Bank of Youngsville v. Hunt, 188 N.C. 377 (1924)

Oct. 15, 1924 · Supreme Court of North Carolina

188 N.C. 377

BANK OF YOUNGSVILLE v. R. P. HUNT.

(Filed 15 October, 1924.)

Hills and Notes — Negotiable Instruments — Statutes — Blue-Sky Raw— Illegality — Due Course — Notice.

Where a note is given for shares of stock, sold in violation of the Blue-Sky Law, O. S., 6367, it is voidable only, and a recovery may be had thereon by a purchaser for value in due course, in good faith,- without .notice of the illegality of the instrument. Bank & Trust Go. v. Felton, post, 384.

Appeal by defendant from Calvert, J., and a jury, November Term, • 1923, of FbaNKLIN.

B. T. Holden.and W. H. Yarborough for plaintiff.

N. Y. Gulley and J. G. Mills for defendant.

Clarkson, J.

Tbe issues submitted to tbe jury and tbeir answers thereto are as follows:

“1. Was tbe execution of'the note obtained by fraud as alleged in tbe .answer ? Answer: No.

“2. Was tbe contract for tbe sale of tbe stock and bonds for which tbe note was given, in writing and containing tbe provisions required by section 6367 of tbe Consolidated Statutes? Answer: No.

“3. Did tbe Bank of Toungsville become a bona fide bolder of said note in due course, for value and without notice of tbe defects and infirmities existing therein? Answer: Yes.

“4. In what amount, if any, is the defendant indebted to tbe plaintiff on said note? Answer: $5,000, and interest from 30 March, 1920.”

Tbe record shows that tbe second issue, by tbe consent of tbe parties, was answered “No” by tbe court. Evidence was offered by both plaintiff and defendant tending to establish tbeir respective contentions upon tbe first, third, and fourth issues, and after argument by counsel and full and proper instruction from tbe court, tbe jury answered said issues as follows:

First issue, “No.”

Third issue, “Yes.”

Fourth issue, “$5,000 with interest from 30 March, 1920.”

Upon tbe answer of tbe second issue by consent, tbe defendant moved for judgment. Motion denied. Tbe defendant excepted.

Tbe only material assignment of error was as follows: “That tbe court erred in overruling defendant’s motion for judgment upon tbe second issue, ‘Was tbe contract for tbe sale of tbe stock and bonds for which tbe note was given in writing and containing tbe provisions required by section 6367 of tbe Consolidated Statutes?’ being answered ‘No.’”

The note sued on being illegal and voidable, not void in not complying with. C. S., 6367, and the jury having found that the plaintiff bank was the holder of the note in due course, without notice of the illegality, bona fide for value and before maturity, and the charge of the court below admittedly from the record to be in accordance with law, this case is governed by the principle laid down in Planters Bank and Trust Co. v. Felton, post, 384. The illegality is a defense between the original parties, but not in the hands of a purchaser in due course, without notice, bona fide, for value and before maturity.

For the reasons given, there is

No error.