Edward Rische & Sons v. Planters National Bank

This action was brought by appellee, as indorsee of an accepted bill of exchange. The bill of exchange and acceptance sued on were as follows:

"$1090.00. "RICHMOND, VA., March 31, 1885.

"Three months after date, pay to the order of ourselves ten hundred and ninety dollars, value received, and charge the same to account of

"HORACE BLACKMUR CO., "M.P. BLACKMUR, Atty.

"To Edw. Rische Sons, San Antonio, Texas."

Accepted across the face thus:

"Accepted: EDW. RISCHE SONS."

Indorsed thus:

"HORACE BLACKMUR CO., "M.P. BLACKMUR, Atty."

The petition alleged, that appellee became the owner of the paper in due course of business, before its maturity, for valuable consideration and without notice of any defense against it.

Appellants, who were partners, answered by general demurrer, general denial, and further, in substance, alleged, that Horace Blackmur Co. agreed to consign to them merchandise to be sold and paid for when sold, but not before; that the consignment was made and the instrument sued upon forwarded to them by Blackmur Co. for acceptance in pursuance of a former understanding and agreement, whereby it was agreed that any acceptance given should not pass from Blackmur Co. or be paid until the goods consigned were sold; that the bill was accepted under this agreement, but that at its maturity the merchandise had not been sold; that after its maturity, at request of Blackmur Co., who were believed still to hold the bill, defendants delivered parts of the merchandise to Blackmur Co. to be credited to them upon their account, and that on account of other transactions in reference to the merchandise the balance due Blackmur Co. never did amount to more than $199.45, and that except in so far the acceptance was without consideration. There was no averment that plaintiff had notice of any of the defenses set up, nor was there any denial that it was a bona fide holder of the paper, except as this was done by the general denial and the averment that plaintiff was not the owner of the paper. The answer further alleged, that plaintiff was estopped from recovering on the paper by reason of the fact that it had failed to proceed against Blackmur Co. until that firm had become insolvent, after being fully advised of the agreement on which the acceptance was made; and on the further ground, that plaintiff, having knowledge of the approaching insolvency of Blackmur Co., failed to notify appellants of that fact, of which they alleged their ignorance. There was, however, no averment that plaintiff had any knowledge of any agreement between Blackmur Co. and defendants, such as was alleged, when it obtained the paper. The defendants' plea above referred to was made under oath.

Defendants further pleaded as follows:

"And further, these defendants aver that said plaintiff and said Blackmur Co., well knowing that said Blackmur Co. were and are insolvent, and well knowing that said defendants had and now have a just and valid defense against any liability arising from said acceptance, have combined and confederated together for the purpose of defeating the ends of justice, and with the intent to defraud these defendants have caused this suit to be instituted in the name of the said plaintiff, for the purpose of cutting off these defendants' said just defense against the said acceptance, as herein before set forth, and of rendering said defense nugatory and unavailing, either now or hereafter; and further, that plaintiff has released and discharged said Blackmur Co. from liability on this bill, for a valuable consideration. And of their said answer, defendants put themselves upon the country."

Exceptions were sustained to all the answers except defendants' demurrer and general denial, and this ruling is assigned as error.

If appellee became the owner of the accepted bill before its maturity, in ordinary course of business, for valuable consideration and without notice of any defenses the acceptors may have had, facts alleged to have occurred after that could not affect its right to recover on the acceptance through which appellants became bound as principal debtors, and there was no error in sustaining exceptions to so much of the answer as alleged such after-occurring transactions.

Plaintiff having alleged the facts that would constitute it an innocent holder of the paper, entitled to protection although the acceptors might have defenses good as against the drawers, the general denial contained in appellants' answer would have entitled them to introduce proof showing that plaintiff was not such a holder; and the production of the paper properly indorsed would have made a prima facie case on which plaintiff would have been entitled to recover in the absence of proof that it was not an innocent holder for value.

The answer to which exceptions were sustained, in addition to matters before stated, contained a denial that plaintiff was the owner of the paper, and, as before stated, not only alleged that the paper was accepted under an agreement that it should not be paid until the consigned goods were sold, but that until that occurred the drawers agreed that the paper should not pass from their control, but that the drawees and plaintiff, in violation of this agreement, "have combined and confederated together for the purpose of defeating the ends of justice, and with the intent to defraud these defendants have caused this suit to be instituted in the name of the said plaintiff for the purpose of cutting off these defendants' said just defense against the said acceptance, as herein before set forth, and of rendering said defense nugatory and unavailing, either now or hereafter."

