Stoddard v. Burton , 41 Iowa 582 ( 1875 )

Day, J. —

The evidence shows that the defendant paid the amount of the note to J". W. Thompson, who had it in his possession on the 11th day of October, 1866. Thompson claims that at that time he was the owner of the note under an agreement entered into on the 19th day of March, 1866, between himself and plaintiff, wherein Thompson agreed to keep and maintain plaintiff and his wife, Annie Stoddard, during their lives, and their grand-daughter, Mary Lovell, until she attained .the age of eighteen years, in consideration whereof the note in question and other notes and property were delivered to him.

On the trial the plaintiff was permitted, against the objection of defendant, to give in evidence the transcript of a record in the District Court of Black Hawk county, in an action commenced on the 26th day of January, 1869, wherein Alfred Stoddard was plaintiff, and John W. Thompson, Charles Brown, Duane Brown and W. R. Wilson were defendants, in which a decree was rendered that the contract between Thompson and Stoddard had never been fully completed, and had never become valid or binding as between them, and setting aside and cancelling it, and perpetually enjoining the collection, by Thompson, of a certain other note, which he claimed as consideration in part of said agreement.

The bill of exceptions recites that upon the introduction of said transcript the court refused to hear or- receive any further evidence on the part of the defendant, touching the ownership of said note at the time defendant claimed to have paid the same, to which ruling the defendant excepted.

i estoppelaXfonf eviaeiiee. The court also instructed the jury as follows: “4. The whole question as to the right of ownership of said note, as between Thompson and Stoddard, having been adjudicated in a suit between said parties, and the same having been determined in favor of said Stoddard, such adjudication is conclusive between these parties, and leaves the question which is submitted to you: Did the defendant have reason to believe that said Thompson had such a title to said note as would authorize the payment to said Thompson, and was such belief caused by the acts of said Stoddard coming to the knowledge of said defendant prior to the payment of said note by said defendant? ”

The action of the court in admitting the above evidence, in rejecting further proof on the part of defendant respecting the ownership of the note, and in giving the above instruction, is clearly erroneous. The defendant was not a party to the former litigation, nor is he in any manner in privity with any one who was a party thereto. That action was commenced more than two years after the defendant paid to Thompson the note in controversy. The defendant cannot, therefore, be in any manner affected by that litigation. As between the defendant and this plaintiff, the question of Thompson’s ownership of the note in question, at the time defendant paid it, must be determined as though that decree had never been rendered. Myers v. The County of Johnson, 14 Iowa, 47; Dorr v. Stockdale, 19 Id., 268; Huntington et al. v. Jewett et al., 25 Id., 249; Griffith v. Lovell, 26 Id., 226.

II. The defendant asked the court to instruct the jury as follows: “ 12. The note in controversy was payable on or before a certain date. This made the note payable at a fixed time absolutely, and sooner if defendant saw fit to pay it sooner. Such were the express terms of the contract, and, therefore, no presumption of bad faith can arise from the simple fact that defendant paid it when he did, though by its terms payment could not have been demanded or enforced at the time. Defendant had the right to pay it whenever he chose to do so.”

The court refused this instruction, and gave the following: “ 8. A promissory note, payable on or before two years after date, is due at the end of two years and not before; the rule of law being that the note becomes due at the time when the payee or legal holder or owner of the same has the right to demand payment, and this is true, although the note provides that the payor may at his option pay the same before the time fixed when it shall absolutely become due.”

■ “ 9. The payment of a note by the payor before it becomes due, to a stranger who may have possession of the note, will not protect and discharge the maker, if said note has been stolen, or otherwise surreptitiously come into the hands of the party presenting the same.”

Other instructions given embrace the same doctrine.

2. promissory sumption. There was error in giving these instructions, and in refusing. that asked. The note was payable to the bearer, and there is a presumption that the person in possession of it, and who presented it for payment, was the owner.

It has been declared in general terms, that the payment of a note which has been lost or stolen, before it is due, does not discharge the maker from liability to the real owner, because the payment is out of the ordinary course of business. 2 Parsons on Notes and Bills, 255, and cases cited.

3.-: pay-maturity. But the note in question, by its express provisions, at the option of the maker, is payable at any time within two years from its date. Whilst the holder could not enforce payment before January 6, 1868, yet the maker might claim the right to make payment before that time. It cannot be said to be out of the ordinary course of business for the maker to insist upon a provision which was incorporated for his benefit. No presumption against the bonafides of the defendant can arise from the time of making payment.

4_. wllen not t£<?eris owner. III. The defendant asked the court to instruct in substance that, if Burton paid the note to Thompson in good faith, Thompson being in possession of it, and believing be the owner, without actual notice or knowledge that it was stolen, then Burton was protected by such payment, and that mere suspicion on Burton’s part as to Thompson’s right to demand payment or negligence in making inquiries W'as not' enough to invalidate payment; but to do so, it must appear that Burton had acted in bad faith. The court refused this instruction, and in substance directed that a payment made under circumstances that would put a reasonably prudent man upon inquiry as to Thompson’s right to receive payment would not protect nor discharge defendant.

This action was erroneous. Mere suspicion that a person in possession of a note payable to bearer may not be the owner, will not exonerate the maker from payment; but there must be circumstances amounting to clear proof that he is a fraudulent holder. Story on Promissory Notes, section 613, and cases' cited; Gage v. Sharp, 24 Iowa, 15; Lake v. Reed, 29 Id., 258; Goodman v. Simonds, 20 How., 343; 1 Parsons on Notes and Bills, 238; 2 Id., 212, 279:

For tlie errors discussed, the judgment is

Reversed.