January 1917 - Philippine Supreme Court Decisions/Resolutions
Philippine Supreme Court Jurisprudence
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G.R. No. 11526 January 2, 1917 - B. A. GREEN, ET AL. v. M. LOPEZ, ET AL.
036 Phil 1:
036 Phil 1:
EN BANC
[G.R. No. 11526. January 2, 1917. ]
B. A. GREEN, ET AL., Plaintiffs-Appellees, v. M. LOPEZ, ET AL., Defendants-Appellants.
Delgado & Delgado for Appellants.
Crossfield & O’Brien for Appellees.
SYLLABUS
1. BILLS AND NOTES; NEGOTIABLE PAPER; INDORSEMENT; CONSIDERATION. — An allegation that a negotiable note was indorsed by the payee to a purchaser "for value received" is substantially equivalent to a formal allegation that the indorsement was made for a valuable consideration.
2. ID.; ID.; RIGHTS OF PURCHASER. — Where negotiable paper has been put in circulation, and there is no infirmity or defense between the antecedent parties thereto, a purchaser of such security is entitled to recover thereon, as against the maker, the whole amount, irrespective of what he may have paid therefor.
3. ID.; ID. — Where there is nothing on the face of a negotiable note to put a purchaser from the payee on notice of the existence of an equitable defense as between the maker of the note and the payee, the existence of such equitable defense can in no event defeat the right of the holder of the note by indorsement and for valuable consideration, until and unless knowledge thereof is brought home to him, or until it appears that he had such knowledge of the existence of defects in the instrument as to charge him with bad faith in acquiring it under all the attendant circumstances.
2. ID.; ID.; RIGHTS OF PURCHASER. — Where negotiable paper has been put in circulation, and there is no infirmity or defense between the antecedent parties thereto, a purchaser of such security is entitled to recover thereon, as against the maker, the whole amount, irrespective of what he may have paid therefor.
3. ID.; ID. — Where there is nothing on the face of a negotiable note to put a purchaser from the payee on notice of the existence of an equitable defense as between the maker of the note and the payee, the existence of such equitable defense can in no event defeat the right of the holder of the note by indorsement and for valuable consideration, until and unless knowledge thereof is brought home to him, or until it appears that he had such knowledge of the existence of defects in the instrument as to charge him with bad faith in acquiring it under all the attendant circumstances.
D E C I S I O N
CARSON, J. :
This is an appeal from a judgment for the face value of a negotiable note, favor of the plaintiffs who purchased the note, and against the makers, with a declaration of the subsidiary liability of the payee, from whom the note was purchased and by whom it was indorsed to the plaintiffs.
The complaint alleged that the note was indorsed by the payee to the plaintiffs "for value received," and this allegation was conclusively established by the evidence adduced at the trial. We are of opinion that this allegation was substantially equivalent to a formal allegation that the indorsement was made for a valuable consideration, and that the truth of this allegation having been established by the introduction of competent evidence establishing the fact that the indorsement was made for a valuable consideration, the purchasers were clearly entitled to judgment for the face value of the note.
"By the decisive weight of authority in this country, where negotiable paper has been put in circulation, and there is no infirmity or defense between the antecedent parties thereto, a purchaser of such security is entitled to recover thereon, as against the maker, the whole amount, irrespective of what he may have paid therefor." (149 U. S., 327. 1)
It follows that any allegation which sets forth the existence of a valuable consideration for the transfer by indorsement is sufficient, notwithstanding the failure to allege expressly the amount which was in fact paid by the indorser.
What has been said disposes of the various contentions of appellants based upon the failure of the court below to sustain a demurrer to the complaint because of the lack of an allegation setting forth specifically the nature and amount of the consideration paid by the plaintiffs to the payee of the note, by whom it was indorsed in their favor.
The real defense relied upon in the court below by the makers of the note was that the plaintiffs were not bona fide holders of the note by indorsement, in that they had knowledge of the existence of certain equitable defenses which the makers were entitle to set up as against the payee of the noted, before they acquired it by indorsement from the payee.
