Court Opinion

ID: 5170173
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:53:40.906887+00
Date Added: 2024-06-11T08:26:02.986901
License: Public Domain

DAYIS, District Judge,
Dissenting. — I regret that my view of this case makes it necessary for me to dissent from the conclusion reached by the majority of this court.
One of the principal questions for consideration is as to whether or not a payee of a promissory note may become the holder thereof in due course, with a right to enforce payment against the maker, free from any defect. And the authorities definitely furnish an answer in the affirmative. (Lookout Bank v. Aull, 93 Tenn. 645, 42 Am. St. 934, 27 S. W. 1014; Jordan v. Jordan v. 10 Lea (Tenn.), 124, 43 Am. Rep. 301; Cherry v. Frost, 7 Lea (Tenn.), 1; Passumpsic Bank v. Goss, 31 Vt. 315; Deardorff v. Foresman, 24 Ind. 481; Smith v. Moberley, 10 B. Mon. (Ky.) 269, 52 Am. Dec. 543; Armstrong v. American Exc. Bank, 133 U. S. 433, 10 Sup. Ct. 450, 33 L. ed. 747; Boston etc. Co. v. Steuer, 183 Mass. 140, 97 Am. St. 427, 66 N. E. 646; Watson v. Russell, 3 Best & S. 34; Nelson v. Cowing, 6 Hill (N. Y.), 336; 7 Cyc. 925 (note); Eaton & Gilbert on Commercial Paper, p. 305.)
It is finally established by the findings of the district court, fully supported by the evidence, that Mrs. Miller and Cramer made a separate contract previous to the transaction wherein the receiver joined them in making the agreement in which *321the notes sued on herein were given as part consideration. In making such previous contract, unknown to the receiver of the bank, Cramer committed a fraud upon Mrs. Miller and falsely promised to give her certain property and securities as consideration for certain certificates of deposit and notes to be delivered by her, provided such certificates of deposit and notes could be used in a proposed compromise settlement between them and the receiver of the Idaho State Bank. Thereupon Cramer made a proposition to the receiver, which was accepted by him. And in pursuance thereof an agreement was entered into by Mrs. Miller and Cramer and the receiver which was approved by the judge of the district court. The notes in controversy here, payable to the receiver of the bank, were executed by Mrs. Miller and delivered to the receiver in accordance with the terms of each of such contracts, entirely free from fraud or false representations on his part, or by anyone in his behalf. And in my opinion the receiver had no information of such facts or circumstances as would reasonably put him on inquiry, or amounted to bad faith when he accepted such notes.
The status of principal and agent did not exist in any way, since each party acted entirely on his own account in making such contract. In making the compromise settlement with Mrs. Miller, the receiver did not stand in the position of trustee, guardian or protector of her interests. All that was required of him was that he deal in good faith on a fair, equitable basis, without deception or misrepresentation. And this he did.
The district court found with reference to the contract signed by the receiver “that in pursuance to said agreement all parties thereto complied with the terms and conditions thereof.” It is clear from the evidence that the receiver faithfully complied in every respect with the terms of the contract entered into by him, and that Cramer also did everything required of him by such contract. Even though the burden is upon the receiver to prove that he acquired title to such notes in due course of business, the evidence clearly establishes to my mind that he received such notes in good *322faith and for a valuable consideration, without notice of any infirmity in the instruments, and that he became a bona fide holder thereof. Every element of the contract with which the receiver was connected was fair and equitable and was faithfully executed by all parties thereto.
But the judgment of the majority of this court in effect charges the receiver with notice of the terms and conditions of another separate and distinct agreement, privately entered into by Cramer and Mrs. Miller prior to any negotiations with him. And it does not seem just to me that a payee of promissory notes received under such circumstances should be charged with notice of the terms of such a prior and private contract, even though made by parties who later join with such payee in another agreement affecting the same subject matter. To so hold imposes upon such a taker of a promissory note a very serious burden.
For these reasons it does not appear to me fair or reasonable to charge the receiver with constructive notice of the fraud committed by Cramer, even though the receiver may have been aware of the relations of the parties and the condition of their affairs, as set forth in detail in the majority opinion, and assigned therein as facts that should have put the receiver on notice as to the terms of the understanding between Cramer and Mrs. Miller wherein the fraud was committed.
In my opinion, the judgment of the district court should be affirmed, and the receiver of the Idaho State Bank should not be charged with constructive notice of the conditions of the purely personal and private contract between Mrs. Miller and Cramer, entirely applicable to themselves and of no concern to such receiver.
Petition for rehearing denied.