82 Vt. 482 | Vt. | 1909
The note in suit was given by the defendant to the Woodford Distilling Company, and was indorsed by that company to the plaintiff. The plaintiff’s case was submitted in depositions, and consisted of the note and evidence of its transfer for value before maturity. The defendant’s evidence was confined to' matters affecting the note in the hands of the payee. The plaintiff offered nothing in reply.
The trial court has found that the note was indorsed to the plaintiff without recourse, for a valuable consideration, and before maturity; and that it was received without notice of a defence, but without inquiry. The court found further that the assignment was not made in due course of business; basing its conclusion upon the fact that the plaintiff took the note thus indorsed without inquiry, when he was wholly unacquainted with the defendant and his financial condition. The plaintiff claims that there was no evidence to support the finding that he bought the note without inquiry; and that if the finding is sustained, the conclusion drawn from it falls short of a finding that he is not a bona fide holder.
The plaintiff claims that the findings touching his conduct, if warranted by the evidence, are not sufficient to support the judgment. ¥e are referred to a list of cases, decided in many jurisdictions, which concur in holding that one who takes negotiable paper before due for a valuable consideration, in good faith, will not be affected by an existing defence, even though he was aware of circumstances that ought to have excited the suspicion of a prudent man. But the cases cited are not in accord with the decisions of this Court. It is held in this State that a purchaser of negotiable paper must exercise reasonable prudence and caution in taking it, and that if he take it without making inquiry, when the circumstances are such as would excite the suspicion of a prudent and careful man, he will not stand in the position of a tona fide holder. This doctrine was promulgated in Roth v. Colvin, 32 Vt. 125, and was reaffirmed in Limerick Bank v. Adams, 70 Vt. 132, 40 Atl. 166, and again in Capital Savings Bank v. Montpelier Savings Bank, 77 Yt. 189, 59 Atl. 827. It remains to be seen whether this distinction will be of importance in the determination of the case presented.
The case states that nothing appeared tending to show that the plaintiff made any inquiry regarding the note or its maker. The defendant contends that the evidence he introduced was such as cast on the plaintiff the burden of showing that he took the note in good faith, and that this required more than proof of a purchase for value before maturity. The questions raised by this claim are the first for consideration.
The production of a negotiable instrument, properly indorsed, is prima facie evidence of the holder’s right to recover against the maker. But the maker may compel the holder to support his prima facie case with further evidence by showing a defence that would have been available against the payee.
The existence of a rule of this character has long been affirmed in this State, whatever uncertainty may have been felt regarding its application. It was directly involved in the decision of Sandford v. Norton, 14 Vt. 228, where it was said that when the defendant makes out a case upon which none but a tona fide holder for value is entitled to recover against him, it is incumbent upon the plaintiff to show that he is entitled to sue in that character. It was recognized in Blaney v. Belton, 60 Vt. 275, 13 Atl. 564, where it was said that if the defendant offers evidence tending to prove fraud in obtaining the note, or an entire failure of consideration for it between the original parties, the burden of proof is thereby cast upon the plaintiff to show that he was an innocent purchaser of the note for value while it was current. It was restated and applied in Limerick Bank v. Adams, 70 Vt. 132, where it was held that evidence offered by the defendants which tended to show that the note was without consideration and void for fraud as between the original parties was properly admitted as a step in their defence, and for the purpose of casting upon the plaintiff the burden of showing that it was not chargeable with knowledge of the fraud, if the fraud alleged was established.
In some jurisdictions the courts have found no difficulty in applying the rule to defences not connected with the inception of the instrument. It is said that after proof that the paper was
We see no reason why the additional burden should not rest upon the plaintiff in this case. It is true that the defence had no existence when the note was delivered to the payee, and that it never would have existed but for a further contemporaneous agreement of which the note gave no notice. But the terms of the agreement were such that the acts of the parties with reference to it worked an entire failure of the consideration of the note, and operated as a defeasance of the payee’s title to it, and made the transfer of it a fraud upon the maker. The objection that the holder ought not to be prejudiced by a matter not ascertainable from the note has no greater force than it would have had if the fraud or defect of title had existed at the making of the contract. The effect of the payee’s wrongful act upon the maker, and the inducement to a collusive transfer, would be the same in either case. The rule is not one that abridges the holder’s substantive right as determined by the law merchant; it merely puts the burden of proof upon the one who knows the facts. If he is an innocent holder, the fact that the maker has a complete defence against the payee cannot affect him. So when the maker shows a transfer made in fraud of his right, it is not unreasonable to require that the transferee offer some evidence tending to show that he bought, in good faith.
So we hold that the burden was on the plaintiff to show that he took the note in good faith, and that his statement that he bought it for value before maturity did not meet the requirement. The trial court has not found the fact of good faith, and there was nothing before it that required the finding. The plaintiff’s contention that the findings made do not amount to a finding that he was not a purchaser in good faith, is made immaterial by our holding regarding the burden. The only question now available to the plaintiff is whether any of the facts reported required the conclusion that he was such a purchaser.
"We have seen that the note was indorsed to the plaintiff without recourse. It appears from the plaintiff’s evidence that he is an attorney, and resides in Chicago, where the payee does business; that he knows the company in a business way; that he bought this and four other notes at the same time; that he is not acquainted with the defendant; and that at the time he bought the note he had no notice of what it was given for. The trial court has found from this evidence that the note was received without notice of a defence. This is not equivalent to a finding that the purchaser acted in good faith, for he may have had
Judgment affirmed.