But there was nothing on the face of the note to put the purchasers on notice of the existence of such equitable defenses. It was entirely regular in form and came into their possession in the usual course of business. Under these circumstances the burden of proof was manifestly upon the makers of the note to establish the fact of knowledge of the equitable defenses before they could be permitted to rely upon such defenses as against the purchasers.
The only evidence tending to establish such knowledge was the testimony of Lopez, one of the makers of the note, that a person unknown to him and representing himself to be an employee of Green, one of the plaintiffs, came to him, and made inquiries as to the validity and genuineness of the note, stating that his principal desired this information because he was contemplating its purchase; and that he then and there explained the nature of his equitable defenses as against the payee, and repudiated any obligation to meet the note.
There is no evidence of record upon which to base a finding that these alleged disclosures were in truth and in fact made to an employee of either of the plaintiffs other than the testimony of Lopez to the effect that these alleged disclosures were made to a person unknown to him, who represented himself to be an employee of one of the plaintiffs; and the testimony of Green, one of the plaintiffs, who stated that before purchasing the note he sent an employee to call upon the makers of the note to inquire whether it was a good note which would be paid at maturity, and that upon his return this employee stated that he had been informed by the makers of the note that it was a good note duly executed by them and that it would be paid when due. We do not stop to consider whether this evidence is sufficient to establish the fact that the person to whom the maker of the note claims to have disclosed the alleged equitable defenses was in truth and in fact the employee sent by the plaintiffs to the makers of the note for the purpose of inquiring as to its validity, because we are satisfied that, admitting that the person with whom Lopez claims to have had the interview was an employee of one or both of the purchasers, we do not think that the evidence sustains an affirmative finding that the plaintiffs had knowledge of the alleged equitable defenses when they purchased the note. One of the purchasers of the note is a broker, engaged in business in the city of Manila, and the other is an attorney, licensed to practice in the courts of these Islands, and it would require stronger and more convincing evidence than the interested testimony of one of the makers of the note to satisfy us, as against their testimony to the contrary, that these gentlemen were so imprudent as to discount negotiable paper, in the ordinary course of business, after having received formal notice of the existence of equitable defenses against the payee; and our opinion in this regard is strengthened by the undoubted fact that they took the precaution before purchasing the note to send an agent to make inquiries as to its validity. We are forced to conclude with the trial judge that the testimony of the maker of the note as to the disclosures made to the purchasers’ agent must be rejected, either on the ground that it is wholly false, or upon the ground that he failed to make himself understood in the course of his alleged interview with the plaintiffs’ agent, with the result in either event that knowledge of the existence of equitable defenses was not brought home to the purchasers of the note. Equitable defenses of this nature can in no event defeat the right of the holders of a negotiable note by indorsement and for valuable consideration, until and unless knowledge of the existence of such equitable defenses is brought home to them, or until it appears that the holders had such knowledge of the existence of defects in the instrument as to charge them with bad faith in acquiring it under all the attendant circumstances. (Confer numerous cases cited in notes, 7 Cyc., p. 945.)
The judgment entered in the court below should be affirmed, with the costs of this instance against the appellants. So ordered.
Torres, Moreland, Trent and Araullo, JJ., concur.
The complaint alleged that the note was indorsed by the payee to the plaintiffs "for value received," and this allegation was conclusively established by the evidence adduced at the trial. We are of opinion that this allegation was substantially equivalent to a formal allegation that the indorsement was made for a valuable consideration, and that the truth of this allegation having been established by the introduction of competent evidence establishing the fact that the indorsement was made for a valuable consideration, the purchasers were clearly entitled to judgment for the face value of the note.
"By the decisive weight of authority in this country, where negotiable paper has been put in circulation, and there is no infirmity or defense between the antecedent parties thereto, a purchaser of such security is entitled to recover thereon, as against the maker, the whole amount, irrespective of what he may have paid therefor." (149 U. S., 327. 1)
It follows that any allegation which sets forth the existence of a valuable consideration for the transfer by indorsement is sufficient, notwithstanding the failure to allege expressly the amount which was in fact paid by the indorser.
