Court Opinion

ID: 5577204
Source: CourtListenerOpinion
Date Created: 2022-01-11 01:27:57.422475+00
Date Added: 2024-06-11T08:35:58.456214
License: Public Domain

Atkinson, J.
The assignments of error need not be treated separately. If it was erroneous to admit the indorsements without proof of execution, it was also erroneous to direct a verdict in favor of the plaintiff. The case calls for the construction and applicatiof certain provisions of the code. It is declared: “The holder of a note is presumed to be such bona fide, and for value; if either fact is negatived by proof, the defendants are let into all their defenses ; such presumption is negatived by proof of any fraud in the procurement of the note.” Civil Code, § 3696. Also: “The title of the holder of a note can not be inquired into, unless it is necessary for the protection of the defendant, or to let in the defense which he seeks to make.” Civil Code, § 3698. Also: “An indorsement or assignment of any bill, bond, or note, when the same *366is sued on by the indorsee, need not be proved unless denied on oath.” Civil Code, § 3705. The plaintiff demurred to the legal sufficiency of the defendant’s plea relative to denial of the execution of the indorsements, and upon tine defendant’s amending the plea so as to aver that the “defendant denies both the genuineness and the legality of the indorsements and transfers set forth in the third paragraph of the petition,” the court overruled the demurrer, and the plaintiff excepted pendente lite. The ease before us is a writ of error sued out by the defendant, and the plaintiff does not complain by cross-bill of exceptions of the ruling of the court assigned as error in his pendente-lite exceptions. Therefore this court, having no power to review the judgment on demurrer, for lack of ex- , ceptions, must treat the plea as legally sufficient under the statute as set forth in Civil Code, § 3705. So regarding the plea, it should be construed as a denial that the indorsements were made or authorized by the persons purporting to make them. Ordinarily, in a suit upon a promissory note the defendant can not inquire into the title of the holder. lie can not make such inquiry unless “it is necessary for the protection of the defendant, or to let in a defense which he seeks to make.” The quotation just made is from Civil Code, § 3698, and it declares a rule which permits the title of the holder of a note to be inquired into under two conditions: “if it is necessary for the protection of the defendant,” or if inquiry is necessary in order “to let in the defense which he seeks to make.” In the case at bar the defendant seeks to avail himself of the right to inquire into the right of a holder, on the ground that it is necessary for his protection. In the plea it is not stated in what respect it was necessary for the defendant’s protection to make the inquiry, but no point was made as to the sufficiency of the plea on account of a failure to point out the particular reason why the inquiry was necessary for the defendant’s protection. If there was any reason in law why it would be necessary for his protection to make the inquiry, the defendant was entitled to insist upon it. If the defendant should pay the debt to a holder who relied for title on indorsements which were forged, such payment would not be a bar to a recovery by the true owner. In 2 Daniel on Negotiable Instruments, § 1225, it was said: “The maker of a note or the acceptor of a bill must satisfy himself, when it is presented for payment, that the holder traces his title through genuine indorse*367ments; for if there is a forged indorsement, it is a nullity, and no right passes by it. And payment to a holder under a forged inidorsement would be invalid as against the true owner, who might require it to be paid again.” See also Smith v. Chester, 1 T. R. 654; Canal Bank v. Bank of Albany, 1 Hill, 287; Goddard v. Merchants’ Bank, 2 Sandf. 247; Beattie v., Nat. Bank, 174 Ill. 571 (51 N. E. 602, 43 L. R. A. 654, 66 Am. St. E. 318). If the maker of the note were sued by the holder under forged indorsements, unless he were allowed to inquire into the title of'the holder he might be required to pay not only the holder under the forged indorsement but also the true owner in a subsequent suit. It follows that if the maker is sued by the holder under forged indorsements, it is necessary for his protection that he be permitted to inquire into the title of the holder. Under such conditions he would have the right, under the provisions of the Civil Code, § 3698, to inquire into the title of the holder. The section of the code last cited, points out instances, in which the title of the holder of a note may be inquired into. Section 3705 relates to how it may be inquired into and the burden of proof in cases where the inquiry is made. Hnder the provisions of this section the execution of the indorsements may be denied, but it is said that the indorsements “need not be proved unless denied on oath.” This language contains a negative pregnant which means that if the indorsement is denied on oath there must lie proof of the genuineness. In such a case the existence of a genuine indorsement will be essential to the case of the plaintiff, and the burden of proof ordinarily rests upon -the person “to the existence of whose case or defense the proof of such fact is essential.” Civil Code, § 5160. The provisions of the Civil Code, § 3696, relating to the law of presumptions, are to be construed in connection with § 3705, and are not to be considered as so qualifying the rule there stated as to place upon the defendant' the burden of disproving the genuineness of an indorsement, when, by his plea filed under oath, he denies the indorsement. Under this interpretation of the law, and the condition of the record, the note and mortgage were not admissible in evidence without evidence as to the genuineness of the indorsements, nor without such evidence was the judge authorized to direct a verdict- against the defendant.

Judgment reversed.

All the Justices concur, except Lumpkin, J., disqualified.