158 Mo. App. 63 | Mo. Ct. App. | 1911
The evidence in this case was such that no denial is made by the plaintiff that the note was fraudulent in its inception and procured by a scheme pregnant with dishonesty and chicanery. Bnt the issue is presented whether such original fraudulent taint was communicated to the purchaser, the plaintiff in this ease, through actual knowledge or notice. Questions affecting commercial paper, involving the rights of parties claiming to be bona fide holders for value, are always of great importance and often fraught with difficulty, involving, as they do, a system of jurisprudence entering largely into the commercial transactions of the world.
The appellant assigns as error that the instructions given at the trial failed to properly present the law as to what knowledge should be brought home to the purchaser of negotiable paper, and that to defeat a holder of such paper purchased for value before maturity, actual knowledge should be shown. The rule as to what knowledge will charge the purchaser of negotiable paper with knowledge of equities existing between the original parties has undergone radical changes in this state. The old rule was that to let in equitable defenses, constructive notice was sufficient if a person was put on inquiry; that facts and circumstances which would naturally put a person of ordinary prudence in the same situation on inquiry, reasonably leading to a knowledge of the truth, would be sufficient for a court to infer and find such knowledge. [Hamilton v. Marks and Black, 52 Mo. 78.] But in the year 1876, in the case of Hamilton v. Marks, 63 Mo. 167, the question of notice as applied to negotiable paper was brought under consideration on a second trial of the case, and Judge Warner, speaking for
Section Í0026, Revised Statutes 1909, of the negotiable instruments law, now adopted by many states, provides: “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.” [See also, Sees. 9999, 10022, 10024, 10025, R. S. 1909.] These provisions simply put in statutory form the rule of the common law as previously interpreted by many state courts and which was first authoritavely announced as the law of this state in the case of Hamilton v. Marks, 63 Mo. 167. Under the rules as now adopted defining the duties and obligations of a party t.o whose negotiable paper is presented for discount, such party is not bound at his peril to be on the alert
The word “notice,” therefore, must be understood when used in this connection as being used in the sense of actual knowledge; and, indeed, this is one of its usual and appropriate significations. [Goodman v. Simonds, 20 How. 343.] The notice required by the negotiable instruments law means actual knowl-ede as distinguished from implied or constructive notice which arises when a person is put on inquiry and knowledge is presumed. If it can be collected by a jury from circumstances fairly warranting' such an inference that plaintiff knew or believed or thought the bill or note was tainted with illegality or fraud, such a general or implied notice will equally destroy the title. [Henry v. Sneed, 99 Mo. 407, 12 S. W. 663.] According to many authorities, it is ordinarily to b.e expected that the purchaser will testify in his own behalf that he had no actual notice of the circumstances
While neither negligence, nor knowledge of suspicious circumstances, nor failure to inquire into the consideration, will in and of itself be bad faith, such facts when proven may be considered by a jury in arriving at the ultimate fact of good or bad faith of the plaintiff. It is not a question of negligence but of good or bad faith. Gross negligence' may be evidence of bad faith, but it is not the same thing. [Goodman v. Harvey, 4 Adol. & E. 870.] “Everyone must conduct himself honestly in respect to antecedent parties, when he takes negotiable paper, in order to acquire a title which will shield him against prior equities. While he is not oblig’ed to make inquiries, he must not willfully shut his eyes to the means of knowledge which he knows are at hand, for the reason that such conduct, whether equivalent to notice or not, would be plenary evidence of bad faith.” [Goodman v. Simonds, supra; Atlas Nat. Bank v. Holm, 71 Fed. 489, and eases cited.]
Appellant assigns as error in this case that the trial court erred in failing to properly instruct the jury as to actual knowledge. The law undoubtedly is, as already stated, that to defeat recovery- on commercial paper purchased for value before maturity, ac
“The court instructs the jury that if you shall find and believe from the evidence in this case and the circumstances surrounding the execution and sale of the note sued upon, that they had been procured from the defendant through fraud, and that the plaintiff at the time he-purchased the note, had actual knowledge of such fraud or had knowledge of such facts that his action, in taking such notes, amounted to bad faith, then you will find the issues for the defendant.”
