22 S.D. 365 | S.D. | 1908
This action was instituted -by the plaintiff as second indorsee of a promissory note, alleged to have been executed by the defendants to one Henry. Lefebure, for the sum of $800, with interest at the rate of 6 per cent, per annum, payable July 1, 1906, to recover from them the amount due thereon. Verdict and judgment being in favor of the defendants, the plaintiff has appealed.
The complaint is in the usual form, and after alleging the execution of the note, and giving a copy of the same, the plaintiff alleges: “That after the execution and delivery of the said note and before the maturity thereof, the said Henry Lefebure, the payee mentioned in the said note, for a good and valuable consideration, and in the usual course of business, duly sold, indorsed, and delivered to A. J. Struble the said note; that thereafter and before the maturity of said note, the said A. J. Struble, for a good and valuable consideration, and in the usual course of business, duly sold, indorsed, and delivered to this plaintiff the said note, and said plaintiff is now the legal owner and holder thereof.” The de-defendants in their answer admit that they signed the promissory note in question, together with two other promissory notes, each in the sum of $800, payable, respectively, July 1, 1905, July 1, 1906, and July 1, 1907, but deny that any of said notes, including the note in suit, were ever delivered to Henry Lefebure, or to- any other person for him, and deny upon information and belief that the note in this action was ever indorsed and transferred for value before maturity thereof, either to A. J. Struble or to the plaintiff before named, and deny that said note described in plaintiff’s complaint was acquired by said Struble, or by the plaintiff, in the ordinary course of business, and. deny that the plaintiff is now the legal holder and owner thereof.' And the defendants allege, in substance, that said notes were never delivered' to said Lefebure, but were fraudulently obtained from the defendant Carlson, who hal the possession of the same for these defendants, by one Headley, agent of the said Lefebure, and by him'delivered to the said Lefe-bure without the consent of the said defendants. At the "close-of
Evidence was introduced by the defendants tending to prove that, in the fall of 1903, Henry befebure, who was named as the payee in the note, was engaged in the business of importing and selling horses, mostly Belgian stallions; that some time previous to December 15, 1903, he entered into a contract with 24 farmers in Union county to* sell to them a Belgian stallion, known as “Bristol,” for the sum of $2,400; that on December 15th there was a meeting of a number of the signers of the contract, and three notes were executed by 19 of the persons who had signed the contract; that it was agreed between Befebure and the parties who signed.
Plaintiff introduced evidence tending to prove that, some time before the note in controversy in this action became due, the same was purchased by said Struble of the said Lefebure, and that he paid the said Lefebure therefor the sum of $425 m cash, . and a team of driving horses valued at about $350, the note being indorsed by said Lefebure “without recourse”; that subsequently to the delivery of the same to said Struble, but before the maturity of the note, said Struble indorsed the same to the plaintiff in this action, “without recourse,” he claiming that he paid the sum of $800 therefor, either in cash or by the canceling certain indebtedness of Struble to him, and that he took the same for himself individually, and not on account of his bank, of which he was president. It is contended by the defendants that both Struble and the plaintiff had notice of sufficient facts to put them upon inquiry, as
The law applicablé to this case is thus stated in Kirby v. Berguin, supra, as follows: “As we have seen, a party who takes a note procured by fraud from the maker must not only show that he is a purchaser for value before maturity, without notice, but that he purchased it in good faith. If, therefore, there were circumstances connected with the transaction which would arouse the suspicion of an ordinarily prudent man, and he failed to make the
The case of Bank v. Diefendorf, supra, is very analogous to the case at bar; and, in view of the fact that the motion for the direction of a verdict was denied by the trial court, and verdict rendered in favor of the defendant, and the decision of the trial court reversed by the general term, ahd the recision of the latter court reversed by the Court of Appeals, and that the opinion of the Court of Appeals was the unanimous opinion of the court, we have deemed it proper to quote quite largely from the same. The court, after quite fully stating the facts in the case and the evidence, says: “At the close of the evidence the plaintiff requested the court to direct a verdict for it upon the ground 'that upon the undisputed evidence in the case plaintiff purchased the notes before maturity, paid value therefor, and without notice of any facts constituting a defense to the notes.’ This request was denied, and the plaintiff excepted. The trial court submitted the case to the jury under instruction that, if they found the notes were procured from Diefen-dorf by fraud, and under 'such circumstances as would not entitle the payee thereof to recover against him, they should consider the further question whether the plaintiff purchased said notes for value, and in good faith, and if it did not, that the defendant was entitled to a verdict. The jury found for the defendant. Upon appeal the judgment entered on this verdict was reversed upon questions of law, and a new trial ordered. The ground upon which this -result was reached was said to .be that there was no evidence of bad faith in the purchase of the notes on the part of the plaintiff, and that the trial court errer in not directing a verdict for the plaintiff. The plaintiff claims that the proof showing it purchased the notes before maturity, paying value therefor, conclusively establishes its character as a bona fide holder, and entitles it to recover, in the absence of proof showing that it had notice, or knowledge of facts constituting a defense to the action. The plaintiff’s contention eliminates the element of good faith from the transaction, and assumes that the language, ‘a holder for value,’ as used in the authorities, is satisfied by.proof that the notes were purchased before maturity, and value paid therefor. We think this
The contention of the plaintiff that the contract as to the stallion was never rescinded and the same returned to Refebure is not, in our view of the case, material, as it was not shown that the horse was ever delivered to the defendants, or that they ever accepted the same, or that they have in any manner received any benefits from its possession by Bredall. As the company was never organized, and the horse never accepted, the defendants were clearly injured and damaged by the fraudulent acts of Headley as the agent of Refebure and by the acts of Refebure in putting the note into cir-lation, knowing that the same was fraudulently obtained from the defendants.
