Story Case

Howard Day, a citizen of Southern California, executed and delivered the following instrument:

"$200. January 6, 1915.

I promise to pay, to the order of the San Diego Exposition Fund, two hundred dollars, in thirty days. (Signed) Howard Day." Day became angry with two members of the committee handling the fund and, when the note became due, he refused to pay. Suit was brought on the instrument. The committee did not allege or prove that any consideration had been given for the note. In fact, none had been given. Day pleaded the failure of the committee to show a consideration. Is this defense effective?

Ruling Court Case. Carnwright Vs. Gray, Volume 127 New York Reports, Page 27

Samuel Frelign made and delivered to Carnwright a note, in form as follows:

"$1500. Quarryville, Sept. 27, 1871.

Thirty days after my death, I promise to Cornelius Carnwright, fifteen hundred dollars, with interest.

(Signed) Samuel Frelign." Carnwright brought suit upon this note against Gray, who was made executor of the estate of Frelign, after the death of the latter. Gray contended that no recovery could be had upon this note, because Carnwright had not shown that it was given for a consideration. However, Gray introduced no evidence that there was a lack of consideration.

Decision: As between the immediate parties to a negotiable instrument, a consideration is presumed. It is not necessary that the holder shall prove consideration to entitle him to recover. But to defeat this right to recover, the party liable must show that no consideration, in fact, existed. He did not do so in this case, so Carnwright may recover upon the note.

Mr. Justice Brown said: "The instrument sued upon being, therefore, a promissory note within the statute of this state, it follows that it imports a consideration." Judgment was given for Carnwright.

Ruling Law. Story Case Answer

When a person attempts to enforce a simple contract, he must first show that a consideration exists. It has been stated heretofore that, as between the immediate parties to a negotiable instrument, a consideration is necessary. But there is a difference between a negotiable instrument and a simple contract in respect to the existence of a consideration. In a negotiable instrument, it is presumed that a consideration exists until the opposite party has introduced evidence which tends to show that there was no consideration. When he has introduced such evidence, the presumption of consideration is gone, and the holder of the instrument must then prove by a preponderance of the evidence that there was a consideration. The Negotiable Instruments Law provides: "Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party for value." The defense in the Story Case is not effective.