Pierson v. Huntington

• Decision Date: 18 October 1909
• Parties: PIERSON v. HUNTINGTON.
• Court: Vermont Supreme Court

74 A. 88

82 Vt. 482

PIERSON

v. HUNTINGTON.

Supreme Court of Vermont. Washington.

Oct. 18, 1909.

Exceptions from Washington County Court; Willard W. Miles, Judge.

Assumpsit by Amos H. Pierson against Frank L. Huntington. Defendant pleaded the general issue, and on a trial by the court had judgment. Plaintiff excepted. Affirmed.

Argued before ROWELL, C. J., and TYLER, MUNSON, and WATSON, JJ.

William N. Theriault, for plaintiff. John G. Wing, for defendant.

MUNSON, J. The note in suit was given by the defendant to the Woodford Distilling Company, and was indorsed by that company to the plaintiff. The plaintiff's case was submitted in depositions, and consisted of the note and evidence of its transfer for value before maturity. The defendant's evidence was confined to matters affecting the note in the hands of the payee. The plaintiff offered nothing in reply. The trial court has found that the note was indorsed to the plaintiff without recourse, for a valuable consideration, and before maturity; and that it was received without notice of a defense, but without inquiry. The court found further that the assignment was not made in due course of business, basing its conclusion upon the fact that the plaintiff took the note thus indorsed without inquiry, when he was wholly unacquainted with the defendant and his financial condition. The plaintiff claims that there was no evidence to support the finding that he bought the note without inquiry, and that, if the finding is sustained, the conclusion drawn from it falls short of a finding that he is not a bona fide holder. The note was given for liquors in bond, and at the time it was given the payee agreed, by a separate writing, that if the goods did not give satisfaction they might be held subject to its order, and that the note should be returned on a return of the certificates. The goods were not satisfactory, and the defendant returned the certificates and demanded the note; but the payee refused to return it, and soon after sold it to the plaintiff. These facts were found from evidence received subject to the plaintiff's exception.

The plaintiff claims that the findings touching his conduct, if warranted by the evidence, are not sufficient to support the judgment. We are referred to a list of cases, decided in many jurisdictions, which concur in holding that one who takes negotiable paper before due for a valuable consideration in good faith, will not be affected by an existing defense, even though he was aware of circumstances that ought to have excited the suspicion of a prudent man; but the cases cited are not in accord with the decisions of this court it is held in this state that a purchaser of negotiable paper must exercise reasonable prudence and caution in taking it, and that if he take it without making inquiry, when the circumstances are such as would excite the suspicion of a prudent and careful man, he will not stand in the position of a bona fide holder. This doctrine was promulgated in Roth v. Colvin, 32 Vt 125, and was reaffirmed in Limerick Bank v. Adams, 70 Vt. 132, 40 Atl. 166, and again in Capital Savings Bank v. Montpelier Savings Bank, 77 Vt. 189, 59 Atl. 827. It remains to be seen whether this distinction will be of importance in the determination of the case presented. The case states that nothing appeared tending to show that the plaintiff made any inquiry regarding the note or its maker. The defendant contends that the evidence he introduced was such as cast on the plaintiff the burden of showing that he took the note in good faith, and that this required more than proof of a purchase for value before maturity. The questions raised by this claim are the first for consideration.

The production of a negotiable instrument, properly indorsed, is prima facie evidence of the holder's right to recover against the maker; but the maker may compel the holder to support his prima facie case with further evidence by showing a defense that would have been available against the payee. The defenses which have ordinarily been recognized as imposing this additional burden are illegality, procurement by fraud or duress, want of consideration, and an intervening theft or loss. This enumeration is in accord with the statements generally made in our own decisions. It was said, however, in Quinn v. Hard, 43 Vt. 375, 5 Am. Rep: 284, that it did not appear to be very clearly settled in what cases and to what extent the burden of proof would be thrown upon the plaintiff by the introduction of matters amounting to a defense against the payee. The more recent cases have apparently relieved the subject of some of its uncertainty, for the statement is now generally framed in terms that cover fraud in the transfer as well as in the inception of the note, and a subsequent failure of consideration as well as an original want of it. 4 Ency. Law, 320, 322; 8 Cyc. 236; National Revere Bank v. Morse, 163 Mass. 383, 40 N. E. 180; Sperry v. Spaulding, 45 Cal. 544.

The existence of a rule of this character has long been affirmed in this state, whatever uncertainty may have been felt regarding its application. It was directly involved in the decision of Sandford v. Norton, 14 Vt. 228, where it was said that, when the defendant makes out a case upon which none but a bona fide holder for value is entitled to recover against him, it is incumbent upon the plaintiff to show that he is entitled to sue in that character. It was recognized in Blaney v. Pelton, 60 Vt. 275, 13 Atl. 564, where it was said that if the defendant offers evidence tending to prove fraud in obtaining the note, or an entire failure of consideration for it between the original parties, the burden of proof is thereby cast upon the plaintiff to show that he was an innocent purchaser of the note for value while it was current. It was restated and applied in Limerick Bank v. Adams, 70 Vt. 132, 40 Atl. 166, where it was held that evidence offered by the defendants which tended to show that the note was without consideration and void for fraud as between the original parties was properly admitted as a step in their defense, and for the purpose of casting upon the plaintiff the burden of showing that it was not chargeable with knowledge of the...