The contention of the plaintiff that, as the testimony of Mr. Struble was not contradicted, and his reputation for truth and veracity was not impeached, his testimony must be taken as true by the jury is not tenable, for the reason that, while his testimony was not directly contradicted, and no witness was called to testify as to his character for truth and veracity, he was impeached by his cross-examination, which is one of the methods by which the testimony of a witness may be impeached. He admits on his cross-examination that, notwithstanding- the existence of facts calculated to arouse the suspicion of an ordinarily prudent man as to the validity of the note in the hands of Refebure, he made no inquiries of Refebure, or any other person, as to the nature of the
Section 2451 of our Revised Civil Code provides that, “Constructive notice is notice imputed by the law to a person not having actual notice.” Section 2452 provides: “Every person who- has actual notice of circumstances sufficient to. put a prudent man upon inquiry as to a particular fact, and who omits to make such inquiry with reasonable diligence, is deemed to have constructive notice of the fact itself.” As before stated, we are of the opinion that Struble had actual notice of circumstances sufficient to pút a prudent man upon inquiry, and hence he must be deemed to. have had constructive notice of all the facts which such inquiries would have elicited. As a purchaser of the note therefore, in order to constitute him a purchaser in good faith, he should have made such inquiries of Lefebure in regard to the making and delivery of the note, as would, if they had been truly answered by Eefe-bure, placed him in possession of facts showing that the note in the hands of Eefebure was invalid and worthless, for we have a right to presume that Lefebure would have answered the inquiries made of him truly, as, if untrue, his answers might have subjected him to a prosecution for obtaining money from Struble un
It was stated in the opinion in the case of Bank v. Diefendorf, supra, from which we have quoted: “The notes were apparently for unusual amounts for a farmer, in ordinary circumstances, to give, and would naturally have excited curiosity in those who knew him as to the circumstances under which such an indebtedness was incurred. The plaintiff’s cashier, however, studiously refrained from acquiring any information in regard thereto, even such as might be, under many circumstances, desirable for the bank to have. He made no inquiry as to the consideration of these large notes, the influences which had taken this farmer so far from home, nor the circumstances attending their execution. He asked no1 questions as to the responsibility, employment, or associations of his vendor. *.* * Greater caution in avoiding the most natural information could not have been exhibited by the plaintiff if the cashier had known the notes were obtained by fraud or crime, and desired to remain in ignorance of those facts. His conduct indicated something more than negligence! He exhibited a studous desire to avoid any information which , might throw light upon the origin of the notes, or the existence of equities in favor of their makqs.” This language is equally applicable as to Struble and the plaintiff.
It is quite clear from the facts as disclosed by the evidence in this case that Struble was not a purchaser in good faith, and entitled to the protection which the law gives to a good faith purchaser. The plaintiff is clearly in no better position than Struble. He took the note indorsed by Struble “without recourse,” and the only inquiries he claims to have made was of Struble, who said to him the note was all right. He admits that he would not have
The further contention of the plaintiff that, if denied his right to recover in this action, it would be introducing a dangerous rule into the law in regard to the transfer of negotiable papers is not tenable. A person purchasing a note in good faith, who has exer-. cised in its purchase such care as an ordinarily prudent man would exercise, will not be liable to suffer loss by the enforcement of the rule adopted by the- Court of Appeals of New York and approved by this court, but, however, if he fails to show that he purchased the note in good faith, by failing to observe the ordinary rules applicable to the purchase of commercial paper, where the circumstances attending the purchase are calculated to excite suspicion in the mind of an 'ordinarily prudent man, the law will not protect
Finding no error in the record, the judgment of the court below and order denying a new trial are affirmed.