176 Mo. App. 192 | Mo. Ct. App. | 1913
is the secThisond appeal of this case. The opinion on the former appeal is reported in 151 Mo. App. 86,131 S. W. 728. The
For reply, plaintiff alleges that he is the holder of the note in due course, stating the facts essential to this relation. The reply then states facts on which it is sought to base a plea of estoppel as against defendants as to the defenses set up in their answer. It was held in the former opinion that the matters
The opinion on the former appeal gives somewhat in detail the facts tending to sustain the answer that the execution of the note was procured by fraudulent representations and acts. Reference is made to that opinion for these facts. The evidence on this question was substantially the same at each trial. It was held, on the former appeal that the evidence on this question was sufficient to entitle defendants to go to the jury on the question of the note having been procured by fraud. In this opinion we concur.
Appellant contends for the application in this case of the rule that the possession of a negotiable instrument endorsed in blank imports prima, facie that the holder acquired it bona fide, for value, in the usual course of business, before maturity and without notice of any circumstances impeaching its validity; also, that plaintiff’s evidence tended to prove this situation, and that as there was no evidence to the contrary, plaintiff was entitled to a peremptory instruction directing a verdict in his favor. In this connection, it is urged that the court erred in refusing instruction No. 4, asked by plaintiff, which is as follows:
“The court instructs the jury that the instrument sued on in this case is a negotiable promissory note and the defendants admit in their answer that they executed the same and that it has been assigned to the plaintiff, and, in law, it is presumed that such note was negotiated with plaintiff before maturity, for value, and without notice of any defense thereto.”
The cases cited by appellant on this point arose before the enactment of our Negotiable Instruments Law, while this question must be determined by the provisions of that law. Section 10022, Revised Stat
“A holder in due course is a holder who has taken the instrument under the following conditions: (1) That it is complete and regular upon its face; (2) 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; (3) that he took it in good faith and for value; (4) 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.”
Section 10025 provides when the title of a person who negotiates an instrument is defective, and is as follows :
“The title of a person who negotiates an instrument is defective within the meaning of this chapter 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 a fraud. ’ ’
Section 10029, locates the burden of proof when defective title is shown, and is as follows:
“Every holder 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 was defective, the burden is on the holder to prove that he or some persom under whom he claims acquired the title as 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.”
Under the plain provisions of these sections, when it was shown that the title of the payee was defective because the instrument was obtained by fraud, then the burden rested on the plaintiff to prove that he acquired the title as holder in due course. This has been
Possibly the opinion in Reeves v. Letts, 143 Mo. App. 196, 128 S. W. 246, is to the contrary, but in this case the provisions of the Negotiable Instruments Law were not presented to or mentioned by the court. If this case is in conflict with the cases above cited, It must be held as overruled by Southwest National Bank v. House, 157 S. W. 809, decided by the same court, which declares the rule in harmony with the cases above cited. The same construction of these sections has been given by the courts of various other States having a similar statute relating to negotiable instruments. [Southerland v. Mead, 80 N. Y. S. 504; Bank v. Foley, 103 N. Y. S. 553; Packard v. Figiuolo, 114 N. Y. S. 753; Kennedy v. Spieka, 129 N. Y. S. 390; Keene v. Behan, 40 Wash. 505, 82 Pac. 884; Singer Mfg. Co. v. Summers, 55 S. E. (N. C.) 522; Am. Natl. Bank v. Fountain, 148 N. C. 590, 62 S. E. 738; Cook v. Co., 28 R. I. 41, 65 Atl. 641; Louis DeJonge & Co. v. Woodpost & Co., 72 Atl. (N. J.) 439; Parsons v. Co., 80 Conn. 58, 66 Atl. 1024; Stouffer v. Alford, 78 Atl. (Md.) 387; Wilson v. Kelso, 80 Atl. (Md.) 895; Second Natl. Bank v. Hoffman, 229 Pa. 429, 78 Atl. 1002; McKnight v. Parsons, 113 N. W. (Iowa), 858, 136 Ia. 390; Iowa Natl. Bank v. Carter, 123 N. W. (Iowa) 237; Arnd v. Aylesworth, 123 N. W. (Iowa) 1000; Cox v. Cline, 117 N. W. (Iowa) 48; Warren v. Smith, 100 Pac. (Utah) 1069; Leavitt v. Thurston, 113 Pac. (Utah) 77; Cedar Rapids Natl. Bank v. Myhre, 57 Wash. 596, 107 Pac. 518; Wells v. Duffy, 69 Wash. 310, 124 Pac. 907, 19 Idaho, 18; Winter v. Nobs, 112 Pac. 525; Shellenberger v. Nourse, 20 Idaho, 323, 118 Pac. 508; Hodge v. Smith, 130 Wis. 326, 110 N. W. 192;
The situation then is that the defendants introduced evidence tending to prove that the execution of the note was induced by fraud, and the plaintiff offered evidence, not contradicted, tending to prove that he was a holder in due course. The burden rested on plaintiff to show this under the statute. This created an issue of fact which was exclusively for the jury, notwithstanding the fact that the only evidence on this question was that introduced by plaintiff, and that all of this evidence tended to prove that he was a holder in due course. The decision of this question was solely the province of the jury, and the court, under the decisions in this State, could not invade that field and peremptorily direct a verdict for plaintiff. [Gannon v. Gas Co., 145 Mo. 502, 46 S. W. 968, 47 S. W. 907; Link v. Jackson, 158 Mo. App. 63, 92, 139 S. W. 588; Dalton v. City, 173 Mo. 39, 72 S. W. 1068; First State Bank v. Hammond, 124 Mo. App. 177, 101 S. W. 677; McCrosky v. Murray, 142 Mo. App. 133, 125 S. W. 226; Hugumin v. Hinds, 97 Mo. App. 346, 71 S. W. 479; Kingsbury v. Joseph, 94 Mo. App. 298; Dodd v. Guiseffi, 100 Mo. App. 311; Hunter v. Wethington, 205 Mo. 284, 293; Johnson v. Grayson, 230 Mo. 380, 394, 130 S. W. 673.]
