Citizens' Bank v. Stewart

BURNETT, J.

The action is upon a promissory note, which appears, by admissions and evidence, to have been signed, executed, and delivered by appellant to the American Manufacturing Company and by the payee sold and assigned, on July 3,1911, before maturity, and for a valuable consideration, to the respondent. The note was dated June 8,1911, and was in the following form: “For value received I promise to pay to the order of American Manufacturing Company fifteen hundred dollars at Lexington, Tennessee, in ten installments as below: . . . Default in the payment of any installment shall, at the option of the payee herein, render the unpaid balance immediately due and payable, ’ ’

It is not disputed that appellant was in default according to the terms of said note, but he seeks to justify upon the ground of fraud on the part of the payee and of failure of consideration as between the original parties to the instrument. Respondent’s position is that any such defense cannot be considered for the reason that the case is clearly brought within the contemplation of sections 3123 and 3124 of the Civil Code, providing as follows: “An indorsee in due course is one who, in good faith, in the.ordinary course of business, and for value, before its apparent maturity or presumptive dishonor, and without knowledge of its actual dishonor, acquires a negotiable instrument duly indorsed to him, or indorsed generally, or payable to the bearer,” and “An indorsee of a negotiable instrument, in due course, acquires an absolute title thereto, so that it is valid in his hands, notwithstanding any provision of law making it generally void or voidable, and notwithstanding any defect in the title of the person from whom he acquired it.”

It is not denied that the note was transferred before maturity and in the regular course of business, but the principal question of dispute relates to the burden of proof as to the consideration and notice of appellant’s equities.

It is contended by him that it was incumbent upon respondent to show that it paid full value for the note and that it had

[93]

no notice of any defense that might have been urged by the maker against the payee. In this appellant is clearly in error.

Respondent, having purchased the note before maturity in the regular course of business, became thereby the owner of the legal title, invested with the presumptions that are incidental to the ordinary transfer of property ownership, and to overcome the effect of these presumptions it was incumbent upon appellant to offer proof to impeach the good faith of respondent’s purchase.