Southwest Nat. Bank of Kansas City, Missouri v. Lindsley

• Decision Date: 15 July 1916
• Citation: 29 Idaho 343,158 P. 1082
• Parties: SOUTHWEST NATIONAL BANK OF KANSAS CITY, MISSOURI, Appellant, v. E. W. LINDSLEY et al., Respondents
• Court: Idaho Supreme Court

158 P. 1082

29 Idaho 343

SOUTHWEST NATIONAL BANK OF KANSAS CITY, MISSOURI, Appellant, v. E. W. LINDSLEY et al., Respondents

Supreme Court of Idaho

July 15, 1916

NEGOTIABLE INSTRUMENTS-HOLDER IN DUE COURSE-BURDEN OF PROOF.

1. Every holder of a negotiable instrument 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 is defective, the burden is on the holder to prove that he acquired title as a holder in due course, except where a party became bound on the instrument prior to the acquisition of such defective title.

2. Sec 3512, Rev. Codes, declares when a title to negotiable paper is defective.

3. Sec 3509, Rev. Codes, defines a "holder of negotiable paper in due course."

4. Held, that the evidence shows, without contradiction or conflict, that the appellant was a holder of said promissory note in due course.

5. While the jury is the judge of the evidence and the weight that should be given to it, it is not at liberty to ignore entirely evidence where there is no conflict in it and where there is nothing to indicate that the witness was testifying falsely.

6. Held, that the jury in rendering its verdict was misled or influenced by passion or prejudice.

[As to who is a bona fide holder of a note, see notes in 9 Am.Dec 272; 44 Am.Dec. 698]

APPEAL from the District Court of the Second Judicial District, in and for Idaho County. Hon. Edgar C. Steele, Judge.

Action on a promissory note. Judgment for defendants. Reversed.

Reversed and remanded. Costs awarded to appellant.

A. S. Hardy, for Appellant.

The purchaser of a negotiable note before maturity is under no duty to make inquiry as to the origin of the note or of the consideration for it. Nor will mere suspicious circumstances, if any exist, be sufficient to defeat the recovery by the purchaser, if he was not guilty of actual fraud or such conduct as amounts to dishonesty. The only notice which will defeat the purchaser is actual knowledge of the fraud or defect in the note, or knowledge of such facts that his action in taking the instrument amounts to bad faith and shows dishonest motives. (Vaughn v. Johnson, 20 Idaho 669, 119 P. 879, 37 L. R. A., N. S., 816; Vaughan v. Brandt, 21 Idaho 628, 123 P. 591; Goetz v. Bank of Kansas City, 119 U.S. 551, 7 S.Ct. 318, 30 L.Ed. 515; Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525; Setzer v. Deal, 135 N.C. 428, 47 S.E. 466; Gray v. Boyle, 55 Wash. 578, 133 Am. St. 1042, 104 P. 828; Lehman v. Press, 106 Iowa 389, 76 N.W. 818.)

Where the evidence shows that the plaintiff is a holder in due course, and the circumstances are shown, and there is no conflict with such proof, it is the duty of the court to direct a verdict for the plaintiff. And on appeal in such case the court should order judgment for the plaintiff. (Southwest Nat. Bank of Kansas City v. Baker, 23 Idaho 428, 130 P. 799; Exchange State Bank v. Taber, 26 Idaho 723, 145 P. 1090; Piper v. Neylon, 93 Neb. 51, 139 N.W. 836; Elk Valley Coal Co. v. Third Nat. Bank of Lexington, 157 Ky. 617, 163 S.W. 766; First National Bank etc. v. Humphreys (Tex. Civ. App.), 166 S.W. 53; First National Bank v. McNairy, 122 Minn. 215, Ann. Cas. 1914D, 977, 142 N.W. 139; First State Bank of Okla. City v. Tobin, 39 Okla. 96, 134 P. 395; Lowry Nat. Bank etc. v. Seymour, 91 S.C. 305, 74 S.E. 648.)

Jas. De Haven, for Respondents.

The bona fides of a purchaser of negotiable paper, subject to defenses in the hands of the original payee, is a question for the jury. (Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525; Park v. Johnson, 20 Idaho 548, 119 P. 52; Park v. Brandt, 20 Idaho 660, 119 P. 877; Vaughn v. Johnson, 20 Idaho 669, 119 P. 879, 37 L. R. A., N. S., 816; Winter v. Hutchins, 20 Idaho 749, 119 P. 883.)

If the court is to take away from the jury and decide, as a matter of law, that a particular fact is established by the evidence, the evidence must be of such a nature as to leave no reasonable doubt of the fact, and there must be no substantial evidence, either direct or indirect, to the contrary. (Union Investment Co. v. Rosenzweig, 79 Wash. 112, 139 P. 874; Richmond v. Tacoma Ry. & Power Co., 67 Wash. 444, 122 P. 351; McNight v. Parsons, 136 Iowa 390, 125 Am. St. 265, 15 Ann. Cas. 149, 113 N.W. 858, 22 L. R. A., N. S., 718.)

