Court Opinion

ID: 6871528
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:01:51.708061+00
Date Added: 2024-06-11T16:05:25.055020
License: Public Domain

PARKER, Circuit Judge
(dissenting).
I think that, upon the evidence in the record, verdict should have been directed for the plaintiff. Upon the proof of fraud in the negotiation of the notes sued on, the burden of proof, it is true, rested upon plaintiff to show that it was a holder in due course, and, as the plaintiff occupied the same position as Father Matthew Woods with respect to the paper, the burden resolved itself into a showing that he was a holder in due course; but this burden, in view of the provisions of section 56 of the Uniform Negotiable Instruments Law, was merely one of showing that he took the notes for value and without knowledge of the defect in title and not under such circumstances as amounted to bad faith. The testimony shows beyond question that the notes were acquired for value.
Father Woods specifically denies knowledge of the defect in title, and I can find nothing in the circumstances which justifies the conclusion that he did have such knowledge or that he acquired the notes in bad faith. The bonds and coupons which he surrendered for them were guaranteed by the Terrill Bond & Mortgage Company as-well as secured by mortgages on real estate; and there is nothing to show that at that time he knew the Terrill Bond & Mortgage Company to be insolvent or that he was entering into a conspiracy with its officers to accept paper which it had no right to transfer and thus perpetrate a fraud upon one of the bishops of his church. The case is not one resting upon the unsupported testimony of a holder. Letters and telegrams passing between the parties with respect to the last two notes clearly negative, in my opinion, any knowledge on the part of Father Woods of any defect in the title to the paper or any bad faith in its acquisition.
Thus on May 20, 1932, he sent checks aggregating $1,454.50 in payment of the balance due after application of other items on the purchase of one of the Brennan notes. The next day, May 21, 1932, upon the dishonor of certain Southgate coupons which the Terrill Bond & Mortgage Company had guaranteed, he sent the following telegram to that company: “Southgate coupons due April twelfth aggregating fourteen eighty seven fifty returned today unpaid Stop Return our checks for fourteen fifty four fifty sent you yesterday plus your check thirty three to balance and will send you the coupons Wire reply.”
In reply to the telegram the Bond & Mortgage Company wrote him the following letter, setting forth the proposition under which the last of the Brennan notes was purchased, viz.:
“I have just received your wire in reference to Southgate coupons aggregating $1,487.50 plus Springfield coupons which we have written you about in another letter in the amount of $612.50 or a total credit for coupons of $2,100.00.
“This we will allow as a credit on the other $5,000.00 Bishop Brennan Note and as you will' have some additional coupons due in June I am enclosing the $5,000.00 Bishop Brennan Note, which you can keep custody of until all credits have been received in the form of coupons which are past due and will be shortly due.
“In other words, I trust you to hold this Bishop Brennan Note until we have made our final adjustment. Therefore the check which apparently you have sent by mail will be banked in the usual manner and kindly make preparations to see that it is honored on presentation. Meantime you have received credit for $2,100.00 on the purchase of an additional Bishop Brennan Note in the amount of $5,000.00 which we are enclosing, leaving a balance due of $2,-650.00 which can be equalized by the payment of coupons to become due or whatever accrued interest will become due on *404the exchange when it has been accomplished. I must have some justification for the payment of past due coupons in turning over to you Bishop Brennan’s Notes as we are preferring you over others and I am subject to criticism and censure when I deliver Bishop Brennan Notes to you without any cash payment on same. I hope you will understand what I am confronted with.”
Finally, in a letter of May 28, 1932, Father Woods proposed to buy further pa,per of this character, saying:
( “George makes me understand that I have so many TBM Bonds, my account is all one sided. Something should be done to make for a broader diversification, even tho there may be some loss to be absorbed thereby. A local Bond Salesman wishes to sell some of the TBM for me, but I think-possibly you’d prefer to do this for me yourself if there is any market at all. What can you do for me in the matter?
“Further: I have some Cash on hand and some more to come in soon — and the investment market is very attractive right now. But if I can kill two or three birds with one stone; (read on and you’ll understand about the stone) so much the better. I propose to buy from you some of the Bishops paper if you have any for sale, paying therefor in TBM Bonds for four-fifths of the amount due, plus cash for the final fifth. Would such a plan appeal to you? The Bishops paper need not necessarily be that of Bishop Brennan — that of almost any of the Catholic Bishops would be satisfactory I presume, tho I’d like to see the individual notes before acceptance of course. By this method, I’d be cutting down the amount of my bond holdings, helping the Bishops to carry their financial difficulties, and at the same time, possibly, be helping you by feeding you a bit of Cash now and then.”
It is hard to believe that the holder of coupons secured by mortgage and indorsed by a supposedly solvent Bond & Mortgage Company would surrender them and pay in addition a considerable amount of cash for notes which he knew were being negotiated in fraud of the maker and which he would probably have great difficulty, for that reason, in collecting; and especially is this hard to believe where the acceptance of the ' notes under such circumstances would involve a priest of the church in the perpetration of a fraud on one of its bishops. When letters and telegrams, written at the time, so conclusively negative bad faith or knowledge of the fraud as do the letters and telegram which I have quoted, I feel that the matter should not have been left to the speculation of the jury but that verdict for the plaintiff should have been directed.