Vaughn v. Johnson

AILSHIE, J. The motion to dismiss the appeals in this case must be-denied, and it is so ordered. On the 29th day of March, 1906, the respondents herein executed and delivered their promissory note to McLaughlin Brothers as part payment of the purchase price of a stallion. Thereafter and prior to the -maturity of the note, and on about the 5th day of February, 1910, McLaughlin Brothers sold and delivered the note to the appellant herein, who thereafter commenced this action against the -makers for the collection of the principal and interest thereon. The case was tried before a jury and a verdict was rendered for the defendants and a judgment was thereupon entered accordingly. A large number of errors have been assigned but most of the questions presented have been considered by this court and passed upon in Winter v. Nobs, 19 Ida. 18, 112 Pac. 525, and Park v. Johnson, ante, p. 548, 119 Pac. 52. We will therefore only consider such questions as have not received consideration in the foregoing cases. It seems that the deposition of the appellant was taken in conformity with the statute at Columbus, Ohio, on the 3d day of February, 1911; that at the time of the taking of the depo — 673 — sition no one appeared on behalf of the respondents and no cross-examination was had. Thereafter and about the 27th of March, the attorneys for the defendants served notice on the attorneys for plaintiff that they would take the deposition of the plaintiff at Columbus, Ohio, on the 6th day of May following. The deposition was thereafter taken in conformity with the notice. When this deposition was taken, however, on the part of the defendants, it was taken as if it were a cross-examination of the witness on his previous deposition. The questions were propounded in the form of cross-examination, and the witness’ attention was called to the evidence previously given by him. When the ease came on for trial, the plaintiff introduced the deposition containing tbe evidence he had first given. Before the plaintiff rested his case, the defendants offered “deposition on cross-examination.” The plaintiff’s counsel objected to the introduction of this deposition as a deposition on cross-examination, and insisted that if it be admitted at all it should go in as a part of defendant’s evidence when they came to make their defense. The court overruled the objection and admitted the deposition, and the appellant now urges the ruling as erroneous. We think, as a matter of procedure, it was error for the court to admit this deposition as a'part of the plaintiff’s case. While it was taken on the theory that it was a cross-examination of a witness and was in fact so treated, it had not been taken at the time and in the manner authorized for the cross-examination of the witness. If the defendants failed and neglected to appear at the time noticed and cross-examine the witness, it was their own fault. If, on the other hand, they saw fit to take the deposition of the witness for their own use as a part of their own case, they had a right to do so, but they should have been compelled to introduce this evidence as a part of their own ease. We do not think, however, that the error thus committed calls for a reversal of the judgment. Had the plaintiff been nonsuited after the introduction of this deposition and without putting the defendants on their defense, there might be some merit to the contention made by the appellant and there might be prejudicial error under such — 674 — circumstances. In the case at bar, however, the bulk of the record consists of evidence introduced on the part of the defendants and so the jury had the entire ease before them for their consideration. It is contended that the court erred "in admitting the evidence of the defendant’s witnesses which tended to show the condition of the horse and the alleged fraud surrounding the inception of the contract upon which the note was based.” In other words, the appellant contends that evidence of failure of consideration or fraud in procuring the note could not properly go to the jury and had no bearing on the case, unless the defendants could successfully show that the plaintiff who purchased the note before maturity either "had actual knowledge of the infirmity or defect or knowledge of such facts that his action in taking the instrument amounted to bad faith.” This contention is substantially correct. (Winter v. Nobs, 19 Ida. 26, 112 Pac. 525.) The difficulty, however, with which appellant is confronted in the case at bar is that the facts and circumstances in the present case tending to show "actual knowledge” and "bad faith” were sufficient to go to the jury, and were likewise sufficient to justify them in concluding and finding as a matter of fact that the plaintiff either had actual knowledge of the fraud and deception that had been practiced and the infirmity in the instrument or had knowledge of such facts and circumstances that would have led him if acting in good faith to ascertain the true situation. The frequency with which these cases are arising and finding their way into this court leads us to suggest that mere evidence of fraud or deception in procuring negotiable promissory notes which appear fair on their face is not sufficient to raise any presumption against the purchaser of such paper; nor should such facts be given any consideration whatever by a jury in determining the other fact; namely, that the holder of the instrument had actual knowledge of the infirmity or defect or knowledge of such facts that his action in taking the instrument amounted to bad faith. This latter fact is an independent fact which must be determined upon evidence wholly independent of the original transaction in which the — 675 — note was executed. Bona fide holders of negotiable paper are entitled to absolute protection and cannot be in the least chargeable with any fraud to which they were not parties that was practiced in procuring the note or in the contract out of which the note arose. Evidence of fraud in procuring the execution of a note shifts the burden of proof as to good faith but of itself in no way tends to establish the bad faith of a purchaser of such note. Those who execute negotiable paper and set it afloat are chargeable with a much higher degree of diligence and caution than is chargeable to those who purchase such paper in the due and regular course of commercial transactions. The frequency with which such defenses as the one set up in this case are being plead reminds us that there is either a grave need of invoking the criminal statutes of this state against persons who are procuring the execution of negotiable paper through fraud, deception and misrepresentation, or else there is gross negligence on the part of many who are executing such paper and sending it broadcast in the channels of commerce. The appellant has assigned a great many errors against the action of the court in admitting certain evidence offered by respondents. "We have