Bowman v. Metzger

Opinion by Mr. Justice Woeverton. Two questions arise upon this record; one relates to — 28 — the instructions of the court to the jury, and the other to the admissibility of the testimony of witnesses S. E. Paddock and J. P. Wilson. Of these in their order. 1. It is settled law that where a party takes a negotiable promissory note before maturity, for a valuable consideration, in' good faith, and without knowledge of any defect of title, he acquires a title valid against all the world. Four things must concur to give him a good and valid title. He must have acquired before due; he must have acted in good faith; must have purchased without knowledge of any defect of title; and have paid a valuable consideration therefor: Murray v. Lardner, 69 U. S. (2 Wall.) 121; Goodman v. Simonds, 61 U. S. (20 How.) 364; HotChkiss v. National Bank, 88 U. S. (21 Wall.) 354. But the question is here presented whether anything less than knowledge is equivalent thereto; that is to say, whether notice of facts or circumstances of a suspicious character, which a prudent man would observe and inquire into, and which, if followed up, would lead to a disclosure, and consequently to knowledge of the real infirmities of the paper sought to be negotiated, is equivalent to such knowledge. The current of judicial authority both in England and the United States has narrowed the inquiry, and practically limited it to the single question whether the purchase had been made in good or bad faith, as one who purchases with knowledge of defects in the title is deemed guilty of bad faith towards him who has a good defense against all the world except an innocent purchaser. If a person takes paper with knowledge of its defects and infirmities, he takes mala fide. The one follows the other as day follows night. So “the rule may be said to re-' solve itself into a question of honesty or dishonesty, for guilty knowledge and wilful ignorance alike involve the result of bad faith”: Murray v. Lardner, 69 U. S. (2 Wall.) 121. The doctrine is now well established, al — 29 — though it was otherwise maintained in England at an early period for a short time, under the dicta of Gill v. Cubitt, 3 Barn, and c. 466, that the right of a bona fide purchaser of negotiable paper, for value, in the usual course of business, cannot be defeated on account of negligence in omitting to make such inquiries as a prudent man would be prompted to m,ake. It is the policy of the law to eliminate from the consideration of the jury the question of common prudence as the measure of good faith, and with it the question of negligence, except in so far as it may be taken as indicative of bad faith. A person having under consideration the purchase of negotiable paper may be less suspicious at one time than another, while the accompanying and attendant circumstances may be similar, and yet ordinarily he may be accounted a prudent man. One person may suspect where another would not, and common prudence may characterize each, and the standard by which the jury may measure prudence may be higher or lower according as their business training has moulded their impressions and ideas. Accordingly, it is held that gross negligence only is not a sufficient answer to the bona fides of the purchaser, where he has given consideration for the paper. Gross negligence may be evidence of mala fides but it is not the same thing. Where negotiable paper has passed without any proof of bad faith in the purchaser, there is no objection to his title: Goodman v. Harvey, 4 Ad. and El. 870; Goodman v. Simonds, 61 U. S. (20 How.) 364; Murray v. Lardner, 69 U. S. (2 Wall.) 121; Johnson v. Way, 27 Ohio St. 381; Randolph on Commercial Paper, § 1001; Lane v. Evans, 49 Iowa, 156; Edwards v. Thomas, 66 Mo. 483; Craft's Appeal, 42 Conn. 146; Kelly v. Whitney, 45 Wis. 110 (30 Am. Rep. 697); Belmont Bank v. HoGe, 35 N. Y. 65; Hotchkiss v. National Bank, 88 U. S. (21 Wall.) 354. The Ohio case of Johnson v. Way, 27 Ohio St. 381, is based — 30 — upon an instruction so very similar to the one rendered in the case at bar that we direct special attention to it. In Murray v. Lardner, 69 U. S. (2 Wall.) 121,wherein Mr. Justice Swayne ably reviews the leading authorities touching the question under consideration, the objectionable instruction was as follows: “It will be for you, gentlemen of the jury, to say whether the defendant has made out, — as the burden lies upon the defendant, — whether he has made out that he received the paper in good faith, without any notice of the defect of the title; in other words, of the theft from the