That the answer set up a good defense, in part, at least, against the drawers of the bill, will not be questioned.

There was no denial in the answer excepted to that the indorsement was not genuine, and we understand the rule to be that the mere denial that a person who sues on a bill of exchange, under an indorsement in blank, is the owner of the bill, although such denial be sworn to, will not be sufficient to put the plaintiff on proof of the genuineness of the indorsement. Way v. Richardson, 3 Gray, 412; Dan. on Neg. Inst., 813.

In the case of Hay v. Hathorn, 74 N.Y. 486, which was an action on a negotiable promissory note indorsed in blank, it was held, that an answer denying that plaintiff was the legal owner of the paper and alleging that another was the real party in interest, was sufficient to entitle the defendant to prove these facts, and thus defeat the action, although the defendant did not set up any defense against the real party alleged to be interested in the paper.

In the case before us it is not important to inquire which of these cases states the correct rule; for we are of opinion that the answer, to which exceptions were sustained, does deny that plaintiff had the beneficial interest in the paper while conceding that it holds the legal title, for the answer does not controvert the fact that the paper was indorsed in blank by Blackmur Co., nor that it was delivered to plaintiff by them, but it does in effect allege that this was done for a fraudulent purpose. If this be so, we see no good reason for sustaining the exceptions to the entire answer which set up a good defense against the drawers, who, according to the answer, were the real parties in interest.

The order of pleading has perhaps brought about confusion in this case. If the plaintiff, as it might have done and at the same time have stated a good cause of action, had not in the petition alleged the facts which would constitute it an innocent purchaser, then the answer to which exception was sustained would manifestly have stated a good defense, in reply to which, if plaintiff desired to show that such a defense could not be available to the defendants, it would have been incumbent on it to have alleged the facts which made it an innocent holder of the paper. That this was not the order of pleading pursued can not affect the question of the sufficiency of the answer.

If, as the pleadings stand, the plaintiff offered in evidence the acceptance with indorsement thereon, then it might rest; for it thus proved prima facie a right to recover; and in the absence of evidence to support the answer, would have been entitled to a judgment. If, however, after the plaintiff had made such proof defendants proved the facts alleged in the answer that was stricken out, then this prima facie case would be destroyed, and to recover, it would be necessary for the plaintiff then to have proved that it acquired title to the paper before its maturity, in the ordinary course of business, for valuable consideration. Plaintiff then would have been entitled to a judgment, unless defendants went further and proved that plaintiff had notice of the defenses against Blackmur Co. at the time it acquired title to the paper.

If the averments of the answer are true, there can be no doubt that the paper was put in circulation fraudulently; and when this is shown to be the case, the presumption that an indorsee is an innocent holder can not be indulged, and the burden of proving that he had acquired the paper before maturity, in ordinary course of business, for valuable consideration, rests upon him. Blum v. Loggins, 53 Tex. 136; Collins v. Gilbert, 94 U.S. 761; Listermans v. Field, 9 Gray, 337; Tucker v. Morrill, 1 Allen, 528; Smith v. Sac County, 11 Wall., 140; Conley v. Winsor, 41 Mich. 254; Hutchinson v. Boggs, 28 Pa. St., 294; Sperry v. Spaulding, 45 Cal. 544; Johnson v. McMurry, 72 Mo., 282; Bookstaver v. Jayne, 60 N.Y. 146; Moore v. Hegeman,92 N.Y. 529; Bailey's Onus Probandi, 223; Dan. on Neg. Inst., 815.

The petition alleged, that the bill was drawn by Blackmur Co., by M.P. Blackmur, attorney, and it was urged on the trial that it appeared on the face of the bill that M.P. Blackmur was a party to it, and for this reason the court was asked to exclude the paper as evidence, on the ground of variance; but we are of opinion that the objection was properly overruled. M.P. Blackmur upon the face of the paper appeared as attorney, the answer alleged that the bill was drawn by Blackmur Co., and the acceptance admits that it was properly drawn.

No question was raised by the pleadings nor during the trial as to the want of authority in M.P. Blackmur to indorse the paper, and it can not be raised in this court for the first time. How such a defense must be pleaded the statute prescribes. Rev. Stats., 271.

For the error of the court below in sustaining exceptions to the answer, its judgment will be reversed and the case remanded.

Reversed and remanded.

Delivered April 22, 1892.