Court Opinion

ID: 3891301
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:21:17.48073+00
Date Added: 2024-06-11T13:56:13.098936
License: Public Domain

ON PETITION TO REHEAR.
The questions presented by defendant's petition to rehear are the same as were made on the hearing. Emphasis, however, is now laid on section 7383 of the Code, which is as follows:
"Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of *Page 673 
any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. But the last mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title."
Section 7379 defines when a title is defective and is as follows:
"The title of a person who negotiates an instrument is defective within the meaning of this law when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud."
Section 7380 is as follows:
"To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith."
The declaration averred that plaintiff was the "owner and holder" of the note sued on and of which profert was made. This was sufficient to show, prima facie, that plaintiff was the holder in due course, the note being regular on its face.
The defendant's plea of no consideration as between himself and the payee was no defense as against the holder in due course. Code, section 7352; 8 C.J., 748. The plea was fatally defective without allegations *Page 674 
showing that plaintiff was not a bona fide holder in due course. 8 C.J., 913. The demurrer to the plea was properly sustained.
Defendant made no plea that the title of the payee was defective for any of the reasons defined in section 7379,supra. But it is argued that defendant should have been allowed under his second plea to show no consideration, and that this would have constituted a defect in title and, under section 7383, would have cast upon the plaintiff the burden of proving it was a holder in due course. But, no consideration, or failure of consideration, is not enumerated or embraced in section 7379 as constituting defect in title.
In 3 R.C.L., 1044, the rule is thus stated:
"The law is now well settled that evidence of want of consideration, as between the original parties to a note or bill, will not shift the burden of proof in an action by an indorsee, nor put him to show that he is a holder for value. The presumption is that the indorsee of a negotiable bill or note is a bona fide holder for value, and this presumption is not repelled merely by proof that the bill or note as between the immediate parties was without consideration, and was made, indorsed, or accepted by one for the sole accommodation of the other. Nor is want of consideration a defect in title within the statutory rule that when it is shown that the title of any person who has negotiated an instrument was defective, the burden is on the holder to show that he acquired the paper in due course."
The above was quoted with approval by the Supreme Court of Indiana in the case of Wheat v. Goss, 193 Ind. 558, 141 N.E. 311, 313, where, in dealing with section 59 *Page 675 
of the Negotiable Instruments Law (our Code, section 7383), the court held that want of consideration does not repel the presumption that indorsee is a bona fide holder for value, or constitute a defect of title, so as to shift to him, in his suit, the burden of showing that he acquired it in due course. The court said:
"But the courts in all jurisdictions which had previously followed the rule of law above laid down hold that it has not been changed by the statute, and that a defendant in an action by the assignee of a note payable in bank who admits the execution of the note sued on and fails to show that its execution was induced by fraud, duress, or other unlawful means, but bases his defense upon lack or failure of consideration, has the burden of proof to establish that the holder took an assignment of the note with notice of the facts constituting such defense. Cole BankingCo. v. Sinclair, 34 Utah 454, 457, 98 P. 411, 131 Am. St. Rep., 885; Title G.  T. Co. v. Pam, 232 N.Y. 441, 452,134 N.E. 525; Standing Stone Nat. Bank v. Walser, 162 N.C. 53, 59, 77 S.E. 1006; Downs v. Horton, 287 Mo. 414, 431,230 S.W. 103; Bank of Polk v. Wood, 189 Mo. App. 62, 67, 173 S.W. 1093; Citizens' Bank v. Kriegshauser, 211 Mo. App. 33,244 S.W. 107, 112; Biggs v. Carter, 179 Iowa 284, 288, 161 N.W. 322; Colquitt v. Dye, 29 Ga. App. 247, 114 S.E. 643;Kirby v. Arkansas Bank  T. Co. (Tex. Civ. App.), 222 S.W. 1118; Du Pont Nat. Bank v. Chase (D.C.), 272 F., 1016;Moyses v. Bell, 62 Wash. 534, 540, 114 P. 193."
It is further contended that the note was not transferred by indorsement to plaintiff. The name of the payee is indorsed on the back of the note. Defendant filed *Page 676 
no plea of non assignavit. Klyce v. Black, Estes  Co., 66 Tenn. (7 Baxt.), 277. When the suit is in a court of record, the indorsee or assignee cannot be required to prove the assignment, unless it has been denied by plea. Stone v. Bond, 49 Tenn. (2 Heisk.), 425; Blackwell v. Fitzpatrick, 68 Tenn. (9 Baxt.), 218.
Defendant complains that he was not permitted to show, under the general issue, that he did not consent to the extension of the due date of the note as indorsed on the back thereof. He filed no special plea of non est factum asserting that the extension of the due date was an alteration not authorized by him.
It thus appears that neither the plaintiff's title to the note, nor the validity of the extension, was put in issue by requisite pleas.
Finally, we might add that nowhere in the testimony offered by defendant, and rejected by the court for want of proper plea, is there the remotest suggestion that plaintiff had any knowledge or notice of the want of consideration for the note sued on. Defendant was a director of the payee bank, and he says that he executed this note and trust deed given to secure the same to protect himself from his creditors.
The petition must be overruled. *Page 677