ERROR to the Circuit Court of the United States for the Western District of Pennsylvania. This suit was brought by Gilbert & Gay against Thomas Collins upon his acceptance of a certain draft for $8,000, drawn by P. F. Collins & Co., to their own order, and by them indorsed in blank. The firm of P. F. Collins & Co. consisted of P. F. Collins and John M. Moorhead, who were, as sub-contractors, engaged in grading seven miles of the Connecticut Western Railroad, then in process of construction. The contractor with the railroad company was one Barnes, who was to pay them monthly for work done, less fifteen per cent, retained to secure the proper completion of their contract with him; but they were unable to proceed with the work unless he advanced the retained percentage. He agreed to do so, if they would give him as security for their execution of the contract, to be held by him for that purpose, an acceptance of Thomas Collins to the amount of $8,000. The draft accepted by him was accordingly given to Barnes, for whom it was discounted by the plaintiffs. The jury found for the plaintiffs; and judgment having been rendered upon the verdict, the case was brought here. The errors assigned are grounded upon the exclusion by the court below of certain evidence offered by Collins, a statement of which is given in the opinion of the court. Argued by Mr. Richard T. Merrick for the plaintiff in error, and by Mr. Hill Burgwin for the defendants in error.
The opinion of the court was delivered by: Mr. Justice Clifford delivered the opinion of the court.
Transferees of a negotiable instrument, such as a bill of exchange or promissory note payable subsequent to its date, hold the instrument clothed with the presumption that it was negotiated for value in the usual course of business at the time of its execution, and without notice of any equities between the prior parties to the instrument.
Instruments of the kind are commercial paper in the strictest sense, and must ever be regarded as favored instruments as well on account of their negotiable quality as their universal convenience in mercantile affairs. They may be transferred by indorsement, or, when indorsed in blank or made payable to bearer, they are transferable by mere delivery. Goodman v. Harvey, 4 Ad. & E. 870; Goodman v. Simonds, 20 How. 365; Wheeler v. Guild, 20 Pick. (Mass.) 551; Noxon v. DeWolf, 10 Gray (Mass.), 346; Mager v. Badger, 34 M. Y. 249.
Possession of such an instrument payable to bearer, or indorsed in blank, is prima facie evidence that the holder is the proper owner and lawful possessor of the same; and nothing short of fraud, not even gorss negligence, if unattended with mala fides, is sufficient to overcome the effect of that evidence, or to invalidate the title of the holder supported by that presumption. Story on Bills (4th ed.), sect. 416; Byles on Bl ls (10th ed.), 119; Chitty on Bills (12th ed.), 257; Mills v. Barber, 1 Mee. & W. 425; Murray v. Lardner, 2 Wall. 110; Bank of Pittsburgh v. Neal et al., 22 How. 96.
Apply that rule in a suit in the name of the transferee against the maker, and it is clear that he has nothing to do in the opening of his case except to prove the signatures to the instrument, and introduce the same in evidence, as the instrument goes to the jury clothed with the presumption that the plaintiff became the holder of the same for value at its date, in the usual course of business, without notice of any thing to impeach his title. Bank v. Leighton, Law Rep. 2 Exch. 61; Pettee v. Prout, 3 Gray (Mass.), 503; Way v. Richardson, 3 id. 413.
Clothed as the instrument is with those presumptions, the plaintiff is not bound to introduce any evidence to show that he gave value for the same until the other party has clearly proved that the consideration of the instrument was illegal, or that it was fraudulent in its inception, or that it had been lost or stolen before it came to the possession of the holder. Uther v. Rich, 10 Ad. & E. 784; Bailey v. Bidwell, 13 Mee. & W. 73; Arbouin v. Anderson, 1 Ad. & E. N. S. 504; Bank v. Fagan, 7 Moore, P. C. 76; Fitch v. Jones, 5 El & Bl. 238; Smith v. Braine, 16 Ad. & E. N. S. 251; Hall v. Featherstone, 3 Hurls. & Nor. 286.
Sufficient appears to show that the drawers of the draft described in the declaration were sub-contractors to grade seven miles of a railroad referred to in the affidavit of defence, and that they were to be paid monthly for work done, subject to a certain deduction to be retained as a security for the completion of their contract. Moneys received from the monthly payments being insufficient for the purpose, they were unable to complete their undertaking without an advance from the principal contractor. What they wanted was an advance of $8,000; and it appears that the contractor was willing to make it, if they would give him the acceptance of the defendant in the same amount, as a security that they would perform their contract. Pursuant to that arrangement, they drew their draft upon the defendant in that amount, payable to the order of thier senior partner; and the record shows that the draft was accepted by the defendant, and was duly indorsed by the payee.
Beyond doubt, the draft was duly executed and delivered to the contractor as security for the performance of the contract of the drawers of the instrument. By its terms it was payable in ninety days from date; and it must be assumed, in the absence of proof to the contrary, that the plaintiffs became the holders of the same before maturity.
Payment being refused, the plaintiffs instituted the present suit to recover the amount. Process was served, and the defendant appeared and pleaded that he never accepted the draft, and that he never promised in manner and form as alleged in the declaration. Subsequently the parties went to trial, and the verdict and judgment were for the plaintiffs. Exceptions were filed by the defendant, and he sued out the present writ of error.
Six offers of proof were made by the defendant in the course of the trial, all of which were excluded by the court, subject to the exception of the defendant. Four of the rulings of the court in that regard are now assigned for error, and they present the only matters of controversy exhibited in the record. Rulings of the kind, not assigned for error, may be dismissed without remark; nor would the other two exceptions have required much examination, even if they had been assigned for error, as they involve substantially the same questions as those presented by the other rulings of the court.
1. Testimony having been introduced by the defendant that one of the plaintiffs was informed, before the draft came into their hands, that the contractor had agreed to advance money to enable the sub-contractors to pay their employes, they, the sub-contractors, giving the defendant an acceptance as security in lieu of retained percentage, the defendant proposed to ask the witness what was the arrangement between the sub-contractors and the contractor, by virtue of which the defendant's acceptance was obtained; to which the plaintiffs objected, and the court excluded the question.
2. Evidence having been given by the same witness that there was an arrangement between the sub-contractors and the contractor, to the effect that the latter would advance money to the former to pay their men, upon their giving to the contractor the defendant's acceptance, to be retained by him in lieu of the stipulated percentage, the defendant proposed to show by the same witness that the work was finished by the defendant, and that by the terms of the contract all of the percentage retained became due and payable when the contract was completed; which offer of proof was objected to by the plaintiffs, and was ruled out by the court.
3. Complete execution of the draft is not denied; but the theory of the defendant is, that the contractor took the same of the sub-contractors in lieu of retained percentage; and he proposed to show that the sub-contractors subsequently abandoned their contract, and that the defendant, at the suggestion of the contractor, finished the same, he agreeing that if the defendant would complete the work, he, the contractor, would return the acceptance; and that the defendant never got either the percentage or the acceptance: to which the plaintiffs objected, and the court excluded the testimony.
4. Finally, the defendant proposed to show that the contractor, when the acceptance was delivered to him, was indebted to the sub-contractors for retained percentage in excess of the amount of the acceptance; which was also ...