#### Richmond Railway & Electric Co. *v.*Dick *et al.*

*(Circuit Court of Appeals, Fourth Circuit.*

October 11, 1892.

No. 17.

1. Appealable Orders—Continuance.

A motion for a continuance is addressed to the discretion of the court, and its action thereon is not reviewable by the circuit court of appeals.

2. Same—New Trial.

The action of a federal court in disposing of a motion for a new trial is not reviewable in the circuit court of appeals.

3. Negotiable Instruments—Bona Fide Holders—Notice.

A manufacturing corporation received negotiable notes for property sold. The notes were discounted by a banking firm, in which the president of the corporation was a partner, but he had no actual knowledge as to the consideration for the notes, or of the transaction in which they were given. *Held,*that the mere fact of his connection with the two concerns was not sufficient to affect the banking firm with constructive notice of the consideration for the notes and of an alleged failure thereof.

In Error to the Circuit Court of the United States for the Eastern District of Virginia.

Action by J. R. Dick & Co. against the Richmond Railway & Electric Company on certain promissory notes. Verdict and judgment for plaintiffs. New trial denied. Defendant brings error. Affirmed.

Statement by Simonton, District Judge:

The record discloses these facts: The defendant contracted to purchase two engines from the Phoenix Iron Works Company. The engines were to be delivered at Richmond, Va., to be paid for on arrival, one fourth in cash, remainder in notes. They were delivered at Richmond, the cash was paid, and three negotiable promissory notes were executed, payable to order of the Phoenix Company, and delivered to them. These notes bore dates and were in the amounts following: One for $1,500, dated 23d June, 1891; one for $1,687.50, dated 1st July, 1891; one for $1,500, dated 15th July, 1891,—all at four months. The Phoenix Iron Company indorsed before maturity and delivered thess notes to plaintiffs, who are a banking firm at Meadville, Pa. One of *380them, (S. B. Dick,) at the date of the contract and of the execution and discount of the notes, was president of the Phoenix Company. The notes were not paid. J. R. Dick & Co., indorsees, brought this action against the maker. The pleas were *nil débet*and failure of consideration. At the trial the defendant produced a telegram sent two days before to the plaintiffs at Meadville, directing them to bring to the trial books showing the state of the account with Phoenix Iron Works at and before the time of delivery and indorsement of the note of the Richmond Company and to commencement of suit. “Do this to avoid delay.” The telegram was signed by attorneys of plaintiffs and defendant. The books were not produced. Defendant then moved for a continuance until the evidence from the books could be produced. The motion was refused, and defendant excepted. The trial proceeding, defendant called S. B. Dick, who admitted that he was president of the Phoenix Company at the date of the contract, and at the time the notes were delivered and discounted. He denied any knowledge of any part of the transaction until this suit was brought. Defendant then offered to prove the contract made between it and one Henry Church, manager of the Phoenix Company, and in its behalf, and to show that the consideration for these notes given under this contract had failed. The court below withdrew all evidence from the jury on this point. It also refused to instruct the jury, as requested, “that, from his position as president, S. B. Dick must be presumed to have such notice of the defect in the notes as to destroy their negotiability in the hands of his firm; that actual notice was not necessary; that it was enough to show that plaintiffs had opportunities of knowledge, such as would put a prudent man on his guard.” The defendant makes this refusal of the court the ground for his second and third exceptions. The jury found for the plaintiffs. Defendant moved for a new trial, which was refused. He makes this the ground of his fourth and last exception.

*Wyndham R.*Meredith, for plaintiff in error.

*Legh R. Page,*for defendants in error.

Before Bond, Circuit Judge, and Simonton, District Judge.

Simonton, District Judge.

A motion for continuance is addressed to the discretion of the court below. Its action thereon is not reversible here. *Woods v. Young,*4 Cranch, 237; *Sims v. Hundley,*6 How. 1. In Banks’ Edition of the Supreme Court Reports all the cases are quoted in a note to this case. The first exception is overruled.

Nor will this court entertain an exception because of the refusal of the court below to grant a new trial. This is wholly within its discretion. *Parsons*v. *Bedford,*3 Pet. 433; *Insurance Co.*v. *Folsom,*18 Wall. 237; *Railroad Co. v. Fraloff,*100 U. S. 24; *Cattle Co. v. Mann,*130 U. S. 75, 9 Sup. Ct. Rep. 458; *Railroad Co.*v. *Winter,*143 U. S. 75, 12 Sup. Ct. Rep. 356. The fourth exception is overruled.

The second and third exceptions have been earnestly pressed. They will be considered together. The position taken is this: S. B. Dick, one of the plaintiffs, being president of the Phoenix Company, had con*381structive notice of the consideration for which the notes were given, and of its failure. Notwithstanding that in fact he had no knowledge whatever of the transaction, still his position afforded him the means of knowledge. This affected him and his firm with such notice as to take away from them the. protection afforded to *bona fide*holders of negotiable paper, and to subject them to the plea of failure of consideration. The record shows that the plaintiffs are holders of commercial paper. They are presumed, as such holders, to have taken it before maturity for value, and without notice of any objection to which it maybe liable. This presumption stands until overcome by proof. *Swift*v. Tyson, 16 Pet. 1; *Lexington*v. *Butler,*14 Wall. 282; *Pana*v. *Bowler,*107 U. S. 541, 542, 2 Sup. Ct. Rep. 704. There is no evidence whatever tending to show that the notes were not acquired before maturity, and for value. The sole contention is that defendant had notice through S. B. Dick. He denies all actual knowledge of the transaction, and the sole inquiry is, did his position as president give him such notice, and put such means of knowledge in his power, as to defeat the title of his firm? The title of a holder of negotiable paper for value before maturity can only be defeated by showing bad faith in him which implies guilty knowledge or willful ignorance of the facts impairing the title. *Hotchkiss*v. *Bank,*21 Wall. 354; *Murray*v. *Lardner,*2 Wall. 110. In this case there is nothing in the record which charges, and nothing in the evidence which proves or tends to prove, fraud or bad faith on the part of the Phoenix Company. The only thing charged is its failure to perform the contract to the satisfaction of defendant,—an occurrence of any day, an occurrence of every day, with honest contractors. Were we to assume that S. B. Dick, as president, was affected with knowledge of all the transactions of the Phoenix Company, nothing appears showing bad faith or guilty knowledge. The most that can be said is that he knew that the notes were given for two engines. The last note was dated 15th July. The first complaint was made 3d August. There is no testimony showing that any of the notes were discounted after that last date. It would be an alarming doctrine were it to be established that a bank discounting the business paper of a well-known customer took the paper subject to any defense which the maker of the note could set up, showing that the goods for which the paper was given were deficient in quantity or quality or both. “When a person,” says the supreme court in *Wilson*v. *Wall,*6 Wall. 91, “has not actual notice, he ought not to be treated as if he had notice, unless the circumstances are such as to enable the court to say, not only that he might have acquired, but also that he ought to have acquired, it, but for his gross negligence in the conduct of the business in question. The question, then, when it is sought to affect a purchaser with constructive notice, is not whether he had the means of obtaining, and might by prudent caution have obtained, the knowledge in question, but whether not obtaining it was an act of gross or culpable negligence.” These exceptions are overruled, and the judgment of the circuit court in every respect affirmed, with interest and costs.