Case Name: J. E. LATHAM COMPANY v. E. C. ROGERS; FIRST NATIONAL BANK OF MULLINS, S. C., Intervenor
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1915-12-01
Citations: 170 N.C. 239
Docket Number: 
Parties: J. E. LATHAM COMPANY v. E. C. ROGERS; FIRST NATIONAL BANK OF MULLINS, S. C., Intervenor.
Judges: 
Reporter: North Carolina Reports
Volume: 170
Pages: 239–241

Head Matter:
J. E. LATHAM COMPANY v. E. C. ROGERS; FIRST NATIONAL BANK OF MULLINS, S. C., Intervenor.
(Filed 1 December, 1915.)
1. Bills and Jiotes — JiegotiaMe Instruments — Fraud—Holder in Hue Course —Burden of Proof.
Where it is established that the draft and acceptance sued on was procured by the original payee by falsely and fraudulently representing the character of wares or merchandise — the grade of cotton, in this case —for which it was given, an intervenor in the action, claiming the instrument as a holder in due course, has the burden of proving that he paid full value for the draft and that he was a bona fide purchaser, before maturity and without knowledge of the infirmity.
2. Pleadings — Answers—Admissions—Intervenors—Bills and Jiotes — Fraud— Due Course — Trials—Directing Verdict.
Where the defendant is sued for damages for fraudulently and falsely representing the grade of cotton sold and delivered to the plaintiff, for which the latter had given his acceptance, and an intervenor in the action claims as a holder of the paper in due course, it is reversible error for the court to admit the defendant’s answer in evidence, which admits that the plaintiff is a bona, fide holder of the draft in due course, without notice of the infirmity in the instrument, when the controversy is solely betwéen the plaintiff and the intervenor; and the statements in the answer being of no more effect than the defendant’s ex parte affidavit, it is proper for the trial judge to direct a verdict for the plaintiff, if the evidence is found by the jury as a fact, in the absence of other evidence.
Appeal by plaintiff from Lyon, J., at June Term, 1915, of Guil-PORD.
Civil action tried upon these issues:
1. Did the defendant E. 0. Rogers procure from the plaintiff, J. E. Latham Company, the acceptance and payment of the draft described in the complaint by falsely and fraudulently representing by his invoices the grades of the cotton covered by said invoices, and paid for by said drafts? Answer; Yes.
2. What amount of damages, if any, is plaintiff entitled to recover of the defendant? Answer; One thousand dollars.
3. Did the intervenor, the First National Bank of Mullins, South Carolina, purchase said drafts for value before maturity in good faith, and without notice of any infirmity, defect or fraud therein? Answer ; Yes.
From the judgment rendered plaintiff appealed.
BrooTcs, Sapp & Williams for plaintiff.
Justice & Broadhurst, Thomas S. Beall for intervenor.
No counsel for defendant Rogers.

Opinion:
BrowN, J.
This action is brought to recover damages against defendant Rogers on account of false and fraudulent representation of the grades of a certain lot of cotton covered by invoices attached to certain drafts. The jury assessed the damages of the plaintiff against the defendant at the sum of $3,000.
As there is no appeal by defendant Rogers, it must be taken that there are no errors arising upon the findings of the jury in respect to him. The only assignments of error, therefore, to be discussed relate to the third issue.
The first assignment of error is because the court allowed the inter-venor to introduce in evidence upon the trial four paragraphs of the defendant Rogers' answer. These paragraphs tend to prove that the intervenor paid Rogers full value for the drafts, the proceeds of which have been garnisheed in this action. The issue of fraud having been found against defendant Rogers, the burden of proof then rested upon .the intervenor to satisfy the jury that it paid full value for the drafts and that it was a bona fide purchaser without knowledge of the infirmity. Bank v. Fountain, 148 N. C., 590; Bank v. Exum, 163 N. C., 203.
Bank v. Brown, 160 N. C., 24, is relied upon by the intervenor to establish the proposition that the burden rests upon the plaintiff to show that the intervenor had knowledge of the infirmity. In that case there was no finding of fraud and no evidence tending to show it, and, therefore, the burden of proof was not shifted; and if the construction placed upon that opinion by the intervenor's counsel is warranted, then the language used by the judge was inadvertently used. It is undoubtedly well settled that where fraud is shown in the execution of the note, or other evidence of debt, the holder thereof who claims to be a tona fide purchaser for value without notice must satisfy the jury of those facts.
"We think the assignment of error must be sustained. There was no issue raised by the pleadings or submitted to the jury between the intervenor and defendant Rogers. The whole contest, in respect to the third issue, was between the plaintiff and the intervenor. Rogers' answer was, therefore, nothing more than an ex parte affidavit and was evidently offered for the purpose of getting before the jury Rogers' statement to the effect that the intervenor was a bona fide purchaser of the drafts for value. The proper method would have been to have put Rogers on the witness stand or to have taken his deposition in the regular way.
It is said, however, that the court admitted the answer only as against Rogers and not as against the plaintiff. Assuming that to be true, the court should then have given the plaintiff's prayer for instruction, namely, that if the jury believe the evidence, they should answer the third issue "No." For there was no other evidence offered by the inter-venor except the answer of Rogers, and if that was offered only against Rogers, then there was no evidence as against the plaintiff tending to prove that tbe intervenor was a bona, fide purchaser in good faith for value. So, whichever way you take it, there was error, for which there must be a
New trial.