“The court instructs the jury that the note sued on is a negotiable promissory note and that the plaintiff is entitled to recovery if you believe from the evidence that plaintiff purchased said note before maturity in good faith, for value, without notice, all of which is presumed to be the case, unless the contrary is made to appear by the evidence.”
Plaintiff requested and the court refused to give the following instruction:
“The court instructs the jury that although the plaintiff may have known when he bought the note facts that would put a prudent man upon his inquiry and enable him by investigation to learn the truth, and although he may have known of facts and circumstances that would excite suspicion in the mind of a reasonable and prudent person that the note was tainted with fraud or that there was a failure of consideration, yet these facts are not sufficient to defeat a recovery by plaintiff. If the plaintiff bought the note before maturity, before you would be warranted in finding the issues for the defendant you must find that the plaintiff had actual knowledge either of the fraud or of the failure of consideration before you can find the issues for the defendants.”
The plaintiff further assigns as' error that the court failed to properly instruct the jury as to the burden of proof, and he asserts with.much earnestness that the true rule in cases like the present -is that when the note has been shown to have had its inception in fraud, the burden shifts to the plaintiff to show a purchase for value before maturity in good- faith, and when he introduced sufficient evidence to make a prima facie case as to these facts the burden again shifts to the defendant’s to show plaintiff’s actual notice of the existence of such facts as will warrant a
Section 10029, Revised Statutes 1909, is, in part, 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 person under whom he claims acquired the title as holder in due course.”
The question is therefore raised as to what the term, “burden of proof,” means as used in this section of the negotiable instruments law. Unfortunately, this term is used by judges and text-writers in two distinct senses, either as “burden of proof,” correctly speaking, or as the “burden of evidence,” and the failure to discriminate in which sense the term is applied in each case has been the cause of much confusion in legal literature. The “burden of proof” is the burden of producing a preponderance of evidence, while the “burden of evidence” means the burden that rests upon a party to meet a prima facie case. These burdens are often on the same party, but this is not necessarily or always the case; nor is it safe-to infer because a party has the burden of meeting a prima facie case therefore he must have a preponderance of evidence. It may be sufficient for him to produce just enough evidence to counter-balance that produced against him by his adversary. [Scott v. Wood (Cal.), 22 Pac. 871; Atlas Nat. Bank v. Holm, supra.] Justice Bigelow of the Supreme Court of Massachusetts in the case of Bridge Corp. v. Butler, 3 Gray, 132, stated the distinction as follows: “The burden of proof and the weight of evidence are two very different things. The former remains on the party affirming a fact in support of his case, and does not' change in any aspect of the cause; the latter shifts from side to side in the progress of a trial, according to the nature and strength of the proofs offered in support or denial of the main
Under section 10029, Revised Sttatutes 1909, “burden of proof,” as therein provided is used in the strict sense of “burden of proof,” and not in the sense of “burden of evidence.” [Hamilton v. Marks, 63 Mo. l. c. 100.] After the note has been shown to have had a fraudulent inception, the reason for requiring the plaintiff to prove his good faith is stated in the case of Hamilton v. Marks, 63 Mo. l. c. 180, to be “obviously salutary, for the presumption is natural that an .instrument so issued would be quickly transferred to another, and unless he gave value, which could be easily proven if given, it would perpetrate great injustice and reward fraud, to permit him to recover. The reasoning by which the foregoing rule is supported is, I think, unanswerable, and commends itself for its manifest justice. Where an instrument is procured by fraud, or is affected with illegality, the payee would undoubtedly be eager to transfer it, so that suit would be brought in the name of another, in order to prevent any valid defense if possible. In such a case, it is justice to the defendant, and it is no hardship to the plaintiff, to require him to show, that in acquiring the note he acted honestly and in good faith, and that he gave value for it.” The language of the statute— “every holder is deemed prima facie to be a holder
