Southwest National Bank of Kansas City v. Baker

• Decision Date: 22 February 1913
• Citation: 130 P. 799,23 Idaho 428
• Parties: THE SOUTHWEST NATIONAL BANK OF KANSAS CITY, a Corporation, Appellant, v. H. D. BAKER et al., Respondents
• Court: Idaho Supreme Court

130 P. 799

23 Idaho 428

THE SOUTHWEST NATIONAL BANK OF KANSAS CITY, a Corporation, Appellant, v. H. D. BAKER et al., Respondents

Supreme Court of Idaho

February 22, 1913

PROMISSORY NOTE-HOLDER IN DUE COURSE-EVIDENCE.

1. 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 were the fact; third, that he took it in good faith and for value fourth, that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

2. A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce the payment of the instrument for the full amount thereof against all parties liable thereon.

3. Under the provisions of sec. 3514, Rev. Codes, fraud misrepresentations and no consideration are not available as a defense, where the evidence clearly shows, and is in no way contradicted, that the plaintiff is the holder of the note sued upon free from any defect of title of prior parties and free from defenses available to prior parties among themselves.

4. Evidence in this case examined, and held that the evidence is positive, certain and uncontradicted that the instrument is complete and regular upon its face, and that the plaintiff purchased the note in controversy in the usual course of business of the bank in good faith and for value before maturity, and at the time of the purchase without notice that said note had been dishonored or of any infirmity in the instrument or defect in the title of the person negotiating it.

APPEAL from the District Court of the Ninth Judicial District for Fremont County. Hon. James G. Gwinn, Judge.

Action to recover upon a promissory note. Reversed.

Judgment reversed, and judgment entered in favor of the plaintiff. Costs awarded to appellant.

Soule & Soule, for Appellant.

The lower court erred in refusing to give an instruction copied from the opinion of this court in the case of Vaughn v. Johnson, 20 Idaho 669, 119 P. 879, 37 L. R. A., N. S., 816. The jury should have been informed as to the duty of the makers of notes in regard to the degree of diligence they should exercise and to which they are held.

Millsaps & Moon, for Respondent.

"Whether plaintiff in such a case has satisfactorily met the burden of proof to make good his claim to be an innocent purchaser is a question of fact for the jury, and is subject to the same rule as to its weight and sufficiency as any other fact in the case; and the jury had a right to determine it in the light of all the facts and circumstances presented in the case." (Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1012C, 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; Goodman v. Simonds, 61 U.S. 343, 15 L.Ed. 934; Shellenberger v. Nourse, 20 Idaho 323, 118 P. 508; City National Bank v. Jordan, 139 Iowa 499, 117 N.W. 758; Citizens Sav. Bank v. Hutchens, 64 Wash. 275, 116 P. 866; Hallowell v. McLaughlin Bros., 136 Iowa 279, 111 N.W. 429; Union National Bank v. Windsor, 101 Minn. 470, 118 Am. St. 641, 11 Ann. Cas. 204, 112 N.W. 999; Hallowell v. McLaughlin Bros. (Iowa), 121 N.W. 1039; Park v. Windsor, 115 Minn. 256, 132 N.W. 264; City National Bank v. Windsor, 116 Minn. 422, 133 N.W. 961; Union National Bank v. Mailloux, 27 S.D. 543, 132 N.W. 168.)

The notes of McLaughlin Bros. are so fraudulent, and such fact is so well known, that it becomes incumbent upon the one purchasing the same to show that he did not know of the conditions surrounding the execution of the note, as the notes have been so often declared fraudulent by the courts of last resort. (Union Inv. Co. v. Wells, 39 Can. S.Ct. 525; 11 Am. & Eng. Ann. Cas. 33.)

STEWART, J. Ailshie, C. J., and Sullivan, J., concur.

OPINION

STEWART, J.

This is an action to recover the sum of $ 1,423, with interest, upon a promissory note dated October 17, 1907, and executed by the defendants in favor of McLaughlin Bros., and by McLaughlin Bros. indorsed and sold to plaintiff for value. The defendants filed an answer and admitted the execution of the note and that such note was given as a part of the purchase price of a certain stallion sold by McLaughlin Bros. to the defendants, and that such sale was made upon misrepresentation and fraud upon the part of McLaughlin Bros., and that said note was acquired by plaintiff subsequent to maturity and without value, and that said note is held by plaintiff for collection only and for the purpose of defrauding the defendants, and that the plaintiff was not the bona fide owner or holder in good faith, or in due course.

Upon the issues thus presented the cause was submitted to a jury and a verdict was rendered in favor of the defendants. This appeal is from the judgment.

The first error assigned is, that the evidence is insufficient to sustain or support the verdict of the jury. Two questions are involved: First, was the note sued upon in this action secured and obtained from the defendants through fraud and misrepresentation? Second, if the evidence in this case shows that the note was obtained through fraud and misrepresentation, did plaintiff become the purchaser and holder of the note in due course under the provisions of sec. 3509, Rev. Codes, and is he protected as provided by sec. 3514, Rev. Codes?

The evidence is positive, certain and in no way contradicted that the plaintiff, purchased the note in controversy on the 1st day of February, 1909; that he paid for said note the sum of $ 1,228.19, and that the purchase of the note was in the usual course of business of the bank for the profit that would arise by reason of the purchase; that at the time the note was purchased it...