plaintiff; or whether there were such circumstances of the character which I have described to you as would warrant the inference that there was ground of suspicion, and that he should have made further inquiry as to the character of the paper.” In Lake v. Evans, 49 Iowa, 156, the following instruction to the jury was held erroneous: “If the circumstances attending the purchase of the note were of such a character as necessarily to cast a shade upon the transaction, or to put the plaintiff on inquiry as to such fraud, then you will find for the defendant.” And Lake v. Reed, 29 Iowa, 259 (4 Am. Rep. 209), was reversed upon an instruction rendered as follows: “Although the note may have been procured by fraud perpetrated by the payee of the note, or his agents, yet if plaintiff took the note before maturity in the ordinary course of business, and for a valuable consideration, such fraud would not be available as against plaintiff as a defense, until it is shown that the plaintiff had notice of such fraud, or such facts and circumstances as would have put a reasonable man upon inquiry in relation to the same. ” So that, in the light of the authorities, the instruction of the court below was erroneous. Fraud is proven in such cases when it is shown that the purchaser had notice or knowledge of defects or infirmities in the title to the paper at the time of — 31 — purchase. Knowledge may be imputed either by direct proof or by evidence of a circumstantial nature, the same as any other fact. If a person is grossly negligent in the exercise of common prudence, this is a fact competent to go to the jury as evidence of bad faith, but the jury must pass upon the question whether the purchaser has acted honestly or dishonestly, and not speculate as to his probable diligeuce or negligence: Belmont Bank v. Hoge, 35 N. Y. 65. The rule is thus established that the usefulness of commercial paper may not be restricted, and yet the party taking it is not relieved from the just obligations of the exercise of good faith. 2. If a person purposely refrains from making inquiry lest he should become possessed of knowledge of infirmities in the title to paper which he is about to purchase, this is a fact to go to the jury touching his good faith in the purchase. Good faith cannot be predicated upon want of knowledge resulting from the evasion of a plain duty. A man cannot shut his eyes to the light of day, and say he is without knowledge that the sun is shining. The jury are the judges whether a person has evaded information readily at his command for the purpose of gaining an advantage under the law relative to the transfer of negotiable instruments; and they have a right to consider such a circumstance, if it exists, in determining the mala fldes of the holder: Schumueckle v. Waters, 125 Ind. 269 (25 N. E. 281); State National Bank v. Bennett, 8 Ind. App. 679 (36 N. E. 551). These considerations make the evidence of the witnesses Paddock and Wilson pertinent to the inquiry, since it has a tendency to impute to the plaintiff knowledge of the real transaction as it took place between Durand and defendant J. H. Metzger. Their testimony is not directed to the particular transaction out of which the notes in question originated, but to similar transactions in which Durand was the chief actor, which — 32 — were calculated to apprise plaintiff of Durand’s business methods. The knowledge of other transactions of a like peculiar and suspicious nature is a circumstance which might properly be considered by the jury in passing upon the good faith of plaintiff in the purchase of the notes in question: Goodrich v. McDonald, 77 Mich. 486 (43 N. W. 1020), and State National Bank v. Bennett, 8 Ind. App. 679 (36 N. E. 551). Inasmuch as the substantial rights of plaintiff were injuriously affected by the instruction referred to, the judgment is reversed, and a new trial ordered. Reversed. Respondents moved to dismiss the appeal for that the notice was uncertain and insufficient. Overruled. Mr. James N. Davis, for the motion. Mr. WilMam Wallace Thayer, contra. [Decided December 3, 1894] On Motion to Dismiss Appeal. Per Curiam. 3. Where counsel, without objecting to the sufficiency of the notice of an appeal for a failure to technically describe the judgment appealed from, voluntarily accept service thereof, and afterwards sign a stipu- ] ation in this court consenting to an order enlarging the time in which to file the transcript, they cannot, after the time for an appeal has expired, question, on a motion to dismiss, the sufficiency of the notice in the respect alluded to.