114 Wash. 247 | Wash. | 1921
— On February 2, 1918, respondent, who is a farmer and merchant doing business at Farmer, in Douglas county, in this state, purchased from one L. B. Simons the note involved in this action, which was dated January 19, 1918, due one year after date, for the sum of $1,500, with interest at the rate of eight per cent, payable at maturity, paying therefor $1,375. Respondent knew, or might have known, that Simons
The case was tried to a jury, and at the close of all the testimony, the trial court instructed the jury to render a verdict in favor of the plaintiff, respondent here, for the amount of the note, with interest. From a judgment on the directed verdict, this appeal is prosecuted.
It is appellant’s contention that the facts and circumstances under which respondent purchased the note were such as required the submission to the jury of the question of his good faith. Our negotiable instrument statute, Rem. Code, § 3443, provides:
“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;
*249 “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.”
And it appears to be admitted that the facts were such as to warrant the court in determining, as a matter of law, that all of "these conditions existed, except the one of good faith, and there being evidence offered tending to show that the execution of the note was fraudulently procured, appellant urges that, under Rem. Code, § 3450, the burden was on the respondent to establish all of the elements necessary to constitute a holder in due course. Assuming, for present purposes, but not deciding, that appellant correctly construes this latter section of the statute, we must also bear in mind Rem. Code, § 3447, which reads:
“To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith. ’ ’
Appellant’s argument is based upon his cross-examination of respondent, from which it appears that, although Simons had solicited him to buy stock, he had refused without any investigation, because it was his fixed purpose not to buy that of which he knew nothing; that he had reason to suppose that Simons was endeavoring to sell stock of some kind to farmers generally and that this note had been given in such a transaction, and that he did not inquire personally of appellant Betcher before purchasing the note; though if he had done so he could have learned only that Simons had orally agreed with Betcher that the note was to be sent to the company whose stock Betcher was purchasing, and would be held by the company until due .unless it was found necessary to use it as collat
Since our statute provides, as already quoted, that to constitute notice of an infirmity in the title of the person negotiating the note, the person buying it must have had knowledge of the infirmity, or knowledge of such facts that his action in taking the instrument amounted to bad faith, it is apparent that the purchaser of a note, under the statute, acts either in good faith or in bad faith; and unless bad faith, as defined by the statute, is shown, or can be inferred from the facts or circumstances, good faith is presumed.
In the final analysis, the question really urged which we are attempting to discuss, is, in effect, that, as the note arose out of a stock transaction, the jury should have been permitted to find that one knowing, or having reason to believe that a note was so given, could not purchase it in good faith. It may be admitted that farmers and others are all too often fleeced by the sale to them of worthless stock, and the legislature might well take steps to put a stop to this crying evil, but until the legislature does act, we cannot say from our judicial knowledge that all stock transfers are fraudulent, or even that a considerable percentage are so, and much as we would like to protect all who are victimized, we cannot do so at the expense of the innocent, or in defiance of well-established law. Neither can a jury be permitted to draw the inference that one purchasing negotiable paper does so in bad faith merely because he knows the paper had its inception in the purchase of corporate stock.
In Wells v. Duffy, 69 Wash. 310, 124 Pac. 907, this court held that the fact that a note had its inception in
“The holder is not hound at his peril to he on the alert for circumstances which might possibly excite the suspicion of wary vigilance; he does not owe to the party who puts the paper afloat the duty of active inquiry in order to avert the imputation of bad faith. The rights of the holder are to he determined by the simple test of honesty and good faith, and not by a speculative issue as to his diligence or negligence. The holder’s right cannot he defeated without proof of actual notice of the defect in title or had faith on his part evidenced by circumstances. Though he may have been negligent in tailing the paper, and omitted precautions which a prudent man would have taken, nevertheless, unless he acted mala'fide, his title, according to settled doctrines, will prevail.”
This rule we have consistently followed. Scandinavian-American Bank v. Johnston, 63 Wash. 187, 115 Pac. 102; Fisk Rubber Co. v. Pinkey, 100 Wash. 220, 170 Pac. 581. The authorities upon which appellant relies are all distinguishable upon the facts. Since the evidence discloses no fact or circumstance from which the jury would he justified in drawing the conclusion that respondent acted in had faith, the court did not err in directing the verdict.
Error is assigned also upon the limiting of'the appellant’s cross-examination of respondent. We have carefully studied the record and cannot find that there was any error in this respect.
The judgment is affirmed.
Holcomb, Mitchell, Mount, and Main, JJ., concur.