Rivers Bros. v. C.F.T. Co., Inc.

• Decision Date: 14 February 1928
• Citation: 124 Or. 157,264 P. 368
• Parties: RIVERS BROS. v. C. F. T. CO., INC.
• Court: Oregon Supreme Court

264 P. 368

124 Or. 157

RIVERS BROS. v. C. F. T. CO., INC.

Supreme Court of Oregon

February 14, 1928

Department 2.

Appeal from Circuit Court, Josephine County; C. M. Thomas, Judge.

Action by Rivers Bros., a corporation, against C. F. T. Company Inc., sometimes known as Colby French Thompson Company. Judgment for defendant, and plaintiff appeals. Reversed, and judgment rendered for plaintiff, with directions.

Myer C. Rubin, of Portland, for appellant.

James T. Chinnock, of Grants Pass (W. T. Miller, of Grants Pass, on the brief), for respondent.

BELT J.

This is an action to recover amount alleged to be due on two trade acceptances of which plaintiff claims to be a holder in due course. These bills, each in the sum of $220, were drawn on May 31, 1923, by the Cascade Products Company on the defendant corporation, and were accepted by it on the same date. The acceptances were executed by the defendant company which was engaged in business in the city of Grants Pass Or., in payment for certain washing machines contracted to be delivered by the Cascade Products Company. It is alleged that the plaintiff purchased the acceptances before maturity, for value, and without notice of any infirmity in the bills or defect in the title of the person negotiating them.

The answer admits the execution of the trade acceptances, but denies that the plaintiff is the holder in due course. As a further and separate defense, after reciting the execution of the instruments, it is alleged that:

The "Cascade Products Company agreed to ship the said washing machines immediately upon receipt of said order, and that the said Cascade Products Company failed, neglected, and refused to fill said order, and did not ship the kind and quality ordered, and by reason thereof the defendant herein refused to pay the amount agreed upon."

Further:

"The defendant alleges that the plaintiff herein is not the holder of said instruments in writing, as set forth in plaintiff's complaint, and that the said alleged transfer of the bill of exchange was not made at all, or, if made, was done for the purpose of defrauding the defendant herein."

And finally:

"That the plaintiff had knowledge that the Cascade Products Company had not fulfilled their part of the obligation with the defendant herein, and that the said alleged transfer, if made, was fraudulent, and for the purpose of defrauding the defendant by trying to make it appear that the plaintiff was the holder in due course of the said trade acceptances."

Plaintiff replied with a general denial to the affirmative matter as above stated.

On these issues the cause was submitted to a jury, and a verdict returned in favor of the defendant. Plaintiff appeals.

Was the plaintiff entitled to a directed verdict? It established a prima facie case by introducing the trade acceptances whose execution was admitted, and by proving its ownership thereof. By virtue of section 7851, Or. L., plaintiff is presumed to be a holder in due course. It had the right to rely upon this presumption until evidence had been offered by defendant showing that the title of the person negotiating the instruments was defective. If such were shown by the defendant, it was incumbent upon plaintiff to establish by the greater weight of the evidence that it was a holder in due course. Section 7847, Or. L., provides:

"The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith or under such circumstances as amount to fraud."

In the answer of the defendant no facts were alleged upon which the charge of fraud could be predicated. The pleader seems to have been content merely to allege conclusions. No contention is made that the execution of these acceptances was obtained through "duress, or force and fear, or other unlawful means, of for an illegal consideration." If the title is defective, within the meaning of the act, it is by reason of its negotiation "in breach of faith or under such circumstances as amount to fraud." Turning again to the pleading, and giving it every reasonable intendment to which it is entitled after verdict, we find there was no allegation of failure of consideration for the acceptances. It is alleged that the Cascade Products Company did not ship washing machines of "the kind and quality ordered." In other words, we take it that defendant complains of a breach of warranty.

While failure of consideration is no defense against a holder in due course, it might well be argued that, if the Cascade Products Company had failed to deliver any washing machines, the negotiation of the trade acceptances, under such circumstances, would be a breach of faith, and would amount to the perpetration of a fraud. The general denial of the allegations of the complaint that plaintiff is a holder in due course does not put such matter in issue, and is not sufficient to overcome the presumption of the statute attaching to negotiable paper. Holdsworth v. Anderson Drug Co., 118 Va. 359, 87 S.E. 565; First National Bank of Buffalo v. Wallace, 50 N.D. 330, 196 N.W. 303: Gulf States Steel Co. v. Ford, 173 N.C. 195.

91 S.E. 844. To overcome the prima facie case established by plaintiff it was necessary for the defendant to allege and prove facts showing a defective title.

Let us assume, although we do not so decide, that there is an issue under the pleadings whether the plaintiff is a holder in due course. It appears, without contradiction, that the plaintiff, which is a San Francisco firm dealing in negotiable paper, acquired these trade acceptances before maturity, and is the owner and holder thereof. There is evidence that, prior to the purchase of the bills in question--which was at face value, less 8 per cent discount--the plaintiff made investigation, through a commercial agency, as to the financial standing of the defendant. It had knowledge of the facts that the Cascade Products Company was in the business of selling merchandise and accepting trade acceptances in payment therefor. It is recited in the bill of exceptions that the "purchase of these instruments was made in the course of plaintiff's business." and that the discount of 8 per cent. was the market rate at San Francisco on papers of this nature. There is no testimony tending to show that the plaintiff...