And for proof of these facts which are alleged by plaintiff and denied by defendant the plaintiff assumes the burden of proof and must establish the same by a preponderance of the evidence before he is entitled to a verdict at your hands.

By a preponderance of the evidence is meant the greater weight that which weighs more or is more convincing to your minds than all evidence to the contrary.

If the plaintiff has established all of such facts by such degree of proof then he is entitled to a verdict for the damages actually sustained by him by reason thereof.

If the plaintiff has failed to establish such facts by such degree of proof then your verdict should be for defendant.

As a matter of law you are instructed that the statutory warranty against defect in validity of consideration (from the manner the transfers are alleged to have been made in this case), would inure to the benefit of plaintiff against defendant as fully as to the immediate transferee of defendant-J. A. Jacobs-if you find from the evidence that the transfer from Jacobs to plaintiff was made as alleged in the petition, and at such time plaintiff had no notice or knowledge of the illegality of the consideration.

While indorsers are liable prima facia in the order in which they indorse and ordinarily plaintiff would first be compelled to pursue J. A. Jacobs the one who had endorsed and transferred said note to him; if you find from the evidence that the plaintiff has failed to do so, but that J. A. Jacobs has no property subject to execution, and that plaintiff could not effect a collection from him, even if he were to recover a judgment against him, then I charge you, as a matter of law, that plaintiff has a right to bring his action directly, and in the first instance, against defendant as a prior endorser.

A question is presented, in this case-one of the essential elements of plaintiff's right to recover, of his want of notice or knowledge of the invalidity of the consideration for such note and mortgage.

If plaintiff at or before the time of his alleged purchase of said note and mortgage knew that it was given in settlement of or to suppress a criminal prosecution then plaintiff can not recover in this case.

Knowledge of the infirmity in the consideration of said note on the part of Jacobs would not be notice or knowledge to charge this plaintiff, unless you find from the evidence that actual notice or such knowledge was brought to the attention of plaintiff at the time or before, he took such note and mortgage by endorsement and transfer and paid for the same whatever the consideration therefor was, if anything.

It is alleged by plaintiff that the note and mortgage in question was endorsed to the said J. A. Jacobs on or about June 17, 1915, and by him endorsed to plaintiff on or about Sept. 25, 1916; and the note shows on its face that it became due on Dec. 12, 1914-in other words both Jacob and plaintiff took said note after it became due.

It is the law that one who takes or purchases a note after it is due is not a holder in due course, and takes such note subject to any defenses which might be asserted by the maker against the payee, or the person to whom originally given; in other words as to the maker of the note the holder, in such case, is presumed to have knowledge of all defects in the note; but this legal presumption of said notice does not inure to the benefit of an endorser to relieve him from his liability to an endorsee on the warranty, of the statute, that the endorser's title to the note is good and that there is no invalidity of consideration.

The mere fact that the endorsee-plaintiff herein-become the purchaser, if he did, of the note a long time after the same was due would not raise a legal presumption against him that at the time of the purchase he knew the note was invalid; but the fact as to the date of his purchase would be a circumstance which may be taken into consideration with all the other evidence in the case to determine whether or not plaintiff, as an endorsee and purchaser, had notice, or should be chargeable with such knowledge.

On account of objections made to certain remarks in argument, in reference thereto, I again call your attention to an instruction of the court at the time of its admission of original files, as part of the record of the case in the Court of Common Pleas of Crawford county, Ohio-plaintiff's Exhibits A. B. D. and F.

These exhibits were admitted, on behalf of plaintiff, only as tending to show an effort of plaintiff to realize against the makers-Kibler-on the mortgage security of this note here in controversy-the nature of the defense of the makers, in such action; and the result of such action; and the mere fact that the pleadings in such case were sworn to, do not make them evidence or proof in this case of the facts alleged in such pleadings, and you have no right to consider them or any other purpose than that for which they were permitted to be introduced as I have explained to you.

