Sperry v. Spaulding , 45 Cal. 544 ( 1873 )

By the Court, Rhodes, J.:

This action is brought by the indorsee against the maker of two promissory notes. JTo question is made in respect to the smaller of the two notes. As a defense to the other note, it is alleged that when it was given, the parties entered into a “ collateral, independent agreement,” that the payee should not put it into circulation, and that it should “ never be used by him excepting only as evidence ” to sustain an assignment of certain notes, accounts, and bills receivable, which the payee had assigned to the maker for collection, should a suit be brought by the creditors of the payee to set aside the assignment; and that the note should be surrendered after the maker had accounted with the payee for the proceeds of the notes, accounts, and bills receivable. It is also alleged, that the note was indorsed by the payee to the plaintiff, without any consideration.

On the trial the defendant testified substantially to the facts set up in his answer, in respect to the collateral agreement made between him and the payee, and among other V things, stated that the payee agreed to keep the note until he (the maker) called for it; that it “should never see the light of day till I (the maker) called for it;” and that it was to be used to protect the maker in the assignments mentioned in the answer, if certain creditors should institute a suit to take them out of his hands, and in no other way.

The principal question in the case is this: Upon which, party does the law cast the burden of proof in respect to the consideration of the indorsement? The general rule is that the holder of negotiable paper is presumed to have taken it for value, and before its dishonor, and in the regular course of business; and the burden of proof to overthrow these presumptions lies upon the maker. (1 Pars. Notes and Bills, 255, and cases cited.) To this rule, however, there are exceptions, one of which is, that if the note was fraudulently put into circulation, it is incumbent on the indorsee to prove that he gave value for it. Most of the cases cited by the defendant sustain this exception to the general rule. (See, also, 1 Pars. Notes and Bills, 188.) The reason given for the exception is, that the presumption is that the guilty party transferred it, in order that he might recover on it for his own’ use, but in the name of a third person. The defendant’s fourth instruction, to the effect that if the evidence showed that the note had been fraudulently assigned to the plaintiff', the burden was on him to show that he had paid value for it, should have been given.

It is insisted by the plaintiff, that as the defendant’s evidence in respect to the time when the note was made and .transferred was contradicted by that of the payee and the indorsee, the jury were justified in rejecting as untrue, all of the defendant’s evidence; and that in view of the verdict, the Court should presume that the jury had so rejected the evidence. But it is obvious that the defendant was entitled to have the jury instructed upon the law of the case, on the theory that they would regard all his testimony as true.

Judgment and order reversed, and cause remanded for a new trial.

Mr. Chief Justice Wallace did not express an opinion.