examined the record in this respect and do not think there was any prejudicial or substantial error committed by the court in the admission of evidence. These questions have all been considered and passed upon in Park v. Johnson and Winter v. Nobs, supra. The appellant has assigned as error the action of the court in giving a number of instructions and in modifying certain instructions requested by the appellant. We shall only notice two of these instructions. Instruction No. 22 is, to say the least, misleading, and we do not think should be given in such a case. It is as follows: “The court instructs the jury that a person who, in purchasing negotiable paper, wilfully remains ignorant of facts which are apparent from the transaction, or refrains from making inquiry lest he should become possessed of knowledge of infirmities in the title of the paper which he is about to purchase, shows lack of good faith, and a plaintiff cannot say — 676 — that he did not know the facts regarding the title of negotiable paper when such lack of knowledge is predicated upon an evasion of plain duty, and you have a right to consider all of the facts and circumstances surrounding the alleged purchase of this note, in determining whether or not the plaintiff wilfully refrained from making inquiry regarding the title of McLaughlin Bros, to the note in controversy in order not to learn anything regarding their title thereto, and the court charges you that wilful ignorance, if it be shown by the evidence, involves bad faith and- is as binding upon the plaintiff as a positive knowledge of the defendants’ title would have been.” The foregoing instruction is calculated to mislead a jury. They are likely to infer from such an instruction that the purchaser of a negotiable instrument cannot “wilfully refrain from making inquiry regarding the title” to a note he is about to purchase; in other words, that it is the duty of such a purchaser to always make inquiry as to the title. Such is not the law. The purchaser of negotiable paper in due course and before maturity is under no duty to make inquiry as to the title to paper, fair and regular on its face, nor is he under any duty to inquire into the consideration given for the note or of the transaction out of which it arose. (McNight v. Parsons, 136 Iowa, 390, 125 Am. St. 265, 113 N. W. 858, 22 L. R. A., N. S., 718.) He is only chargeable with facts which actually come to his knowledge. Those facts may be actual knowledge of a defect in the title, want of consideration or such facts as would constitute a defense to the note as between the maker and original payee; or actual knowledge of such facts and circumstances as would lead an honest and fair business man to make further inquiry and which inquiry if made would lead to the discovery of the fraud, defect and defenses. In other words, it must be such actual knowledge of the defenses or such actual knowledge of facts and circumstances that a failure to make further inquiry would charge a reasonably prudent business man with bad faith and dishonest motives. (Winter v. Nobs, 19 Ida. 18, 112 Pac. 525; Park v. Johnson, ante, p. 548, 119 Pac. 52; Bothwell v. Corum, 135 Ky. 766, 123 — 677 — S. W. 291.) The first part of the instruction with which we are dealing proceeded upon the correct view of the law, but the vice is to be found in the closing part of the instruction. In view of the fact, however, that the court had correctly instructed the jury on this subject and in consideration of the nature of the evidence that was submitted to the jury, we are satisfied that the jury were not misled in this respect. The other instruction which we think was erroneous is No. 26, and is as follows: ‘ ‘ The question of honesty of the plaintiff in this transaction is one of the things by which you are to be guided in determining his bona fides, and if you find from the facts and circumstances given in evidence surrounding this transaction, and the knowledge of the plaintiff of other like transactions of McLaughlin Brothers, if shown in evidence, that the plaintiff is not acting honestly, then you have a right to find that he did not act honestly in the alleged purchase of this note.” This instruction advised the jury that if they found from the facts of this particular transaction “or knowledge of other like transactions of McLaughlin Brothers that the plaintiff is not acting honestly, then they had a right to find that he did not act honestly in the purchase of this note.” This was erroneous. The jury might conclude that the holder of a note had acted dishonestly with the maker in some respect, as, for example, a failure to make the proper indorsement of interest or principal paid, or a failure to defer bringing a suit for a given length of time, or in any number of respects, and yet there be no evidence whatever that he acted dishonestly or in bad faith in the purchase of the note itself. However dishonestly the purchaser of a note may have acted subsequent to the purchase thereof, that fact alone would not justify the conclusion that he acted in bad faith or dishonestly in the purchase of the note. The appellant has also prosecuted an appeal from the order of the district court in taxing costs. It appears that the respondent claimed costs in the sum of $15.15 for taking the deposition of appellant which has been hereinbefore considered. The specific items for which this $15.15 is charged — 678 — do not appear in the memorandum of costs. The cost bill reads: “Expenses in securing deposition of Edgar J. Vaughn for notary fee, stenographer, securing attendance of witness, swearing witness, -and return of witness and transcribing testimony.” In the first place, this is not properly itemized to show what was a legal charge and what was not; and, in the second place, this extra expense was incurred by reason of the failure of the defendants to appear at the time and place specified when and where the deposition was taken and cross-examine the witness. This also entailed extra trouble and expense on the plaintiffs in attending and having counsel present a second time for the taking of this deposition. For these reasons this item should have been stricken from the cost bill, and it will be so ordered. We do not think that any error which has been committed is of such a nature or character as to require a reversal of the judgment. From a Anew of the whole record, we are satisfied that the same result would have been obtained and the same conclusion would have been reached by the jury had the errors hereinbefore pointed out not been committed, and we are satisfied that the evidence adduced in this case justified the verdict returned. The judgment should therefore be modified to the extent of striking therefrom the item of $15.15 taxed as costs and, as so modified, is hereby affirmed. Costs of appeal will be equally divided between appellant and respondents. Cause remanded with directions to modify the judgment as herein indicated. Sullivan, J., concurs.