First National Bank v. Warsaw Drug Co., 166 N.C. 99 (1914)

May 30, 1914 · Supreme Court of North Carolina

166 N.C. 99

FIRST NATIONAL BANK v. WARSAW DRUG COMPANY.

(Filed 30 May, 1914.)

1. Bills and Notes — Fraud and Deceit — Innocent Purchaser — Trials —Burden of Proof.

Where it is proved or admitted that a negotiable note sued on has been obtained from the maker by fraud, or deceit, the transferee, the plaintiff in the action, must show by the preponderance of the evidence that he was a 'bona fide purchaser or derived his title from such purchaser, and it is insufficient that he acquired the note for value, before maturity.

2. Same — Impeaching Evidence.

The burden of proof being on the plaintiff, in his action to recover on a negotiable note, to show that he was a bona fide purchaser for value, where it is shown that the note was procured from the maker by fraud or deceit, it is not required that the defendant negatively prove that the plaintiff was not such purchaser, and the plaintiff’s testimony is subject to attack and to be discredited on cross-examination.

Appeau by plaintiff from 0. H. Allen, J., at November Term, 1913, of DupliN.

Tbis is a civil action tried upon these issues:

1. Is tbe plaintiff a corporation, as alleged in tbe complaint ? Answer: Yes (by consent).

2-, "Was tbe note sued on procured by,fraud and deceit of tbe Equitable Manufacturing Company? Answer: Yes.

3. Is tbe plaintiff the bona 'fide bolder of said note in due course? Answer: No.

4. Is the defendant indebted to the plaintiff, and if so, what amount? Answer: Nothing.

From the judgment rendered, the plaintiff appealed.

II. D. Williams for plaintiff.

Stevens & Beasley for defendant'.

BeowN, I.

The principles of law presented on this appeal have been so frequently adjudicated that a further discussion of them would seem to be useless.

Where the maker of a negotiable paper establishes that it has been obtained from him by fraud or deceit, a subsequent transferee must, before he is entitled to recover thereon, show that he is the bona fide purchaser, or that he derived his title from such a purchaser. It is not sufficient to show simply that- he purchased before maturity and paid value, but he must show that he had no knowledge or notice of the fraud. Bank v. Fountain, 148 N. C., 590; Bank v. Branson, 165 N. C., 344.

The defendant in his answer alleges fraud in obtaining the note sued on, and false and fraudulent misrepresentation in regard to the quality of the articles of jewelry and other things for which the note was given. There is abundant evidence in the record to justify the finding of the jury upon that issue.

We also think that there is sufficient evidence in the record to show that the plaintiff is not a bona fide holder of the note in due course. The burden of proof rests upon the plaintiff after fraud is established to show that the plaintiff was such bona fide purchaser, and not upon the defendant to negative that position. Bank v. Exum, 163 N. C., 199; Myers v. Petty, 153 N. C., 462; Bank v. Fountain, supra; Trust Co. v. Ellen, 163 N. C., 45.

The burden of proof being thus placed upon the plaintiff to show that it was a bona fide holder in due course, the credibility of the testimony of Ilrouth, assistant cashier, upon whose evidence the plaintiff relies, was necessarily subject to attack be-fo're the jury and also to be discredited upon cross-examination.

There are some circumstances which have cropped out in the testimony from which the jury might well infer that the plaintiff was not the bona fide owner of the note sued on, but had taken it for collection for tbe benefit of tbe payee, tbe Equitable Manufacturing Company. These circumstances and indicia of fraud it is useless to recount.

Upon a review of tbe whole record, we are of opinion that tbe judge below tried it in accordance with tbe well settled decisions of this Court.

No error.