Acme Coal Co. v. Northrup National Bank

• Decision Date: 08 March 1915
• Docket Number: 785
• Citation: 146 P. 593,23 Wyo. 66
• Parties: ACME COAL CO. ET AL. v. NORTHRUP NATIONAL BANK
• Court: Wyoming Supreme Court

146 P. 593

23 Wyo. 66

ACME COAL CO. ET AL. v. NORTHRUP NATIONAL BANK

No. 785

Supreme Court of Wyoming

March 8, 1915

ERROR to District Court, Sheridan County, CARROLL H. PARMELEE Judge.

Action by the Northrup National Bank of Iola, Kansas, against the Acme Coal Company and others upon a promissory note given for the purchase price of pit cars. The note had been endorsed to the bank before maturity. The note had been drawn on a blank form and the interest rate of seven per cent had been inserted with a typewriter. A circle had been drawn around the figure "7" with a pen and ink and above it was inserted a figure "8" with pen and ink. The maker contended that there was uncertainty as to the rate of interest and that the note was therefore non-negotiatable and open to the defenses of failure of consideration, breach of contract and breach of implied warranty. It was, also claimed that no reply had been filed to the allegations of an amended answer and that said allegations were admitted. Other material facts are stated in the opinion.

Affirmed.

Burgess & Kutcher, for plaintiffs in error.

The court erred in excluding the testimony of A. K. Craig, a witness for the Coal Company, whose testimony related to a breach of the contract made by the Coal Company with the United Iron Works Company for the purchase of one hundred pit cars. The note is non-negotiable and was taken by the defendant in error, subject to all defenses available to plaintiffs in error. Whether the note is negotiable or not the evidence established a prima facie case of fraud, which should have been considered by the court. The evidence was competent and material under the issues in the case. The requirements of a negotiable instrument are defined by Statute. (Section 3159, Comp. Stats. 1910.) Whether an instrument is negotiable must be determined from the face of the instrument itself and cannot depend upon extrinsic facts. (Roblee et al. v. Union Stockyards Nat'l Bank, 95 N.W. 61 (Nebr.); Nicely v. Winnebago Nat'l Bank, 47 N.E. 478 (Ind.); Bank v. McMahon, 38 F. 283; Equitable Trust Co. v. Harger, 102 N.E. 209 (Ill.); Donis v. Brady, 97 N.W. 719 (S. D.) The conflict in the figures fixing the interest rate rendered the rate of interest uncertain and destroyed the negotiability of the note. A suspicious alteration will be presumed to have been made after the execution of the instrument. (Thorpe v. Jamison, 39 L. R. A. (N. S.) 113; Wilson v. Estate of Hotchkiss, 45 N.W. 840 (Mich.) The allegations of the ninth paragraph of the amended answer were admitted by failure to reply. The latent defects in the pit cars were a fraud upon the Acme Coal Company. (14 Am. and Eng. Enc. P. 77; 20 Cyc. 63; Cooley on Torts, 2nd Ed. Pg. 559-560; McAdams v. Cates, 24 Mo. 223; Barron v. Alexander, 27 Mo. 530; Grigsby v. Stapleton, 7 S.W. 421.) To sell a promissory note without disclosing that the maker is to the seller's knowledge insolvent is fraudulent under the Georgia Code. (Gordon v. Irvine, 35 S. E. R. 151.) A failure to disclose the blindness of a horse, where it was not apparent to the buyer, is a fraud. (Hughes v. Robertson, 1 T. B. Mon. (Ky.) 215, 15 Am. Dec. 104; Dowling v. Lawrence, 16 N.W. 552; Stevens v. Fuller, 8 N.H. 463; Paddock v. Strobridge, 29 Vt. 470; Cardwell v. McClelland, 35 Tenn. 105; Maynard v. Maynard, 49 Vt. 297.) A sale of animals afflicted with contagious diseases without disclosing that fact is a fraud, which will justify rescission or action for damages. (Wintz v. Morrison, 17 Tex. 372; Grigsby v. Stapleton, 7 S.W. 421; Jeffrey v. Bigelow, 13 Wend. (N. Y.) 518.) Concealment of defects by vendor is actionable fraud. (Pomeroy Equity, Vol. 2, Sec. 904, P. 1617; Kellogg Bridge Co. v. Hamilton, 28 Law Ed. 89-110 U.S. 108; Thomas v. Murphy, 98 N.W. 1098 (Minn.) The evidence stricken out was competent under the issues and for that reason should not have been stricken. (Metz v. Willits, 14 Wyo. 511; Wilcox v. Stephens, 30 Fla. 377.) Material evidence tending to establish fraud, where fraud is an issue, should be received. (Sections 3213 and 3217, Comp. Statutes 1910, 8 Cyc. 236.)