Upon the question of defendant's knowledge or notice of the infirmity in said note the illegality of the consideration-I charge you as a matter of law that every person is charged with notice and knowledge of what by law he is supposed or required to know; and the purpose of the original giving of said note in settlement of a criminal prosecution being known by him, he is legally charged with notice of its invalidity on such ground and upon that point plaintiff was not required to make proof.

So, gentlemen of the jury, if by a preponderance of the evidence and under the rules of law which I have given you, you find that plaintiff is the owner and holder of the note in question; that he become such owner and holder for a valuable consideration from J. A. Jacobs; that at and before the time he became such owner and holder he had no notice or knowledge of the invalidity of its consideration; that the principal and interest called for in said note is unpaid; that because of such invalidity plaintiff is unable to collect the same from the makers of such note, and that J. A. Jacob, plaintiff's immediate endorser, is legally uncollectible; then plaintiff is entitled to a verdict at your hands against defendant for the damages sustained by plaintiff by reason of defendant's prior ownership, sale and endorsement of said note; and the measure of such damage would be the value of the consideration given or paid by plaintiff to said Jacobs for such note, together with interest on such amount from the date of plaintiff's purchase of such note to the first day of this term of court, which is April 7, 1919.

If, however, plaintiff has failed to establish, by a preponderance of the evidence, all or any one of such essential facts, then your verdict should be for defendant.

You are the sole judges of the facts, the credibility of the witnesses and the weight to be given to their testimony.

The law in this case you will take from the court, as given in these instructions.

When you find the facts, you will apply the facts so found to the instructions given.

In determining the credibility of the witnesses and the weight to be given to their testimony you will take into consideration their demeanor and manner on the witness stand; their interest, if any, in the controversy; the apparent truthfulness or untruthfulness of their stories; the reasonableness or unreasonableness of their testimony; their knowledge concerning the matters about which they testify; their bias or prejudice, if any is shown-take all these matters into consideration and give to the testimony of each witness such weight and such credit as you believe is fairly entitled to.

Two forms of verdict will be given you, to meet your possible conclusions.

If you find for plaintiff you will add interest to the amount found due him for the time I have mentioned and include same in your verdict.

If you find the issues against plaintiff you will simply return a general verdict for defendant.

At least three-fourths or nine of your number, must agree upon the verdict rendered and when you have so agreed your verdict should be signed by all of those agreeing and returned into court.

You may retire.

1920.]

Oldham v. Munitions Mfg. Co.

ADEQUACY OF THE CONSIDERATION PAID BY A CORPORATION TO A LICENSEE OR OWNER OF A SECRET

PROCESS.

Common Pleas Court of Montgomery County.

JACOB OLDHAM VS. THE MUNITIONS MANUFACTURING
COMPANY ET AL.

Decided, August 5, 1920.

Corporations-Right of Creditors to Recover Difference Between the Actual and Alleged Inflated Value of Property-Purchased by a Corporation with Fully Paid-up Stock.

1. The allegation in the petition of a creditor of a corporation that the purchase by the board of directors of a patent right which had "no market value" and the utility of which had not been demonstrated but was "entirely speculative, uncertain and problematical," for which the consideration was fully paid-up shares of the defendant company, does not state a case of constructive fraud against the creditors of the company by the directors and stockholders thereof.

2. In such a case a court will not substitute their judgment as to the adequacy of the consideration for that of the contract of the parties, but will uphold the contract.

SNEDIKER, J.

This case for alleged unpaid stock subscription is before us on a general demurrer to the petition. The claims of the plaintiff disclose that he heretofore recovered a judgment against the defendant, the Munitions Manufacturing Company, and that upon an issuance of an execution on that judgment the execution was returned unsatisfied. The defendants other than the Munitions Manufacturing Company, were stockholders in that corporation, and it appears that before the organization thereof and before they subscribed for their shares in the company, one P. J. Mitten who was by assignment from the Alloy Products Company, the owner of the exclusive right as licensee in the United States of a secret process of alloy to manufacture fuses,