Harbison v. Hammons

Hart, J., (after stating the facts). It is first insisted that there is no evidence to warrant the verdict, but we do not agree with counsel in this contention. The note was introduced in evidence by the plaintiff’s attorney. It bore date of November 12, 1908, and was payable to Johnson & Jarrett ten months after date. Jarrett testified that, not later than February, 1909, the note was transferred to the plaintiff in payment of an indebtedness owed by Johnson & Jarrett to him. His testimony in this respect is not attempted to be contradicted. The transfer of a negotiable instrument before maturity, in payment of an antecedent debt, is a sufficient consideration to constitute the purchaser a holder for value. Southern Sand & Material Co. v. Peoples Savings Bank & Trust Co., 101 Ark. 266; Miles v. Dodson, 102 Ark. 422. Jarrett also testified that at the time the note was assigned to Hammons the latter did not have any notice that there was any defense to the note. If it be said that Jarrett’s testimony on this point is not undisputed because he was contradicted in regard to his statement that the note was not procured by fraud, still the burden of proof was upon the defendants to show that the plaintiff had notice of the fraudulent procurement of the note. Where, in an action on a promissory note, the defense is made that the execution of the note was procured by fraud, the burden is on the plaintiff to show that value was given for the note. Tabor et al. v. Merchants National Bank, 48 Ark. 454. The reason assigned for this rule is that “where there is fraud the presumption is that he who is guilty will part with the note for the purpose of enabling some third party to recover upon it, and such presumption operates against the holder, and it devolves upon him to show that he gave value for it. ’ ’ But when such payment is shown, it devolves upon the defendant to prove that plaintiff purchased with notice, actual or constructive, that the execution of the note was procured by fraud. Bank of Monette v. Hale, 104 Ark. 388; Old National Bank of Fort Wayne v. Marcy, 79 Ark. 149. The rule is that the plaintiff must show himself to be a holder for value, and, on having done so, the burden is then .shifted back to the makers of the note to show that plaintiff had notice of the fraudulent procurement of the note at the time that he purchased the paper. The reason is that the facts which constitute the fraud are, for the most part, affirmative in their nature, and must be set up by the defendants as a defense to the action on the note. Therefore, the burden of proof is upon them to establish their defense. Mr. Daniel, after approving- the rule as announced above, said: “This principle is obviously correct, for to require the plaintiff to show absolutely that he had knowledge of facts would be to burden him with the necessity of proving’ an impossible negative. He makes out a prima facie case by proving that the instrument was endorsed to him for value before maturity. Nothing else appearing, a presumption arises that he purchased the note in good faith without notice of fraud, because it is not likely that he would give full value for a note which he believed to be fraudulent, taking the hazard upon himself, and because it would be difficult to prove good faith in any better way.” Daniel on Negotiable Instruments (6 ed.) vol. 1, § 819; Commercial Bank of Danville v. Burgwyn et al. (N. C.), 17 L. R. A. 326. Again, it is contended by counsel for defendants that the court erred in instructing the jury as to the amount of proof necessary to establish fraud in the procurement of the note; but we need not determine this assignment of error. As we have already seen, the plaintiff proved that he was a purchaser for value before maturity of the note. The burden of proof was then cast upon the defendants to show that the plaintiff had notice that the note was procured by fraud. The defendants made no effort whatever to establish this fact. If it be held that the testimony of Jarrett to the effect that the plaintiff did not have notice of any fraud in the procurement of the note was not undisputed because his testimony in other respects was contradicted by that of the defendant, J. H. Harbison, this contradiction to his testimony would not be affirmative proof that the plaintiff had notice that the note was procured by fraud. . The burden being upon tbe defendants to establish that fact, and no effort having been made by them to do so, it becomes immaterial whether or not the court erred in instructing the jury as to the amount of proof that would be necessary to show that the note was procured by the fraudulent representations of Johnson & Jarrett, for this issue passed out of the case when the defendants failed to show that the plaintiff had notice of the fraudulent procurement of the note. It is next urged by counsel for defendants that the court erred in refusing to instruct the jury that if it should find that the note had been altered by adding the words “10 per cent per annum” since its execution, without permission from the maker, it should find for the defendants. This instruction was abstract. Therefore, the court properly refused to give it. J. H. Harbison testified that he could not read and write. He did not state that the words “10 per cent per annum” were added to the note after its execution. He only stated that the words “10 per cent per annum” were not mentioned when the note was read to him before he signed it. The court, when this testimony was introduced, held that it could only be considered competent insofar as it tended to prove fraud in the procurement of the note. His ruling in this respect was not excepted to by the defendants, and the action of the court in thus limiting the testimony was not made one of the grounds of the motion for new trial. In addition, the testimony of Jarrett shows that the words were in .the note when it was signed by the defendants, and that they were not added there afterward. The defendant can not complain that the court did not give an instruction on a matter which the court held was not an issue in the case, and to which ruling no objection was made. The defendant, Minerva Harbison, was the wife of J. H. Harbison. She was not made a defendant to the original complaint filed in this action. Subsequently an amendment to the complaint was filed by the plaintiff in which she was made a party defendant, and judgment was asked against her in the sum of $73.34. The case' was instituted in the circuit court, and the amount for which Mrs. Harbison was sued not being within the jurisdiction of the court, the judgment against her is void, and will be reversed and the cause of action against her dismissed. The judgment against the defendants, J. H. Harbison and G-. L. Lynch, will be affirmed.