"The bank being an interested party, the credibility of the testimony of the cashier was a matter for the jury to pass upon in the light of all the facts and circumstances surrounding the matter under inquiry." (Joy v. Diefendorf, 130 N.Y. 6, 27 Am. St. 484, 28 N.E. 602; Canajoharie Bank v. Diefendorf, 123 N.Y. 191, 25 N.E. 402, 10 L. R. A. 676; Mee v. Carlson, 22 S.D. 365, 117 N.W. 1033, 29 L. R. A., N. S., 351; Citizens' Savings Bank v. Houtchens, 64 Wash. 275, 116 P. 866; Union National Bank v. Windsor, 101 Minn. 470, 118 Am. St. 641, 11 Ann. Cas. 204, 112 N.W. 999.

SULLIVAN, C. J. Budge, J., concurs. MORGAN, J., Dissenting.

OPINION

SULLIVAN, C. J.

This is an action to recover the principal and interest due upon a certain joint and several promissory note, in the usual form, made and executed by respondents in favor of McLaughlin Brothers, in payment for a certain imported stallion, which note, it is alleged in the complaint, was, prior to its maturity, for a valuable consideration, in the usual course of business, sold and assigned to appellant.

Prior to the commencement of the action, W. A. Shatzer, one of the makers of the note, died and Frank S. Rice, administrator of his estate, was made a defendant in that capacity. A motion has been made in this court to substitute Elizabeth Shatzer as administratrix of the estate of W. A. Shatzer, deceased, as a respondent herein in place of Frank S. Rice, as administrator, Rice having resigned his administratorship since the appeal was taken and Elizabeth Shatzer having been appointed and qualified as administratrix of the estate. The application has been granted and the substitution made.

The defense disclosed by the amended answer is that respondents and S. Delmage and Henry J. Elfers entered into a contract with McLaughlin Brothers, through their agent, Emerson Mays, wherein it was agreed that respondents and Delmage and Elfers were to purchase a stallion from McLaughlin Brothers for the sum of $ 4,000, and were to give in payment therefor four promissory notes for $ 1,000 each; that pursuant to the agreement respondents executed the four notes, including the one sued upon, which were to be delivered to McLaughlin Brothers when signed by Delmage and Elfers; that at the same time and place, and as a part of the transaction, McLaughlin Brothers, through their agent, entered into three written agreements and one oral agreement with respondents, in substance as follows: 1. To hold each of respondents liable upon the purchase price of the stallion, as evidenced by the promissory notes, for the sum of $ 400 only, being the price of one share in the White Bird Percheron Horse Company, which was then formed by respondents and Delmage and Elfers; 2. That McLaughlin Brothers would warrant and guarantee the stallion to prove to be a sixty per cent foal-getter, or if he should not prove to be so, to exchange him for a Percheron, Belgian or French Coach stallion free of any charge to respondents; 3. That in the event the stallion should die before the end of the breeding season of 1908, McLaughlin Brothers would replace him with a Percheron, Belgian or French Coach stallion; 4. That it was orally agreed that McLaughlin Brothers should maintain stables in Spokane, Washington, during the years 1907 and 1908 where a stallion could be selected by respondents in place of the one purchased, in the event he should prove to be unsatisfactory, or should not be a sixty per cent foal-getter, or should die before the end of the breeding season of 1908.

Upon the issues thus made by the pleadings, the cause was tried by the court with a jury and a verdict and judgment rendered and entered in favor of the defendants. The appeal is from the judgment.

The admission of certain evidence and the giving and the refusing to give certain instructions and the insufficiency of the evidence to support the verdict are assigned as error.

The main defense was that the title of McLaughlin Brothers, who negotiated said note, was defective and that said promissory note was procured by fraud and misrepresentation, and that the appellant is not a holder of said note in due course.

Sec. 3512, Rev. Codes, declares when the title to a negotiable instrument is defective, within the meaning of the law concerning negotiable instruments, and is as follows:

"The title of a person who negotiates an instrument is defective within the meaning of this title 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." (Shellenberger v. Nourse, 20 Idaho 323, 118 P. 508.)

The evidence admitted on the trial was sufficient to show that McLaughlin Brothers' title to said promissory note was defective. It then, under the statute, devolved upon the appellant bank to show that it was a holder in due course.

Sec. 3509, Rev. Codes, defines a holder of negotiable paper in due course as follows:

"A holder in due course, is a holder who has taken the instrument under the following conditions:

"First. That the instrument is complete and regular upon its face;

"Second. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

"Third. That he took it in good faith and for...