12 Colo. App. 472 | Colo. Ct. App. | 1899
Gumaer, as the maker of five several demand promissory notes, dated the 15th and 20th of July, 1893, four for the sum of $2,500 and one for the sum of $2,000, payable to the order of the Needles National Bank, Isaac E. Blake, the Gladiator Mining Company, the Needles Reduction Company, and the Nevada Southern Railway, was sued by the appellant, Murphy, as receiver of the Needles National Bank which had acquired and held the notes prior to the time it went into liquidation and passed under the control of the comptroller of the currency. It was recited on the face of the notes that they were given for value, payable at the Needles National Bank to the several payees with interest at ten per' cent. When sued the defendant by answer admitted the incorporation of the bank, and then proceeded to deny the appointment of the receiver, the giving of the notes for value, the demand for payment, and as a second defense, averred that neither the bank nor anybody else paid any consideration for the notes, and set up somewhat at length, the real basis of his defense which may be stated in legal form as one based on the fact that the paper was accommodation paper, given without consideration, and that the bank never acquired a title as a bona fide holder for value. The defense generally rested on allegations to the point that one Isaac E. Blake was a stockholder in, manager of, and agent for, the Needles National Bank, and that he requested Gumaer to sign the notes for the bank’s accommodation, agreeing with him that the bank would not hold him liable on the notes. There was a further allegation that the bank had full information that the note was not to be collected from Gumaer and took the paper with this understanding and agreement. This is substantially the defense pleaded to each one of the notes. It will be observed there was no allegation otherwise than by the general
When the cause came to trial, the plaintiff produced the paper establishing his appointment as the receiver of the bank and then offered proof that the notes were discounted by the bank prior to maturity and rested. There were some other facts brought out by the cross-examination of one of the plaintiff’s witnesses which will be subsequently adverted to which bear materially on the question of the character of the bank’s holding. Disregarding this evidence for the present, it is quite clear when the plaintiff showed that the bank acquired the notes before maturity in the usual course of business, and as receiver he was entitled to sue, he had made out a case because it is true that the possession of the notes furnished a presumption of title, and when it transpired that the original notes had been discounted by the bank before maturity, its title and right to sue was fully established. When the defendant assumed the burden which he undertook by his plea that the paper was accommodation paper, he offered considerable testimony. The defendant Gumaer testified to the fact that the original notes were given at the request of I. E. Blake as accommodation paper, and that he received no con
The rights of holders of commercial paper properly designated as accommodation paper, who acquire title before maturity and for a valuable consideration, are well settled. In the absence of statutory regulations to the contrary where such negotiable paper is received in payment of an antecedent debt, or transferred by indorsement as collateral security for a debt created or a purchase made at the time of the transfer, or the transfer is made to secure a debt not then due, or if due, where by the terms of the agreement the collection of the principal sum is delayed, and under all other similar conditions the holder taking it as stated without notice and for value, acquires thereby an unimpeachable title. No equity and no defense however strong which may exist between the original parties to the paper can either retard or defeat its collection. It is probably true, though the question does not at all arise in this case, that a holder, for value before maturity of accommodation paper will get a good title even with notice of its character, and the defense may not be interposed that the transaction between the original parties rested on no valid or valuable consideration in the absence of fraud or other circumstances which will impeach such or any other paper. In this respect probably there is a difference between accommodation paper and ordinary notes issued in the course of business. It is equally true that where such paper is received as collateral security for an antecedent debt, the holder is regarded as a holder in good faith and for value and his title cannot be impeached by proof that it was given without consideration and for the accommodation of one to whom
At the conclusion of the trial the plaintiff asked an instruction respecting this burden of proof, stating the law as we have expressed it. The instruction was refused, no equivalent advice was given to the jury on the subject and the failure to give this instruction was manifest error because the plaintiff was entitled to have the jury directly and distinctly told the law governing the burden of proof and advised as to the duty thereby imposed on the defendant. The plaintiff was entitled to have the jury instructed that if the defendant failed -to establish to their satisfaction that
The court further emphasized the error by instructing the jury that if the bank received the notes sued on as additional collateral for a pre-existing debt then it was not a Iona fide holder and the notes were open to any defense which might exist between the original maker and the payee. This instruction is on its face against the settled law. If the notes were taken as collateral security or as additional collateral security, the transaction gave the bank a good title, and was as good between the parties as though they had become the discounters or purchasers of the note. A further vice which inheres in the instruction proceeds from the circumstance that there was not a particle of evidence introduced by the defendant or anybody else which either showed or tended to show the bank took the paper as collateral security, as additional collateral security, or in any way or form other than by its regular discount in the ordinary course of business for which they paid their currency. The evidence of Gove who was a witness produced by the defendant was clearly to this effect and in this he was supported by the testimony of Manly, that the original notes were sent to the bank, received by it without notice or knowledge of the transaction between Blake and Gumaer, and when the bank received them, that they were regularly passed by the discount committee; that the proceeds were placed to the credit of the various accounts standing in the name of the various payees, and that the credit thus received by those parties to whom credit was given was checked out by those companies and by Mr. Blake, and that the money was paid by the bank directly for the notes as upon the ordinary discount of paper received in the usual course of business. There was absolutely no testimony otherwise than as to the knowledge which came to Blake himself who was not an officer but only a director and a stockholder, that information concerning the character of the paper ever came to the board, to the executive officers of the bank, or to anybody charged with the transaction of its business.
