## Facts

- Colthurst signed a negotiable promissory note for $3,200, dated December 16, 1918, payable one year after date, with interest.
- Lake View State Bank of Chicago sued Colthurst in federal district court (Southern District of Iowa) to recover principal and interest, alleging it was a holder in due course for value and without notice of any defense.
- The bank presented testimony that it purchased the note from W. F. Van Buskirk on February 20, 1919 (before maturity) for $3,234.67 (principal plus accrued interest), and that it had no knowledge of any defense when it acquired the note.
- Colthurst denied the bank’s holder-in-due-course status and asserted that the note was procured from him by fraud.
- The trial judge required Colthurst to proceed in sequence: first offer evidence that the bank was not a holder in due course, and only if he produced such evidence could he then offer proof of the alleged fraud in the procurement of the note.
- To challenge the bank’s claimed due-course status, Colthurst offered two letters written by Van Buskirk to Colthurst after the note matured (dated February 4, 1920 and February 25, 1920) demanding payment to Van Buskirk.
- Colthurst offered the letters to support an inference that Van Buskirk, not the bank, owned or controlled the note after maturity, and therefore that the bank had not acquired it before maturity (or not in due course).
- The district court excluded the letters as hearsay, ruled Colthurst had offered no admissible evidence raising a fact question on due-course status, and directed a verdict for the bank.
- Colthurst appealed to the U.S. Court of Appeals for the Eighth Circuit, arguing the evidentiary ruling and directed verdict were wrong and that the jury should have assessed the bank witnesses’ credibility.

## Issues

1. Whether Van Buskirk’s post-maturity letters demanding payment were admissible to prove that the bank was not the holder of the note in due course (including whether the letters could be used to prove ownership or timing of transfer).
2. Whether, after the bank’s prima facie showing that it purchased the note before maturity for value and without notice of defenses, Colthurst produced enough admissible evidence to create a jury question on holder-in-due-course status.
3. Whether the district court properly directed a verdict for the bank (and thus never reached Colthurst’s fraud defense) when the only proffered rebuttal evidence was excluded and the remaining record did not support a reasonable inference against the bank’s due-course proof.

## Decision

- The Eighth Circuit affirmed the judgment for Lake View State Bank.
- The court held the Van Buskirk letters were properly excluded as hearsay when offered to prove the truth of their implied assertion that Van Buskirk was the holder/owner entitled to payment after maturity.
- With the letters excluded, Colthurst failed to introduce substantial admissible evidence contradicting the bank’s proof that it acquired the note before maturity, for value, in good faith, and without notice of defenses.
- Because the bank’s due-course showing stood unrebutted on an evidentiary basis, the district court did not err in directing a verdict for the bank; general attacks on credibility did not require submission to the jury where no evidence supported a reasonable contrary finding.

## Legal Principles

- A party’s out-of-court statements (including letters) offered to prove the truth of the matters asserted are hearsay and are inadmissible unless an exception or a basis for admission (such as authorization, adoption, or another recognized doctrine) is shown.
- The fact that a third party later demanded payment on a note could be relevant to who held the note after maturity, but that fact cannot be proved by the third party’s own unsworn statements to the maker.
- A plaintiff who proves it acquired a negotiable instrument before maturity, for value, and without notice of defenses establishes a prima facie case of holder-in-due-course status; the defendant must come forward with admissible evidence sufficient to raise a real fact dispute.
- A directed verdict is proper when the evidence, viewed in the nonmovant’s favor, contains no substantial admissible proof on which a reasonable jury could find against the movant on the controlling issue; abstract arguments that a jury could disbelieve uncontradicted testimony do not alone prevent judgment as a matter of law.

## Conclusion

The Eighth Circuit affirmed because the maker’s only proffered evidence against holder-in-due-course status consisted of post-maturity demand letters from a third party, which were inadmissible hearsay, and without them there was no substantial admissible evidence contradicting the bank’s prima facie proof that it bought the note before maturity for value and without notice; accordingly, the directed verdict for the bank was proper and the asserted fraud defense was not reached.


Colthurst v. Lake View State Bank, 18 F.2d 875 (1927)