Kipp v. Smith

Winslow, C. J.

There was no direct evidence showing that the plaintiff knew the nature of the consideration given for the note in suit, but there was much evidence of a circumstantial character tending to show that he had considerable knowledge of the business in which the original payees of the note were engaged and of the circumstances under which this note, and others which he purchased at the same time, were given. There was no error, therefore, in submitting the question whether the plaintiff was a holder in due course to the jury; but the serious question on this branch of the case is as to the correctness of the charge of the court.

The court instructed the jury, in substance, that, if the plaintiff had notice of facts which would put a man of ordinary intelligence and prudence upon inquiry, he would be charged with knowledge of the facts which the inquiry would have shown; and that, if he was guilty of gross negligence in not following up the inquiry which facts'known to him suggested, the law would charge him with notice of all the facts which he might have ascertained by the inquiry, and that he could not be a purchaser in good faith. This, we think, was error. The Negotiable Instrument Law — sec. 1676 — 26, Stats. (Supp. 1906) — provides that, “to constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual Icnowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” By the great weight of modern authority, gross negligence is evidence from which bad faith may be inferred, but it does not of itself constitute bad faith as matter of law. That is a question for the jury after consideration of all the evidence. 1 Daniel, Neg. Inst. §§ 774-, 775, and cases cited in notes; 4 Am. & Eng. Ency. of Law (2d ed.) 300; 7 Cyc. 944, 945. Such is substantially the rule adopted by this court in Kelley v. Whitney, 45 Wis. 110 , and Boyle v. Lybrand, 113 Wis. 79, 83 , 88 N. W. 904 .

*239 Another question has presented itself to onr minds in this •connection which seems worthy of very serions consideration, hut as it was not raised or argued in either court and is not necessary to he now decided we express no opinion upon it. The question is this: Can a person he said to he a holder in due course who, without inquiry, takes from an officer of ■.a .corporation, in payment of a private debt, a negotiable note which appears on its face to he the property of the 'Corporation ? In order to be a holder in due course he must take it “in the usual course of business.’’ Is such a transaction yn the usual course of business in view of the principle that one who takes in payment of a private debt the promissory note of a corporation, executed by the debtor as an officer of the corporation, is charged with notice of any fraud •or irregularity that may exist in its execution ? Hiawatha I. Co. v. John Strange P. Co. 106 Wis. 111 , and cases cited on p. 116 (81 K. W. 1034). We merely suggest this question now. The case must go back for a new trial in any event, ■ and upon such new trial the question of actual notice should •again be submitted 'to the jury by proper special question. Should the jury again find actual notice the question above suggested will he immaterial, hut if they find to the contrary ‘the question above suggested can be answered by the court .after due consideration and argument, as the facts bearing upon it seem to be undisputed.

Upon the question of consideration the trial court held, as matter of law, that there was no consideration because, the Blaze Killer not being a patented article, there could be no sale of exclusive territorial rights in it, and as the defendants bought only territory or territorial rights they received no consideration. We cannot regard this ruling as correct. It is true that in the case of a nonpatented article there can ‘be no such thing as the sale of territory or exclusive territorial rights in the sense in which those terms are used with regard to patented articles; but the sole agency for the sale •of a nonpatented article in a given city or county may be a *240 desirable and valuable privilege, notwithstanding neither party can prevent others from invading the territory and selling the same or similar articles which they have purchased elsewhere. The value of the privilege will depend, of' course, upon the desirability and good repute of the article and the ease or difficulty with which it may be simulated pr purchased elsewhere. Such selling rights in desirable non-patented articles are frequently given, and no reason is perceived why, in the absence of other grounds of invalidity, they may not constitute good consideration fox promissory notes. Clark v. Crosby, 37 Vt. 188 ; Roller v. Ott, 14 Kan. 609 ; Keith v. Herschberg O. Co. 48 Ark. 138 , 2 S. W. 777 .

The case of Apollinaris Co. v. Scherer, 27 Fed. 18 , which was largely relied upon by respondents’ counsel, holds nothing to the contrary of this doctrine. In that case the owner of a mineral spring in Europe had granted to the plaintiff' the exclusive right of export and sale in this country of the-mineral water. Third persons, however, purchased the water-in Europe from the owner of the spring and imported it to-this country and sold it in competition with the plaintiff. The action was brought against these third persons to prevent them from doing this, but it was held that the owner of the-spring could not grant any exclusive territorial right which would prevent those who had lawfully purchased the water-in Europe from bringing it to this country and selling it in competition with the plaintiff. But it is further said in the-case that there would seem to be no doubt that the agreement was a valid agreement as between the parties, and that if the owner of the spring were endeavoring to compete with the-plaintiff in the sale of the water in this country, the agreement could be enforced by injunction.

Prima facie, therefore, there was a valuable consideration for the note, especially as there was testimony tending to-show that Blaze Killer was an article which had acquired, some general sale. It may perhaps be shown that the right. *241 was of no value or that the contract was induced by fraudulent representations of fact, npon which the defendant relied; hut neither of these facts appeared in the evidence without controversy so that the court could take them from the jury.

By the. Court. — Judgment reversed, and action remanded for a new trial.