The case of Wright Investment Co. v. Friscoe Realty Co., 178 Mo. 72-80, 77 S. W. 296, cited by appellant, is not to the contrary. Suit was on a note and the case arose before the enactment of the Negotiable Instruments Law. Under the rule declared in Johnson v. McMurry, 72 Mo. at 282, also cited by appellant, where plaintiff made general proof that he received the paper before due, bona fide and for value, it, devolved on the maker- to show that the holder had actual notice of the defense urged. This the defendant in the Wright case had failed to do. But the stat
It is somewhat ' difficult to construe the fourth paragraph of the answer, as it seems to blend the allegations of fraud on the part of the payee in falsely representing that the stock was dividend paying stock' and extremely valuable, when, in fact, it had never paid a dividend and had no value, with the plea that the consideration for the note had utterly failed. But for the instructions' given by the court on behalf of defendants as hereinafter mentioned, a careful consideration of this portion of the answer might not be necessary, hut these instructions make this question of considerable importance. We do not find in the record any evidence tending to prove the allegation that the payee represented that said stock was dividend paying stock or had ever paid any dividend, or that the mine had ever paid any profit, so the charge of fraud in this respect entirely failed of proof. This leaves for determination the plea that the consideration for the note utterly failed.
This question of failure of consideration is to be considered entirely apart from any fraudulent representations, and also from any warranty. It is not pretended that the purchasers who are the makers of the note exacted or received any warranty in connection with the deal. The evidence shows that defendants bought stock in a corporation, which corporation owned title in fee to ten acres of land, together with a mining lease on a much larger tract, and also owned ■ a mining plant, all of said property being subject to
In 9 Cyc. 369, the rule is stated as follows: “On a sale of personal property, it is generally held that in the absence of fraud or warranty, it is no ground for defeating the action for the price that the article proves so defective in quality as to be worthless.” [Sutro v. Rhodes, 92 Calif. 117.] Otis v. Cullum, 92 U. S. 447, 23 L. Ed. 496, was a case of the sale of bonds subsequently held to be void because the Legislature had no power to pass the acts authorizing same. Note was given for the purchase price and suit brought thereon. The defense asserted was failure of consideration. The opinion first points out that the questions of fraud and warranty are to be laid out of view, and then uses the following language pertinent to the present case: “Here also, the plaintiffs in error got exactly what they intended to buy, and did buy. They took no guaranty. They are seeking to recover, as it were, upon one, while none exists. They are not clothed with the rights which such a stipulation would have given them. Not having taken it, they cannot have the benefit of it. The bank cannot be charged with a liability which it did not assume.” To tin same effect is Hunting v. Downer, 151 Mass. 275, 23
This statement is not in any wise in conflict with the rule stated in Brown v. Welden, 99 Mo. 564, and 27 Mo. App. 251; Compton v. Parsons, 76 Mo. 455, Danforth v. Crookshanks, 68 Mo. App. 311, or Murphy v. Gay, 37 Mo. 535. In these cases, there appears either fraud or breach of. an express or implied warranty. Most of them are where an article was sold or purchased for a particular purpose known to both parties. In such cases, there is an implied warranty of fitness for the purpose intended. [St. Louis Brewing Co. v. McEnroe, 80 Mo. App. 429; Aultman v. Hunter, 82 Mo. App. 632; Moore v. Koger, 113 Mo. App. 423.] In 9 Cyc. 371, the rule is stated that if there is consideration, the fact that it subsequently diminishes in value or becomes of no value at all cannot relieve the promisor from liability on his promise. “Where a party gets all the consideration he voluntarily and intentionally contracts for, he will not be. allowed to say that he got no consideration. [Baker v. Roberts, 14 Ind. 552.]” [Smock v. Pierson, 68 Ind. 405, 34 Am. Rep. 269; Bean v. Proseus (Calif.), 31 Pac. 49; Rice v. Grange, 131 N. Y. 149, 30 N. E. 46.]
