Bramante v. Krug

AGEE, J. pro tem.* This is an appeal by plaintiff from a judgment in favor of defendant Krug. Judgment against defendant Hutchins was entered by default and he is not a party to this appeal.

Between July, 1949, and March, 1950, plaintiff loaned to defendant Hutchins a total sum of $27,000. Defendant Krug had also advanced substantial amounts of money to Hutchins. Around April 1, 1950, Krug made and delivered to Hutchins his check in the sum of $6,500, postdated April 3, 1950. This cheek was issued and delivered subject to a condition precedent. This condition was never fulfilled and [772]Krug has a complete defense to the check as against Hutchins or anyone else other than a holder in due course. On April 3, 1950, Hutchins endorsed the check in blank and delivered it to plaintiff, who had no knowledge of the condition precedent or Hutchins’ lack of authority to negotiate the check. Plaintiff immediately deposited the cheek in his bank for collection and payment was refused. The check was thereupon returned to him. He brought suit for the amount of the check against Krug as well as Hutchins on the theory that he was a holder in due course of a negotiable instrument. Judgment was rendered in favor of Krug on the sole ground that plaintiff had not taken the check for value and was therefore not a holder in due course. Plaintiff met all of the other requirements of a holder in due course. (Civ. Code, § 3133.)

The trial court found: “Bramante [plaintiff] gave nothing to Hutchins for the check and there was no agreement either express or implied that the pre-existing debt [from Hutchins to Bramante] would be reduced by the amount of the check.” From this the court concluded that plaintiff was not a holder in due course and was therefore subject to the defense which Krug had as against Hutchins.

The sole question is whether there is sufficient evidence to support the finding. Plaintiff is entitled to the presumption that he gave value. (Civ. Code, § 3105.) Also, an antecedent or preexisting debt constitutes value. (Civ. Code, §3106.)

Since Hutchins’ title to the cheek was in fact defective, because of his fraud in negotiating it, the burden of proof is upon the plaintiff to prove that he took the check for value. (Civ. Code, § 3140; Pacific Acceptance Gorp. v. Goodman, 72 Cal.App. 143, 146 [236 P. 964].) In the case just cited, plaintiff took from its debtor the check of a third person, Goodman, the defendant. As between the debtor and Goodman, Goodman had a good defense because the check was not to be negotiated or cashed until he had received an automobile. The plaintiff, however, contended that it was a holder in due course for value and Goodman’s defense, which was “personal” rather than “real,” did not apply to it. The appellate court, reversing a judgment in favor of plaintiff, held that the taking of the cheek for a preexisting debt is no payment unless it be agreed to take the cheek as payment, and in the absence of such agreement the holder is not a holder in due course. The holding