Wm. Whitman Inc v. York, (No. 493.)
| Decision Date | 09 June 1926 |
| Docket Number | (No. 493.) |
| Citation | 133 S.E. 427 |
| Court | North Carolina Supreme Court |
| Parties | WM. WHITMAN, Inc., v. YORK et al. |
(192 N.C.)
[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Holder.]
Appeal from Superior Court, Burke County; L. Lee Wright, Emergency Judge.
Action by Wm. Whitman, Inc., against W. H. York and another. Judgment for defendants, and plaintiff appeals. No error.
Action upon two notes, executed by defendants, and payable to the order of Paul Rubber Company. Plaintiff alleged that it was the holder in due course of said notes; this allegation was denied by defendants, who set up in their answer, in defense of plaintiff's action against them on the notes, certain equities and defenses as against the payee; they contended that these equities and defenses were good as against plaintiff, for that plaintiff was not a holder of the notes, in due course.
Before the introduction of evidence, plaintiff tendered two issues; the court, being of opinion that other issues arose upon the pleadings, refused to submit these two issues only. To such refusal plaintiff excepted. The court then announced that the following issues would be submitted to the jury:
(1) Were the two notes for §5, 000, each, sued on herein, executed in payment of the purchase price of stock in the Paul Rubber Company, as alleged in the answer? Answer:
(2) If so, has the Paul Rubber Company, or any one acting for and in its behalf, delivered or tendered to the defendants the stock in said company for the purchase price of which the said notes were given? Answer:
(3) Was the defendant J. P. York at the time of the execution of said notes an infant, within the age of 21? Answer:
(4) Were the notes sued on herein given under the terms of a conditional contract for the purchase of said stock on condition that the said contract and the notes, given in pursuance thereof, should not constitute a valid, binding contract, but the notes should be held until the defendant had investigated the financial condition of the Paul Rubber Company and until W. H. York had been appointed guardian of his son, J. P. York, and had been authorized tc purchase said stock and had so notified said company or its salesmen, as alleged in the answer? Answer:
(5) If so, did the Paul Rubber Company, in violation of the terms of said contract, fraudulently put said notes in circulation as alleged in the answer? Answer:
(6) Did the Paul Rubber Company, in entering into said contract for the sale of the stock, fail to comply with the provisions and conditions of section 0367 of the Consolidated Statutes of North Carolina, chapter 180, Acts of 1923, as alleged in the answer? Answer: '
(7) Was the execution of the two notes sued on herein induced and procured by the false andfraudulent representations and assurances of the Paul Rubber Company and its agents, as alleged in the answer? Answer:
(8) Is the plaintiff, Wm. Whitman Company, Inc., a holder in due course of the two notes sued on herein as alleged in the complaint'.' Answer:
(9) What sum, if anything, is plaintiff entitled to recover? Answer:
To the submission of these issues, plaintiff excepted. Upon the announcement by the court that the foregoing would be submitted as the issues, defendants admitted the execution of the notes by them, and admitted also that plaintiff is now the holder of said notes, denying, however, that plaintiff is the holder in due course; defendants further admitted that plaintiff was the equitable owner of said notes. Upon these admissions the court held that the burden was upon defendants upon the first seven issues, and upon the plaintiff upon the last two issues; it thereupon held that defendants should first offer evidence. To this holding, plaintiff excepted.
Upon the announcement of the foregoing ruling, plaintiff agreed, in open court, before the introduction of any evidence, that the first issue should be answered "Yes, " the second "No, " and the third, fourth, fifth, sixth, and seventh each "Yes." Upon this agreement, the court held that, the burden being upon plaintiff to satisfy the jury, by the greater weight of the evidence, first, that plaintiff is the holder in due course of said notes; and, second, that plaintiff is entitled to recover of defendants the amount as alleged in the complaint, plaintiff was entitled to the opening and conclusion. Plaintiff thereupon offered evidence, which was submitted to the jury. No evidence was offered by defendants.
The jury, under the instructions of the court, having answered the eighth issue "No, " and the ninth issue "Nothing, " judgment was rendered upon the verdict that plaintiff is not entitled to recover of defendants or either of them upon the notes set out in the complaint. It was further ordered that plaintiff file said notes with the clerk of the court, marked "canceled."
From said judgment, plaintiff appealed. Assignments of error, relied upon by plaintiff, on its appeal, in this court, are discussed in the opinion below.