In an action upon a promissory note given as the price of real or personal property, it is no defense
In Worth v. Case, 42 N. Y. 362, 369, the court states .the rule: “If one voluntarily and fairly purchases either real or personal property of another, at a fixed price, and executes his note for the payment of the purchase money, he will not he allowed when sued thereon, to prove, for the purpose of defeating, or reducing the amount of the recovery on the note, that the property in fact was not worth one-half, or one-quarter, or even one-tenth of the amount at which he purchased it.” And again in Earl v. Peck, 64 N. Y. 596: “Mere inadequacy of consideration, except as a circumstance bearing upon the question of.fraud, or undue influence, is-not a defense to a note. It is not necessary that- the consideration of a note shall be equal in pecuniary value to the obligation incurred. ... A note for a thousand dollars given for a horse confessedly worth but one hundred, cannot be successfully defended in whole or in part, on the ground of a want or failure of consideration.”
“The value of most considerations, as well as of most promises, is a thing which the law cannot measure ; it is not merely a matter of fact, but a matter of opinion. If, therefore, the promisor thinks .the consideration is equal to the promise in value (i. e., if he is willing to give the promise for the sake of getting the consideration), the consideration will be equal to the promise in value for all the purposes of the contract. From this it is but an easy step to the conclusion that whatever a promisor chooses to accept as the consideration of his promise, the law will regard as equal to the promise in value, provided the law can see it has any value.” [Langdell’s Summary of the Law of Contracts, 55.]
That there was an actual consideration in the present case is- beyond question, and that the defendants,
The Negotiable Instrument Act, in the sections cited above, fixes the burden of proof where defective title is shown, and defines a defective title as being where one obtains 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 a fraud. While in view of the fact that the present judgment must be reversed and the case remanded for a new trial, it is perhaps not necessary to decide the question, it is at least doubtful, whether failure of consideration and particularly, a partial failure, taken alone, constitutes a defective title within the meaning of this act. Section 9999 provides that absence or failure of consideration is a matter of defense as against a person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated, amount, or otherwise. The importance of this is that if such failure or partial failure of consideration be held to constitute a defective title, then
In Cole Banking Co. v. Sinclair, 34 Utah, 454, 98 Pac. 411, this question was considered and- it was held that a partial failure of consideration as between the parties to a negotiable note was not a defect in title so as to require an endorsee suing thereon to show himself a holder in due course'; the burden of showing want of consideration and notice thereof by the endorsee being upon the maker. This was under .a Negotiable Instruments Law similar to the Missouri law. The court states the law as follows: “The defense pleaded was not illegal, but mere partial failure of consideration. Failure or want of consideration does not constitute a defective title within the meaning of the foregoing provisions. [1 Daniels, Neg. Inst., secs. 814, 817.] In the treatise of Eaton & Grilbert on Commercial Paper and the Negotiable Instruments Law, at section 79, in discussing the statutory provision corresponding. to section 1611 of our statute, it is said by the authors: ‘In the absence of proof of fraud or misappropriation, the presumption is that the indorsee of a negotiable bill or note is a bona-fide holder for value, and this presumption is not repelled merely by proof that the bill or note, as between the immediate parties, was without consideration, and was made, indorsed, or accepted by one for the sole accommodation of the other. When no other proof is given, the holder is not bound to prove a valuable consideration. ... It will be noticed that the statute provides that proof of a defective title shifts the burden of proof upon the holder. A title is defective where
To the same effect is Ogden Negotiable Instruments Law, section 319, p. 251, viz.: “Where it is a question of a personal defense, there are two classes of cases: 1. Where the defense shows lack of consideration, or release, or payment of a bill or note. 2. Where the defense shows fraud, duress, or illegality in the inception of the instrument. In the first class it is not so much the question of wrongdoing as merely a question of lack or failure of consideration, the first thing to be proved by the defendant is that the plaintiff had notice of the fact that there was a want of consideration or failure of consideration. He does not prove that there was a failure of consideration, but notice and after that he proves the facts of want or failure of consideration. In the other cases, that is, those of fraud or illegality, the defendant does not prove notice but proves the fraud or illegality itself. Arid when the fraud or illegality is proved the presumption of notice arises without any proof of notice
This is not at all in conflict with the point really decided in Jobes v. Wilson, decided by this court and reported in 140 Mo. App. 281, 124 S. W. 548. In that case it is apparent that the act of plaintiff’s agent, who took the notes with the distinct agreement that certain credits were to be endorsed thereon, but who failed to have these credits endorsed, and negotiated the notes without such credits,- was at least a breach of faith and the negotiation under such circumstances amounted to a fraud. This, as we understand it, is all that is decided in the Jobes case. In fact, the Court uses this language: “If the statements of defendants as to what was to be done with the notes, are to be believed, then it was an act of bad faith, amounting to a fraud, on these defendants, as the term is defined in section 55, to negotiate these notes without placing.the credits upon them.”
