Beacon Trust Co. v.

Ryder
FACTS:
-

Action brought by Beacon Trust Co. against Robert and Charles Ryder for a
promissory note worth $20,000, payable to Morris Rudnick

Transfers:
o

Drawn by Robert Ryder to below

Indorsed in blank by Charles Ryder to below

Indorsed in blank by Morris Rudnick and E.S. Company Inc. to plaintiff

before maturity via discounting

Beacon Trust alleges that on the PNs due date, it was protested for
nonpayment and notice thereof was given to Charles Ryder

Defenses:
o

Denial of their signatures

PN was made without consideration

PN was fraudulently transferred by the payee Rudnick to Beacon Trust

in violation of an agreement with the defendants

Beacon Trust is not a holder in due course

Massachusetts Trial Court: in favor of plaintiff

Defendants Ryder and Ryder appealed to MA SC

o

The burden of proof is upon the plaintiff to show that he is a holder in

due course, when testimony that the note in suit was negotiated in
breach of faith was introduced

If it was understood or was a course of dealing between the plaintiff

and the payee of the note in suit that, if the note was not paid at
maturity by the defendants in this case, the account of the payee was
to be charged, then the plaintiff is not a holder in due course

ISSUE(s):
w/n Beacon Trust is a holder in due course
HOLDING AND RATIO:
Yes.
As to burden of proof:
Under MA law, the holder of a negotiable instrument is deemed prima facie to be a
holder in due course and no further burden rests upon him to prove that he or some
person under whom he claims acquired the title as holder in due course, unless it is
shown that the title of some person who has negotiated the instrument was
defective.
For the exception to apply (i.e. non-prima facie status of holder), it must first be
established that the payees title was defective. Thus, it is the defendants who have
the burden of proving such defective title. If they failed to sustain this burden, no
burden rested upon the plaintiff to support by evidence its prima facie case that it
was a holder in due course.

As to right of plaintiff to charge account of payee:

A right in the plaintiff to charge the account of the payee is not necessarily
inconsistent with the plaintiff's being a holder of the note in due course. It was not
inconsistent with the plaintiff's having acquired title to the note for value, as
distinguished from being the agent of the payee for its collection.
A holder in due course of a note indorsed in blank without qualification ordinarily has
a right of recourse to the indorser if the note is not paid at maturity. If this plaintiff,
by reason of an understanding or "course of dealing" with the payee-indorser, had
the right upon nonpayment by the defendant, without more, to charge the note to
such indorser's account, it might be "simply a method . . . of exacting payment from
the indorser."