Court Opinion

ID: 7903595
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:58:12.202836+00
Date Added: 2024-06-11T16:32:20.574273
License: Public Domain

OPINION DENYING A REHEARING.
In the opinion by way of argument was made the statement: “So in its last analysis the transaction is the same as though the draft had been made payable direct to the bank. It could not then claim to be a holder in due course.” This statement is seized upon to form the basis of a vigorous and ably argued petition,for a rehearing. The portion not italicized is conceded by counsel to be correct. The statement that “It [the bank] could not then claim to be a holder in due course,” it is claimed, is wholly at variance with the definition of what constitutes a holder in due course in the negotiable instruments law as construed by the decided cases. It is said by counsel:
“Certainly, if a payee of a bank draft has no notice of any fraud in the inception of the draft, he may hold the drawer, when such payee has given valuable consideration for the draft. He becomes a holder in due course as such is defined by the negotiable instruments act. ... It would be contrary to present-day custom and ordinary business usage, to hold that the payee of a bank draft, having obtained such bank draft from the purchaser thereof for value, and in good faith, can not maintain an action against the drawer of such draft for! the face value thereof, when payment on such draft is refused.”
Various sections of the negotiable instruments act are quoted to sustain plaintiff’s contention, including section 6522 of the General Statutes of 1915, which provides in part that “ ‘holder’ means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.” The foregoing is from' the section of the act defining in general terms What certain words used in the body of the act mean; but obviously *201this section does not in the slightest respect attempt to distinguish between various kinds of “holders,” or to state what will constitute “a holder in due course.” It is conceded that the plaintiff bank was a holder of the draft in controversy. Was it a bona fide holder? Was it a holder in due course? These were controlling questions on the trial of the case, but section 6522 does not answer or shed any light upon them. The negotiable instruments law is the result of years of study and effort by legal minds to secure a uniform code covering the field of controversy in respect to such -instruments, and if the general definition of words used in the body of the act as expressed in section 6522 had been intended to include what constitutes a holder in due course, the preparation and adoption of article 5 of the act, specifically defining “a holder in due course” and his rights, must have been a work of supererogation.
The statement in the opinion that the situation was the same as though the plaintiff bank had been the payee named in the draft was not necessary to the decision, and no part of the statement formed a basis for the conclusion reached by the court. The statement may, therefore, be considered as eliminated from the opinion. The conclusion that if the bank had been the payee it could not claim to be a holder in due course is, however, a statement of law which finds strong support in decisions construing the uniform negotiable instruments law, although the question is one upon which the courts are not in harmony.
“There is some conflict in the decisions, under the negotiable instruments law, as to whether the payee may be a holder in due course. It has been held in Iowa, Missouri, Oregon and Washington that he is not a holder in due course under such statute. On the other hand, it has been held in Alabama, Massachusetts and New York that the payee may be a holder in due course. In England the decisions construing the bills of exchange act are more or less conflicting, it being held in some cases that the payee is not a holder in due course, while in a later decision the authority of earlier decisions has been at least limited on the theory of an estoppel. In Canada it has been held that the payee may be a holder in due course.” (8 C. J. 469.)
The following text from the same compilation is directly in point, and sustains the statement in the opinion to which objection is made:
*202“On the other hand, one who is in effect the payee is not a holder in due course, although the bill or note is made payable to another and then transferred to the real payee.” (8 C. J. 469. Italics ours.)
In this case the draft was made payable to another (Mun-sell) and by him indorsed to the bank. So that if we were to regard the bank as in effect the payee, this authority sustains our statement that the bank would not then be a holder in due-course. The text quoted cites and is sustained by Johnson v. Harrison, 177 Ind. 240, 89 L. R. A., n. s., 1207.
Among the authorities cited in Corpus Juris upholding the other view are: Armstrong v. American Exchange Bank, 133 U. S. 433; Liberty Trust Co. v. Tilton, 217 Mass. 462, and Note to the same case, L. E. A. 1915 B, 144. Both cases are cited in plaintiff’s petition for a rehearing. The first was decided in 1889, before the adoption of the uniform negotiable instruments law. We refer to the cases merely to show that this contention is one upon which there is a conflict of authority. 'Manifestly, an expression of our view of the interesting question would not at this time be profitable. The question is not involved in the present action for the reason that the draft sued upon required the indorsement of Munsell, the payee, before plaintiff could become a holder at all; and because he paid nothing for it and received nothing in consideration for his indorsement, the bank was not a holder in due course. (See-authorities cited in the original ppinion.)
It is complained the court had no right to assume as a fact that the $2200 note which Johnson left with the plaintiff as collateral was not genuine, and was signed with the names of fictitious persons. It is said this fact was not proved. The answer alleged that the signatures were fictitious, and that the note was not genuine. Munsell, president of the bank, was examined a year and four months after the draft was protested as to his knowledge respecting the parties to the note, and he testified that he did not know either of the alleged makers of -the note, and had made no inquiry about the note except from Johnson. He supposed the note was-genuine, but understood it was claimed by defendant to be a forgery. The defendant had raised the issue, and while it produced no witness to swear that the note was fictitious, neither did plaintiff produce evidence that the parties purporting to have signed it *203ever existed. It would seem' that the facts being naturally more within the scope of plaintiff’s knowledge than defendant’s, it ought not to have been difficult for plaintiff to assume the burden and show that the note was genuine. As there was no evidence connecting the plaintiff with fraud in the inception of the note, the assumption in the opinion that the note was fictitious did not prejudice plaintiff.
A rehearing is denied.