In this connection it is further contended by the appellant that when defendants made a prima facie case of fraud in the inception of the note and the plaintiff showed that he received the note before maturity in good faith and for a valuable consideration,, that the burden shifted and it devolved upon the makers to prove that the plaintiff had actual notice of the specific facts which constituted the fraud, and that a failure to so instruct by the trial court impeaches its judgment and entitles the plaintiff to a new trial. Under the authorities already cited in this opinion, it is obvious that plaintiff is using the term “burden of proof” in the sense of “burden of ■ evidence.” Although the duty of making a prima facie case may shift from time to time, the burden of proof, correctly
Plaintiff cites authorities to the effect that the law presumes honesty and not dishonesty, good faith and not bad faith, and argues that by casting the burden of proof of good faith on the plaintiff he is required to prove his honesty and good faith contrary to the presumption generally prevailing. While it is. true that the law generally presumes honesty and not dishonesty, gopd faith and not bad faith, and that to hold otherwise would seemingly require the plaintiff to prove a negative, contrary to the usual rules of law.
Plaintiff further assigns as error the failure of the court to give the following instruction:
‘ ‘ The court instructs the jury that under the pleading and the evidence the execution of the note sued on is admitted by the defendants, and there is no evidence to authorize the jury in finding that the plaintiff, at the time he purchased said note, had knowledge of any fraud in the inception of said note or of any failure of consideration, and you will therefore find the issues for the plaintiff.”
The basis of this claim is the plaintiff’s testimony as to his good faith was unimpeached and uncontra-dicted and in no wise discredited, and that the jury and trial court arbitrarily and capriciously disregarded the samé and that he was consequently entitled to á directed verdict.
There is a distinction between a demurrer to the plaintiff’s evidence and a directed verdict by the court in plaintiff’s favor. In order to sustain a demurrer to plaintiff’s evidence for failure to make out a prima
Appellant further assigns as error the giving of the following instruction:
*93 “The court instructs the jury that if you shall find and believe from the evidence in this case and the circumstances surrounding the execution and sale of the note sued upon, that they had been procured from the defendants through fraud, and that the plaintiff at the time he purchased the note, had actual knowledge of such fraud or had knowledge of such facts that his action, in taking such notes, amounted to bad faith, then you will find the issues for the defendant.”
Appellant complains that the court by this instruction left to the jury the question as to the meaning of the term, “bad faith.” “G-ood faith” and “bad faith” are questions of law and are not generally understood outside the legal profession; but especially as applied to negotiable paper, these terms are used in a teclmical sense. In the terminology of legal science, these terms have a well-defined and fixed meaning with which courts and lawyers are familiar, but they are not generally understood by the laity. [Bowles Live Stock Com. Co. v. Hunter, 91 Mo. App. l. c. 337.] But on examination of the appellant’s instruction we find that the same error was committed, for his instructions also contain the terms, “good faith” and “bad faith,” and as appellant did not ask the court to tell the jury what constituted “good faith” and “bad faith,” he was guilty of the same error which he charges that the respondents committed and hence is in no position to complain in the appellate court. [Christian v. Conn. Mut. L. Ins. Co., 143 Mo. 460, 45 S. W. 268; Sawyer v. Walker, 204 Mo. 133, 102 S. W. 544.]
The only evidence in this case in any way tending to impeach the good faith of plaintiff in purchasing the notes was facts and circumstances offered to show that he purchased the same with actual knowledge of the original fraud. Hence instruction No. 2 for defendant should have confined the attention of the jury to such actual knowledge, and the additional clause,
As this case is subject to retrial under the view we have taken of the law, it is unnecessary for us to comment on the probative force of the evidence offered as to plaintiff’s actual knowledge and good faith.
For the reasons herein appearing, the judgment is reversed and the cause remanded.