The jury were also instructed at the defendant’s request that if they believed there was no consideration moving from the payees to the maker, and if the maker signed the notes purely as and for an accommodation to Blake, acting for, and on behalf of the Needles National Bank, and Blake agreed with the defendant that said notes should only be used for a certain purpose, and Blake was at the time in the control and management of the operations of the bank to such an extent that he had authority for the bank from the officers and stockholders, that they should find for the defendant. This instruction is numbered three, and although we have not quoted it entirely, we have quoted enough of it whereon to predicate our conclusion that the instruction was erroneous under the law as we have stated it, and under the proofs as they were made. With respect to the consideration it made no difference to the defense whether there was any consideration at all as between the original parties so long as the holder paid value at the time he acquired title and that was within the maturity of the paper. In the next place the instruction was bad because it assumed that Blake had authority to act for
The record may be searched from end to end, and the most diligent scrutiny will absolutely fail to find any testimony whatever that Blake was ever authorized by the board of directors or by any officer of the bank to acquire from Gumaer or anybody else accommodation paper to be used by and for the benefit of the bank. When we remember that it is only the board of directors who can constitute one an agent for that purpose, yet, if we should still concede that the executive officers of the bank might delegate this authority to a third person whose acts would thereby bind the institution if done within the apparent scope of the authority of the executive officers, or within the scope of an actual authority conferred on them for the purpose, yet we should still be unable to find within the record any evidence on which that instruction could be predicated. It is directly denied by the only officers of the bank who were put on the stand by either party. No resolution of the board of directors of that institution was offered in evidence. The proof was direct to the
There are several other instructions found in the record which would probably be subject to criticism, but since the rules which we have laid down and the principles which we have approved are broad and sufficient to establish the rights of the parties and furnish a basis on which the jury on the further trial can be correctly instructed respecting the proof, the burden, and the rights of the parties, we deem this a sufficient analysis of the errors laid.
There are some minor errors to which we must refer, not necessarily to determine all questions presented by the appellant but to prevent a recurrence of the mistakes committed by the nisi prius court during the trial of this case. Gumaer was permitted at some length, and with some particularity to state the conversation had between him and Blake at the time that the notes were executed. Except in so far as this conversation bore on the question of the want of consideration between the maker and Blake or the payees whom Blake represented, it was clearly inadmissible. The defendant undertook to show the close relations which existed between Blake, the bank, the railroad company, the mining company, and the reduction company. These matters were wholly unimportant and immaterial, the naked question being whether there was 'or was not consideration moving from Blake to Gumaer at the
What we have already intimated in the statement of the case respecting exhibits numbered from thirteen to seventy-one, being the letters from Gove to Blake, are subject to the same general criticism and inadmissible on the same general hypothesis. Whether there are any of those letters which ought to be admitted, we do not attempt to determine, nor shall we examine each letter for the purpose of determining whether some one of them might be introduced, leaving the trial court on the subsequent hearing, in the light of the rule which we express, to inspect and determine which if any of them shall be received. The letters were in no sense original evidence; they were not competent to prove agency, they could not be admitted in order to corroborate Mr. Gove’s testimony, nor were they admissible to impeach him, and whatever conversation Blake had as to the transaction whereby the notes were given, was as early as May, 1893, and the very earliest of the letters introduced was written in July. So far as we have been able to discover the letters neither disclosed an original agency nor any ratification of any supposed agency by one having authority to bind the bank for the purpose. Under such circumstances the letters were improperly received. Connor v. The People, 18 Colo. 373; Jackson v. Etz
The defe'ndant also offered Beardslee as a witness, who testified over the plaintiff’s objection respecting an accommodation note which he had given to Blake, but which had no connection, not even the remotest, with the transactions involved in this suit. This deal with Beardslee was made subsequent to the time the Gumaer notes were discounted. While there is a total absence of competent proof to show agency, and it was in no wise partially established whereby it could be aided by proof of this description, it is quite clear under the authorities already cited, that proof of this transaction with Beardslee in no manner tended to show the agency, or that the notes sued on were open to the defense that they were accommodation paper. The T. & H. Pueblo Building Co. v. Klein et al., 5 Colo. App. 348.
We have made no attempt to discuss all the errors assigned by the appellant, and have devoted our entire attention to those which were serious and fundamental and which of necessity compel the reversal of the case. The law and the rules of evidence by which the court must be governed on any subsequent hearing have been sufficiently stated in our judgment to both settle the rights of the parties and secure a just and fair determination of the controversy.
For the errors indicated this judgment must be reversed and the cause sent back for a new trial.
Reversed.
Thomson, P. J., not sitting.