Roach v. Halvorson
| Decision Date | 09 October 1914 |
| Docket Number | 18,729 - (235) |
| Citation | 148 N.W. 1080,127 Minn. 113 |
| Parties | T. P. ROACH v. OLE HALVORSON |
| Court | Minnesota Supreme Court |
Action in the district court for Rock county to recover $3,599.36. The case was tried before Nelson, J., who denied plaintiff's motion for a directed verdict in his favor and a jury which returned a verdict in favor of defendant. From an order denying his motion for a new trial, plaintiff appealed. Reversed and new trial granted.
Collateral security -- title of holder.
1. The transfer of negotiable paper for value and in the usual course of business, as collateral security, vests in the holder a valid title, similar in all respects to that held by an unconditional indorsee.
Evidence -- admissions by former owner of note.
2. The general rule that admissions of a former owner of property in disparagement of his title, made after he has parted with the title and possession, cannot be received in evidence against his successor in interest, applies to commercial paper.
Hearsay.
3. Under the rule admissions made by the payee of a negotiable promissory note after he has transferred the same to a third person, tending to show that the note was by him obtained in fraud, are hearsay and inadmissible against the indorsee in an action against the maker.
A. J Daley, for appellant.
C. H. Christopherson, for respondent.
This action was brought to recover upon a promissory note given by defendant to the American & Canadian Land Co. a copartnership doing business in the state of Iowa, and by the payee transferred to plaintiff as collateral security. Defendant interposed in defense that the note was procured from him by the Land Co. by fraud and fraudulent representations and was wholly without consideration. Plaintiff in reply put in issue the allegations of fraud and fraudulent representations, and affirmatively alleged that the note was duly indorsed and delivered to plaintiff in the usual course of business, before maturity, and as collateral security for a loan of money then made to the Land Co., and that plaintiff had no notice or knowledge of the acts of fraud alleged in the answer. Defendant had a verdict and plaintiff appealed from an order denying a new trial.
The assignments of error in this court challenge certain rulings of the trial court in the admission and exclusion of evidence, the instructions of the court to the jury, and the sufficiency of the evidence to support the verdict.
1. The law controlling the rights of the parties is well settled in this state. The holder of a negotiable promissory note, delivered to him by the payee as collateral security, in the usual course of business for value and before maturity, stands in the same position as an unconditional indorsee, and is presumed to be a bona fide holder. First Nat. Bank of Rochester v. Bentley, 27 Minn. 87, 6 N.W. 422; 2 Notes on Minn. Reports, 94; First Nat. Bank of Morrison v. Busch, 102 Minn. 365, 113 N.W. 898. The defense of fraud in the procurement of the note is available to the maker, and, when he pleads and proves the same on the trial, the presumption of bona fides in the holder in effect disappears, and the burden is cast upon him to establish his good faith in fact. If he succeeds in this, he is entitled to recover notwithstanding the fraud, precisely as an unconditional indorsee may recover under a like state of facts, at least to the extent of the secured indebtedness. In other words, when the good faith is in fact shown the defense of fraud fails. This is settled law in this state (Cummings v. Thompson, 18 Minn. 228 (246); 1 Notes on Minn. Reports, 746), and the trial below proceeded in harmony therewith. Two issues were accordingly litigated, namely: (1) Whether the note in suit was procured by fraud and fraudulent representations, and without consideration, and (2) whether plaintiff was in fact a bona fide holder of the same, without notice of the fraud. The verdict for defendant necessarily answered both questions in favor of defendant.
2. The assignments of error having reference to the admission of evidence may all be considered together, for with one exception they present substantially the same question. The note in suit was given to the Land Co. in part payment for certain land the company then agreed to sell and convey to defendant, which defendant claims the company represented that it owned, whereas, in fact, that the company had no title and could not convey the same, and never did so convey to him. Substantially all the evidence of the admission of which plaintiff complains, was clearly admissible. It was not necessary to connect plaintiff with the fraud, and the statements and representations made by the agents of the Land Co. at the time of and...
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