272 F. 871 | 2d Cir. | 1921
For convenience we shall refer to the parties as plaintiff and defendant.
The plaintiff owned 25 $1,000, 4 per cent. Alleghany county bonds.. On the night of February 26, 1919, his office in Pittsburgh was burglarized, and these bonds were stolen. In October, 1919, 12 of the bonds were found by the district attorney of New York county to be in the possession of Dora Widrevitz. The bonds came into her possession under the following circumstances:
One day while her husband, now deceased, was at the Chatham & Phcenix National Bank, at the Bowery ánd Grand street, New York City, he met' one Joseph Sugarman, who was also a depositor in the bank, and who was known to him. This acquaintance was of long standing. In a conversation which ensued, Sugarman asked Widrevitz to loan him $10,000, with these bonds as collateral/ and this, for the account of his brother, S. C. Sugarman. The defendant’s intestate asked the bank’s representative as to the value of the bonds. Upon his recommendation, he promised to malee inquiry at a brokerage firm, and stated he would advise Sugarman later if he would make the loan. He-later, after having consulted a brokerage firm, agreed to loan $10,-000, taking the bonds as collateral security. A check for $10,000 to the order of S. C. Sugarman was drawn and cashed at the same bank, and a four-months note was given, which was renewed when it became due. After notice, and subsequently, on December 22, 1919, the bonds were sold by an auctioneer, pursuant to the terms of the collateral note. Upon the trial, defendant’s counsel stated as follows, in answer to an inquiry : ■
“Mr. Murray: I have no evidence to show that Widrevitz knew of-these notices prior to his advance of the $10,000; but the whole theory of the ease is that there were facts that would have been known, provided he had made the proper inquiry.
“The Court: In my opinion, he does not have to make inquiry, and I therefore sustain the objection to the deposition.
“Mr. Murray: Exception.
“The Court: I do not think the facts justify any imputation in this ease. * * * ”
“The Court: I do not believe I see it that way. No matter where the burden is, it seems to me the actual facts show that there was no notice, actual or imputed, to Mr. Widrevitz, when he bought these bonds.
“Mr. Murray: There is no actual notice.”
Thereupon, on motion of defendant’s counsel, the court directed a verdict in favor of the defendant.
“Tlie law is well settler! tliat a party who takes negotiable paper before due i'or a valuable consideration, without knowledge of any defect of title, in good faith, can hold it against all the world. A suspicion that there is a defect of title in the holder, or a knowledge of circumstances that might excite such suspicion in the mind of a cautious person, or even gross negligence at the tima, will not defeat the title of the purchaser. That result can he produced only by bad faith, which implies guilty knowledge or wilful ignorance, and the burden of proof lies on the assailant of the title. It was so expressly held by this court in Murray v. Lardner, 2 Wall. 110, where Mr. Justice Swayne examined the leading authorities on the subject and gave ibo conclusión we have stated.” Hotchkiss v. National Bank, 21 Wall. 359, 22 L. Ed. 645.
*874 “Who Deemed, Holder in,Due Course. — Every holder is deemed prima facie to be a bolder in due course; but when it is shown that the title of any person ,who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course. But the last mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title.”
It was shown that the bonds in question had been the subject of a theft, and therefore that the title of the person who negotiated the transfer and delivery of the bonds, at the outset, was defective. The burden was therefore upon the appellee to show that she acquired title as the holder in due course. It having been established that the bonds were stolen, the burden then shifted to the appellee to establish that she was a bona fide holder for value in due course. We think that, by reason of section 721 of the Revised Statutes (Comp. St. § 1530), this burden was upon the defendant. Section 721 provides:
“The laws of the several states, except where the Constitution, treaties or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law, and courts of the United States, in cases where they apply.”
Under the'laws of New York, the burden of proof would, under the circumstances here disclosed, rest upon the defendant. Sabine v. Paine, 223 N. Y. 401, 119 N. E. 849, 5 A. L. R. 1444. Under the same local law, we think the facts here require the direction of a verdict. Second National Bank v. Weston, 172 N. Y. 250, 64 N. E. 949. There were no suspicious circumstances disclosed by this record, which indicate bad faith in defendant’s intestate accepting these bonds as collateral security and later buying them with the $10,000 which he loaned. We think he has sustained the burden which the New York Negotiable Instruments Raw cast upon him, and there was no evidence to the contrary which required the submission of the question to the jury as one of fact.
The judgment is affirmed.