dissenting.
It seems clear to me that the opinion and the judgment of the majority are at variance with the law applicable to the undisputed facts. I think the decision enlarges the provisions of the statute that makes it unlawful for any company or its agent to sell a premium note before delivery of the insurance policy. I am unwilling, therefore, to allow the decision to go. unchallenged, though I. concede that the references in the opinion to the testimony, so far as they go, accurately reflect the record.
The note in controversy was dated October 9, 1919, and was payable April 1, 1920. It was a premium note for $177.04. It bore the genuine signature of defendant J. S. House, as maker. It was not payable to an insurance company. George Fowler was payee. He took the note to the State Bank, plaintiff, October 9, 1919, and offered it for sale. He indorsed it by writing his name on the back of it. Plaintiff bought it for value. It remains unpaid. Plaintiff, claiming to be a purchaser in good faith, brought the present action to collect the principal and interest. The theory of the defense was that plaintiff was not a purchaser in good faith, and that there could be no recovery *685on the note because it had been given to Fowler for an' insurance premium before delivery of the policy. There was a trial on these issues and the district court directed a verdict for plaintiff. Defendant appealed, and the majority reversed the judgment below and dismissed the action, holding that the evidence was insufficient to show good faith in the purchase of the note.
John Lemly, cashier of the State Bank of Tilden, plaintiff, stated positively on the witness-stand that the transactions resulting in the purchase of the note were conducted solely by himself and Fowler, the former acting for plaintiff. Fowler offered to sell the note to the bank. He said, in answer to a question, that it was given for life insurance. Lemly asked him if the policy had been delivered and he said it had. Lemly had no knowledge or information of any infirmity in or defense to the note. He first learned just before or shortly after it matured that defendant claimed to have a defense to it. This was after defendant explained the matter. Lemly had no connection with the insurance company represented by Fowler and did! not know when defendant made his application for a policy. These facts were positively told by Lemly under oath and there is not a word of competent testimony to contradict them. Lemly had been a banker for twenty years and his veracity and integrity were not impeached.' There was no reason to suspect that he committed perjury to prevent the bank of which he was merely cashier from losing a small amount of money. Under rules of evidence applied to similar commercial transactions for ages the undisputed facts of this record have been universally held sufficient to show good faith in the purchase of unmatured negotiable instruments.
Every day honest, capable men, by means of cash, checks and negotiable notes, pay for insurance on the very day on which the policies are delivered. Why should an honest banker be nonsuited for failure to prove good faith established by uncontradicted evidence merely because he discounted a premium note the day it was executed and de*686livered ? Must a banker to whom a premium note is offered for discount by a payee to whom it had been entrusted by the maker suspect that the payee is a rascal ? If the maker of a note for insurance may with impunity make it payable to his own fiduciary, not to the insurance company, and deliver it before the policy is delivered, must a person to whom it is offered for discount ascertain at his peril by telephone or other means that the policy has not been delivered, though told by the payee that it has been? Why should the maker of a note, without any responsibility for the consequences, be permitted to ignore the promptings of his own senses and, over his own signature, put into the hands of a knave the means of defrauding innocent persons in the ordinary course of their legitimate business ? In reason these questions answer themselves.
Lemly had known defendant for fifteen years or more. He recognized on the note when presented at the bank for discount the genuine signature of defendant. Before him stood the payee who said the policy had been delivered. If defendant entrusted Fowler with the note, why could not plaintiff, knowing that fact, honestly and in good faith believe Fowler when he said the note had been delivered ?
The statute making it unlawful to sell a premium note before the insurance policy is delivered does not make the note void, nor prevent its transfer to a purchaser in good faith, nor change the rules of evidence, nor set a new standard for testing the sufficiency of proof to show good faith, nor amend or repeal the negotiable instrument law /on the subject of transferring negotiable paper for value before maturity.
i What the statute relating to transfers makes unlawful is the selling of a premium note before delivery of the insurance policy. Comp. St. 1922, sec. 7898. No one but the insurer or its agent is penalized for violating the act. No person is punishable criminally except the insurer or its agent. Either or both may be subjected to a fine of $100 or to imprisonment for three months. Comp. St. 1922, sec. 7899. No penalty is imposed on a purchaser either in *687good faith or in bad faith. Though plaintiff did not violate any statute, or commit any wrong, or knowingly participate in any unlawful transaction, or commit any fraud or deceive any person, its honest, lawful, business transaction is penalized by the decision of the majority in a civil action to the extent of $177.04, with interest from October 9, 1919, and costs of litigation, thus enlarging the statute and exercising legislative power. ,
The negotiable instrument act declares:
“A holder in due course is a holder who has taken the instrument under the following conditions:
“First. That it is complete and regular upon its face:
“Second. That he became the holder of it before it was over-due and without notice that it had been previously dishonored if such was the fact;
“Third. That he took it in good faith and for value;
“Fourth. That at the time it was negotiated to him he had no notice of any Infirmity in the instrument or defect in the title of the person negotiating it.” Comp. St. 1922, sec. 4663.
This ought to be'the law still, notwithstanding the act' making it unlawful, punishable by fine or imprisonment, for an Insurer or its agent, to sell a premium note before the delivery of the insurance policy. The evidence adduced by plaintiff established without contradiction every necessary element of a purchase in good faith as defined by the negotiable instrument act — a restatement of commercial law based on the business rectitude of centuries.
In a recent opinion by Chief Justice Morrissey, there is a reiteration of the doctrine that a bona fide purchaser is not affected by fraud previously committed by a third person. Farmers State Bank v. Lydick, 112 Neb. 586.
In a still later opinion by Justice Thompson the following rule applicable to negotiable paper was sanctioned by this court:
“To defeat a recovery thereon it is not sufficient to show that he took it under circumstances which ought to excite' suspicion In the mind of a prudent man. To have that effect *688it must be shown that he took the paper under circumstances showing bad faith or want of honesty on his part.” Howells State Bank v. Hekrdle, 113 Neb. 561.
On the issues now under consideration there is nothing beyond mere suspicion, even if there is that, to question positive and uncontradicted evidence of good faith.
In the present case the decision of the majority, as I understand the effect of it, not only extends the statute beyond its own terms, but it overturns a fundamental principle on which a former opinion of this court is based. Citizens State Bank v. Nore, 67 Neb. 69.
The peremptory instruction to the jury to render a verdict in favor of plaintiff was also proper under the rule of law that, where one of two innocent persons is defrauded by the wrongs of a third person, the loss should fall on the one who equipped the wrong-doer with the instruments of the fraud. As between the parties to this action, defendant alone was the mischief-maker. He signed and entrusted to a scoundrel the negotiable note in controversy.
I challenge the ruling that the nonsuit against plaintiff cannot be avoided without making ineffective the statute forbidding the transfer of a premium note before delivery of the policy. An affirmance of the judgment below would leave that legislation operative to the fullest extent. Violators of the act would still be subject to fine or imprisonment. One who knowingly bought a premium note before delivery of the insurance policy would be unable to enforce payment.
The only wrongs shown by the record were attributable to Fowler and defendant. The latter executed and put into the hands of the former the implement of fraud. The metaphor based on plaintiff as the source of pollution does the latter great injustice.
The importance of the decision and its harmful influence on legitimate banking and insurance, with the suspicion it will cast on all honest people in need of immediate credit for premiums, prompt this dissent.
Good, J., concurs in this dissent.