What has been said disposes of the various contentions of appellants based upon the failure of the court below to sustain a demurrer to the complaint because of the lack of an allegation setting forth specifically the nature and amount of the consideration paid by the plaintiffs to the payee of the note, by whom it was indorsed in their favor.
The real defense relied upon in the court below by the makers of the note was that the plaintiffs were not bona fide holders of the note by indorsement, in that they had knowledge of the existence of certain equitable defenses which the makers were entitle to set up as against the payee of the noted, before they acquired it by indorsement from the payee.
But there was nothing on the face of the note to put the purchasers on notice of the existence of such equitable defenses. It was entirely regular in form and came into their possession in the usual course of business. Under these circumstances the burden of proof was manifestly upon the makers of the note to establish the fact of knowledge of the equitable defenses before they could be permitted to rely upon such defenses as against the purchasers.
The only evidence tending to establish such knowledge was the testimony of Lopez, one of the makers of the note, that a person unknown to him and representing himself to be an employee of Green, one of the plaintiffs, came to him, and made inquiries as to the validity and genuineness of the note, stating that his principal desired this information because he was contemplating its purchase; and that he then and there explained the nature of his equitable defenses as against the payee, and repudiated any obligation to meet the note.
There is no evidence of record upon which to base a finding that these alleged disclosures were in truth and in fact made to an employee of either of the plaintiffs other than the testimony of Lopez to the effect that these alleged disclosures were made to a person unknown to him, who represented himself to be an employee of one of the plaintiffs; and the testimony of Green, one of the plaintiffs, who stated that before purchasing the note he sent an employee to call upon the makers of the note to inquire whether it was a good note which would be paid at maturity, and that upon his return this employee stated that he had been informed by the makers of the note that it was a good note duly executed by them and that it would be paid when due. We do not stop to consider whether this evidence is sufficient to establish the fact that the person to whom the maker of the note claims to have disclosed the alleged equitable defenses was in truth and in fact the employee sent by the plaintiffs to the makers of the note for the purpose of inquiring as to its validity, because we are satisfied that, admitting that the person with whom Lopez claims to have had the interview was an employee of one or both of the purchasers, we do not think that the evidence sustains an affirmative finding that the plaintiffs had knowledge of the alleged equitable defenses when they purchased the note. One of the purchasers of the note is a broker, engaged in business in the city of Manila, and the other is an attorney, licensed to practice in the courts of these Islands, and it would require stronger and more convincing evidence than the interested testimony of one of the makers of the note to satisfy us, as against their testimony to the contrary, that these gentlemen were so imprudent as to discount negotiable paper, in the ordinary course of business, after having received formal notice of the existence of equitable defenses against the payee; and our opinion in this regard is strengthened by the undoubted fact that they took the precaution before purchasing the note to send an agent to make inquiries as to its validity. We are forced to conclude with the trial judge that the testimony of the maker of the note as to the disclosures made to the purchasers’ agent must be rejected, either on the ground that it is wholly false, or upon the ground that he failed to make himself understood in the course of his alleged interview with the plaintiffs’ agent, with the result in either event that knowledge of the existence of equitable defenses was not brought home to the purchasers of the note. Equitable defenses of this nature can in no event defeat the right of the holders of a negotiable note by indorsement and for valuable consideration, until and unless knowledge of the existence of such equitable defenses is brought home to them, or until it appears that the holders had such knowledge of the existence of defects in the instrument as to charge them with bad faith in acquiring it under all the attendant circumstances. (Confer numerous cases cited in notes, 7 Cyc., p. 945.)
The judgment entered in the court below should be affirmed, with the costs of this instance against the appellants. So ordered.
Torres, Moreland, Trent and Araullo, JJ., concur.
Endnotes:
1. Wade v. Chicago, etc., L. R. Co.