Avery & Patton and Avery & Hairfield, all of Morganton, for appellant.
CONNOR, J. Manifestly, plaintiff's assignments of error, based upon exceptions, with respect to the issues and to the holding as to the burden of proof, upon the first seven issues, cannot be sustained. Plaintiff's consent that these issues should be answered by the jury, in accordance with the contentions of defendants, make it unnecessary to consider or to discuss the exceptions upon which these assignments of error are based.
The burden upon the first seven issues, involving exclusively matters alleged in the answer, upon which defendants contend that the notes sued on are invalid, was upon defendants, who admitted the execution of the notes by them; the consent of plaintiff that these issues should be so answered as to sustain these allegations precluded the necessity of the introduction of evidence by defendants to sustain their contention that the title of the Paul Rubber Company, payee, to the notes was defective, within the meaning of C. S. § 3030 and C. S. § 3040. The truth of this contention was, in effect, admitted by plaintiff, when it agreed that the issues should be answered as contended by defendants. Fuller v. Smith, 58 N. C. 192; Shingle Mills v. Lumber Co., 171 N. C. 410, 88 S. E. 633. The title of the Paul Rubber Company to the notes was, upon the facts found by the jury, with the consent of plaintiff, defective. Proctor v. Fertilizer Co., 189 N. C. 243, 120 S. E. 608; Phosphate Co. v. Johnson, 188 N. C. 419, 124 S. E. 859; Bank v. Felton, 188 N. C. 384, 124 S. E. 849; Moon v. Simpson, 172 N. C. 576, 90 S. E. 578; and Id., 170 N. C. 335, 87 S. E. 118; Bank v. Walser, 162 N. C. 54, 77 S. E. 1006.
Plaintiff acquired title to the notes from the Paul Rubber Company; the burden upon the eighth and ninth issues was therefore upon plaintiff to prove that it had acquired title to the notes, and held same, as a holder in due course. C. S. § 3040; Bank v. Howard, 188 N. C. 543, 125 S. E. 126; Discount Co. v. Baker, 176 N. C. 546, 97 S. E. 495; Smathers v. Hotel Co., 168 N. C. 69, 84 S. E. 47; Mfg. Co. v. Summers, 143 N. C. 102, 55 S. E. 522. If plaintiff failed to sustain this burden by evidence from which the jury could find, by its greater weight, that plaintiff was such holder in due course, the notes, although in its hands as a holder, other than a holder in due course, are subject to the same defenses as if they were nonnegotiable. C. S. § 3039. The notes are, admittedly, in form negotiable instruments; notwithstanding this fact, they are subject to the same defenses in this action as they would have been in an action by the Paul Rubber Company, unless plaintiff is a holder of the notes in due course, as defined in C. S. § 3033. It is but just that plaintiff, who relied upon the special protection which the law gives to the bona fide holder of a negotiable instrument, to enforce payment of these notes, admittedly procured by the fraud of the payee, should be held to strict proof of all the facts involved in its allegation that it is a holder in due course, and therefore not affected by the equities of defendants. But for the principle underlying the law of negotiable instruments plaintiff could not recover, for it is a general principleof law that no one can transfer a better title to property than he has. The party who claims the benefit of the exception to the general principle must bring himself within all the conditions on which it depends. Combs v. Hodge, 62 U. S. (21 How.) 307, 10 L. Ed. 115.
In their answer defendants deny the allegation in the complaint that plaintiff is a holder in due course of the notes set out in the complaint; in their further defense, they allege "that if said notes were delivered to plaintiff herein, or transferred by the Paul Rubber Company to the plaintiff, which is expressly denied, then defendants allege that, as they are informed and believe, the plaintiff is engaged in the business of a note broker and is not the owner of said notes, but is a mere collecting agent." On the trial, before the introduction of evidence, and while the court had under consideration its ruling as to the burden of proof upon the issues, which it had announced would be submitted to the jury, defendants admitted that "plaintiff is now the holder of said notes, denying, however, that plaintiff is the holder in due course." This admission was immediately qualified by the statement, appearing in the record, that defendants further admitted that plaintiff was "the equitable owner of said notes." Thereafter, and before any evidence was introduced, the court ruled that the burden upon the issues involving the allegations that plaintiff was a holder in due course, and was entitled to recover upon the notes, was upon plaintiff. Plaintiff, without objection, or exception to this ruling,...
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