Gigoux v. Moore

Citations

• 105 Kan. 361
• 184 P. 637
• 1919 Kan. LEXIS 85

Syllabus

<p>SYLLABUS BY THE COURT.</p> <p>1. Promissory Note — Procured by Fraud — Collateral Security by One Corporation for Debt of Another — Notice of Infirmity — “Holder in Due Course.” The plaintiff was the holder of the note of a realty company which was secured by deposit of collateral consisting of notes to the amount of $15,000, and of the value of $15,000. A railroad company then secured the note of the realty company by deposit of collateral consisting of notes of the face value of $6,500, which were exchanged and substituted for the other collateral notes. Among the notes deposited by the railroad company was one given the railroad company by the defendant. ■ It was complete and regular on its face, and was not dishonored or overdue, but it had been procured by fraud, and was negotiated in violation of a restricted agreement. Held: (a) The plaintiff gave value for the defendant’s note; (b) the defendant was not at liberty to assert that deposit of collateral security .by the railroad company for the debt of the realty company was void because ultra vires; (c) the fact that one corporation was securing the debt of another did not charge the plaintiff with notice of infirmity in the instrument or defect in the railroad company’s title; (d) such fact did not render acceptance of the instrument by the plaintiff an act of bad faith, or otherwise deprive him of the character of a holder in due cotirse.</p> <p>2. Same — “Bad Faith” as Used in Statute Interpreted. The bad faith which is referred to in section 63 of the negotiable-instruments law, and which is the antithesis of the good faith referred to in section 59, is bad faith in fact, derived by inference of fact, as distinguished from inference of law, and the substantial equivalent of fraud.</p>