been an undisputed fact, during that trial, that her husband's title was defective, we held this charge erroneous, since the burden was upon her to show value paid or want of notice of the defect, not on the defendant to show no value paid or the existence of notice. In support of this conclusion we referred to the negotiable instruments act (Gen. St. 1902, §§ 4171, 4222, 4229). Our attention is now called to the provision in Gen. St. 1902, § 4170, that the succeeding sections of the chapter, which include those above mentioned, shall not apply to negotiable instruments made and delivered prior to 1897.

The negotiable instruments act, in most respects, was simply a codification of the common law in reference to the subject in hand. It was such in respect to the provision of section 4229 that "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 was 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." In Byles on Bills (chapter 4, p. *60) the common law on this subject, with reference to the burden of proving a consideration, is thus stated: "The defendant is not in general permitted to put the plaintiff on proof of the consideration which the plaintiff gave for the bill, unless the defendant can make out a prima facie case against him by showing that the bill was obtained from the defendant, or from some intermediate party, by undue means, as by fraud, felony, or force, or that it was lost, or that he received no consideration." Where, as here, it appears that the negotiable paper in suit, though there was nothing wrong in its original issue, was obtained from an intermediate party by fraud, proof of consideration is only called for from the plaintiff because it would tend to show that he nevertheless is a "bona fide" holder within the meaning of that term in the law merchant. Whether he acquired the paper by purchase or gift would, under ordinary circumstances, be of itself unimportant. But after proof that it was once in the hands of a fraudulent holder, it may justly be presumed to continue in the hands of a holder of that character until the contrary be proved. Collins v. Gilbert, 94 U. S. 753, 761, 24 L. Ed. 170. The position of the holder of negotiable paper is of an exceptional character. He may acquire a title through a thief, and yet maintain it against the original owner. But his possession is not enough to support a recovery, after it once appears that he must trace title through fraudulent practices and unclean hands. Totten v. Bucy, 57 Md. 452. This is equally true whether the fraudulent practices were connected with the original inception of the paper, or, as in the present instance, occurred subsequently, to the prejudice of an intermediate holder. Fulton Bank v. Phoenix Bank, 1 Hall (N. Y.) 562; 2 Parsons on Notes and Bills, *283; 4 Am. & Eng. Encycl. of Law, 322. The case of Kinney v. Kruse, 28 Wis. 183, asserts the contrary, but is opposed to the strong current of authority.

The cause went to the jury, as respects each count, on two issues. One was on the truth of the complaint; the other was on the truth of the special defense. As to the former issue, the plaintiff had the burden of proof from the outset and to the end. Lockwood v. Lockwood, 80 Conn. 513, 521, 69 Atl. 8. As to the latter issue, her production of the bond, its due execution being admitted, raised a presumption of title, which made out a prima facie case. But as soon as it appeared, either by her witnesses or those of the defendant, that this bond was fraudulently abstracted from the assets of a third party to which it originally belonged, this presumption no longer availed her, and her original burden of proof, only temporarily satisfied by its aid, rested upon her again, and now required her to show a title by affirmative evidence that she obtained the instrument both in good faith and for a valuable consideration. Her good faith she could only show by proof that, when the bond came to her, she had no knowledge of such fraud, and was not equitably chargeable with notice of it. Baxter v. Camp, 71 Conn. 245, 253, 41 Atl. 803, 42 L. R. A. 514, 71 Am. St. 169; Pulton Bank v. Phœnix Bank, 1 Hall (N. Y.) 577. The defendant, it is true, had the burden for certain purposes of proving that she took the bond with such notice, and without consideration; but these purposes were accomplished when the fact was established of its fraudulent abstraction from the assets of the insurance company by her grantor. One legal presumption established by the law merchant was thus met with another legal presumption established by the same law, which by that law was sufficient to destroy it. In a concurring opinion, often quoted, given in a case of a similar character, in which a ruling of his at nisi prius was pronounced erroneous. Baron Martin observed that be did not profess to understand how, when several facts were alleged in a plea, all necessary to make it good, and all put in issue, proof of one could relieve a defendant from the burden of proving the rest; but that, whatever might be the philosophy of that matter, the rule was so, and it was a useful one because it threw a difficulty in the way of fraudulent Indorsements. Harvey v. Towers, 15 Jur. 544; 4 Eng. Law & Equity, 531.

The charge to the jury in the superior court, which followed the rule as stated by us when the cause was previously here (Parsons v. Utica Cement Co., 80 Conn. 60, 66 Atl. 1024), was in conformity to the...