Similar transactions have been held to amount to a breach of faith or a fraud in the following cases: Southerland v. Meade, 80 N. Y. S. 504; Kennedy v. Spieka, 129 N. Y. S. 390; DeJonge & Co. v. Woodpost (N. J.), 72 Atl. 439; Hodge v. Smith, 130 Wis. 326, 110 N. W. 192; McKnight v. Parsons, 136 Ia. 390, 113 N. W. 858. In our opinion, the decision in the Jobes case, supra, is correct. We believe that the court in that opinion went too far by way of argument in stating the general rule as to burden of proof in cases of failure of consideration, total or partial.
The two cases cited by the court, Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, and McKnight v. Parsons, 136 Ia. 390, 113 N. W. 858, 22 L. R. A. (N. S.) 718, were eases not only of failure of consideration, but, more than that, were cases where the notes had been negotiated in breach of faith and under such circumstances as to amount to fraud, thus making a de: fective title within the statutory definition thereof.
At the request of the defendants, the court gave the following instructions: (e) “The court instructs the jury that if you believe from the evidence in this case, that one Grant Hart, the payee in the note sued on, in conjunction with other persons who were interested in the sale of stock in the Golden Jack Mining Company, for the purpose of securing the execution of the note sued on, falsely and fraudulently represented to the defendants herein the condition of the face of
By Instruction “e” it is declared that in case the jury find for the defendants on the question of fraudulent representation, then if they believe from the evidence that the plaintiff, before the assignment of the note to him, knew of the fraud practiced on defendants, or if they believe from the evidence that the plaintiff acted in conjunction with the said Hart (payee) and others in inducing the defendants to execute the notes sued on and assigned in making the deal, the verdict should be for the defendants. This instruction should not have been given.. The answer charges fraudulent representation by the payee Hart “in conjunction with other parties” not named, and does not charge that the plaintiff made any of these representations. It is at least doubtful whether such pleading is sufficient to authorize this instruction. A careful reading of the record warrants the statement that there is no evidence tending to prove that the plaintiff acted in conjunction with the said payee or anyone else in inducing the defendants to execute the note sued on, or in anywise assisted in making said deal in such a manner as to make plaintiff a party to the fraud or connect'him therewith. For this reason,
Instruction “f” is erroneous, first, because under the rules heretofore stated upon the question of failure of consideration the instruction does not properly declare the law on that question; and, second, because as in instruction “e,” there is no evidence to warrant the latter part of the instruction authorizing a verdict for the defendants if the jury believe that plaintiff assisted the payee and others in consummating the transaction that induced the defendants to execute the note.
We have not quoted instruction “g,” but under the present ruling it is incorrect to the extent that it declares on the question of failure of consideration.
Instruction “h” tells the jury, that if the note was obtained by means of fraud, the burden is on plaintiff to prove that he procured the note before maturity for value and in good faith. It is erroneous in that it also tells the jury that if it is found that the note was given for worthless stock in the mining company, the same burden of proof devolves upon the plaintiff. As already stated, there is no question of failure of consideration in this case separate and apart from the question of fraud,' and the mere fact that the stock may have been worthless from the standpoint of value does not constitute a defense, and the question whether or not the stock was worthless should not have been submitted to the jury as an issue for determination by them, nor should that body have been told that' the fact that the stock was worthless in itself cast upon the plaintiff the burden of proof stated. The instruction is also erroneous in that it tells the jury that if they believe that plaintiff assisted in consummating said deal, the verdict should be for. the defendants. This, for the reason that there is no evidence in the case that plaintiff did so assist, and further, because the instruction submits to the jury the question of as
The court, over the objection of appellant, permitted the witness Wakefield to testify that he bought some stock in the company through the influence of Messrs. Loy and Hutler, and also on an engineer’s report he had; that- Loy represented to him that it was a paying mine, etc. The evidence connects Loy with Hart, the payee of the note, in the transaction with defendants, but Wakefield’s purchase of stock was entirely separate and apart from the purchase by defendants, being a different transaction at a different time, and this evidence should not have been admitted. It is not shown that these representations were Untended to be or were in fact communicated to the defendants.
For the errors above noted, the judgment in this case must be reversed and the cause remanded for anew trial, and it is so ordered.