This action was brought to recover the amount of three notes, made by the defendant to H. W. Steinhilper and alleged to have been sold by him to the plaintiff, who is his wife. The defendant averred that two of the notes, each for $500 and dated 26 June, 1898, were executed by mistake, having been given for lumber for which he had already paid, and the jury so found by their verdict.
As to the other note, he alleged that it was given for the purchase price of timber, and that H. W. Steinhilper represented, at the time of the purchase, that the encumbrances thereon amounted to only $150, which representation was false, and the jury found this allegation to be true, and assessed the defendant's damages at $250.
The jury further found that the notes had been transferred to the plaintiff for value before maturity, but it does not appear that there was any endorsement of the notes by the payee to the plaintiff. So far as the case shows, she was a purchaser for value without actual notice of the defendant's equities or defenses, but not a holder by endorsement. The plaintiff moved for judgment upon all the notes, subject to a credit of $150, which had been paid by the defendant. This motion was refused.
The defendant tendered a judgment against himself for $100, which the judge refused to sign. The court thereupon rendered a judgment in favor of the plaintiff for $613.80, of which sum $350 is principal and $263.80, with interest on the principal from 2 May, 1910, and the costs. The amount (295) of this judgment was the balance due on the third of said notes for $500, less $250, the amount of the damages assessed by the jury. Both parties appealed from the judgment.
The court properly denied the plaintiff's motion for judgment. She was not entitled to recover on the first two notes, as they were given by mistake and were without any consideration. The plaintiff was not the holder of the notes in due course, as the notes were not endorsed to her, and it can make no difference that she purchased the notes for value and without any actual notice of the defenses set up in the answer. The notes were negotiable only by endorsement. Code, sec. 41.
By the transfer to her without endorsement, the plaintiff became the holder of the equitable, but not of the legal title, and she took them, therefore, subject to any legal defenses the maker may have against the original payee. Tyson v. Joyner,139 N.C. 69; Bank v. Drug Co., 152 N.C. 142. *Page 241 This is now the law by statute. Revisal, secs. 2178, 2198.
As contended by the plaintiff's counsel, every holder is deemed prima facie a holder in due course, but, by the very definition of a holder, he must have acquired title by endorsement. "A holder means the payee or endorsee of a bill or note who is in possession of it, or the bearer thereof, and `bearer' is defined to be the person in possession of a bill or note which is payable to bearer." Mayers v. McRimmon, 140 N.C. 643, Revisal, sec. 2340.
In Mayers v. McRimmon, supra, it appeared that the plaintiff had purchased notes by discounting them, and we held that unless it appeared that the notes had been endorsed by the payee, the plaintiff was only the equitable owner and holder of them subject to any valid defense of the maker. There was, therefore, no error in the ruling of the court to which the plaintiff excepted, and the judgment as to her is affirmed. No error. DEFENDANT'S APPEAL.
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