H. N. Gottlieb, for defendant in error.

Objections to the depositions should have been made, if at all, by motion to suppress. (Crosby v. Hill, 39 Ohio St. 103, 105.) An inspection of the note indicates that it was the clear intention of the parties to substitute the figure "8." The drawing of a circle around and practically through the figure "7" was merely a method of erasure. The record shows that plaintiff in error admitted that the change in the interest rate was made before the note was delivered. This makes the effect for all purposes the same, as if it had been "8" in the first place. (2 Cyc. 144.) Even if it be regarded as an alteration, it was with the consent of the makers and conformed to the real intention of the parties. Hence, the change did not affect the negotiability of the note. (2 Am. & Eng. Enc. of Law 206; Busjohn v. McLean, 29 N.E. 494; Philips v. Crips, 79 N.W. 373, 108 Iowa 605; Denis v. Brady, 97 N.W. 719.) Citations of authority on the subject of suspicious alterations have no application here because of an admission that the change in the note, as to the interest rate, was made before delivery. There is no uncertainty as to the interest rate. (Durant v. Murdock, 3 App. Dist Col. 114; Thompson v. Hoagland, 65 Ill. 310; Gramer v. Joder, Id. 314.) There is a marked distinction between a mere breach of implied warranty and actual fraud, as affecting the title of a commercial paper. (Kellogg Bridge Co. v. Hamilton, 110 U.S. 108; Thomas v. Murphy, 91 N. W. (Minn.) 1096; 14 Am. & Eng. Encyc. of Law P. 85.) The testimony of witness Craig was properly stricken out. (Bank of Leadville v. Allen, 6 Colo. 595.) Defenses cannot be urged against a commercial paper, until it is shown that the endorsee is not a bona fide holder. (Foy v. Blackstone, 31 Ill. 583, 83 Am. Dec. 246; McRitchie v. Johnson, 49 Kan. 321, 30 P. 477; Violet v. Rose, 39 Neb. 660, 58 N.W. 216; Livingston v. Roberts, 18 Fla. 70; Blair v. Buser, 1 Wils. (Ind.) 333.) Exceptions to the exclusion of testimony are unavailing, unless there be an offer to prove the facts sought to be shown. (Farmers' & Merchants' Ins. Co. v. Dabney, 86 N.W. 1070, 62 Neb. 213; Nebr. Tel. Co. v. Jones, 83 N.W. 197, 60 Neb. 396; Wittenberg et al. v. Mollyneaux, 83 N.W. 842, 60 Neb. 583.) A motion to strike out testimony, objection to which, if properly taken, would have been good, appeals to the discretion of the trial court. (Darling v. Klock, 59 N.E. 1121, 165 N.Y. 623; Frischman v. Zimmerman, 42 N.Y.S. 824, 19 Misc. 53; Tutwiler Coal, Coke & Iron Co. v. Nichols, 39 So. 762, 145 Ala. 666, 146 Ala. 364, 119 Am. St. Rep. 34; Cronk v. Wabash R. Co., 98 N.W. 884, 123 Iowa 349; Watts v. Howard, 72 N.W. 840, 70 Minn. 122; Larson v. Kelley, 75 N.W. 13, 72 Minn. 116; McClellan v. Hein, 77 N.W. 120, 56 Neb. 600; McCormick Harvesting Mach. Co. v. Carpenter, 95 N.W. 617, 1 Neb. 273; Luckenbach v. Sciple, 63 A. 244, 72 N. J. Law, 476, Westervelt v. Burns, 57 N.Y.S. 749, 27 Mis. Rep. 781; Hornum v. McNeil, 80 N.Y.S. 728, 80 A.D. 637; Pescia v. Societa Co-operativa C. F. B., 86 N.Y.S. 952, 91 A.D. 506.) The above authorities distinguish Metz v. Willitts, 14 Wyo. 511, relied on by the plaintiff in error, from the facts in the case at bar. In the Willitts case the question was one of weight and sufficiency, while here it is a question of admissibility.

Burgess & Kutcher, in reply.

Where fraud is shown in the original transaction the burden of proof shifts to the plaintiff to establish that he is a holder in due course. Brannan's Negotiable Instruments Law (2nd Ed.) Sec. 59 et seq.; Bigelow on Bills, Notes and Cheques, (2nd Ed.) P. 251; Blair v. Buser, 1 Wils. (Ind.) 333, cited by opposing counsel is not applicable, for the reason that Indiana has not adopted the Negotiable Instruments Law. United Iron Works Company was chargeable with knowledge of the defects in the pit cars. (Hoe v. Sanborn, 21 N.Y. 552.) A fraudulent intent may be implied from evidence showing a breach of implied warranty. (14 Am. & Eng. Enc. of Law 95.)

BEARD, JUSTICE. POTTER, C. J., and SCOTT, J., concur.

OPINION

BEARD, JUSTICE.

This is an action on a promissory note brought by the defendant in error against the plaintiffs in error. Trial was had to the court and judgment rendered in favor of plaintiff below, and defendants bring error.

The note was given by the Acme Coal Co., and indorsed by Ora Darnall and A. K. Craig, and payable to the order of the United States Iron Works Co., and by said company indorsed to the Bank. The note bears date November 9, 1912, is for $ 1,589.15, due ninety days after date with interest from date. A blank printed form was used and the blanks filled in on a typewriter, and in the blank space for the rate of interest after the printed word "at", the typewritten figure and words are: "7 per cent from date." There is a circle drawn around the figure 7 with a pen and ink and above it is the figure 8, also made with pen and ink. The defendants denied the execution of the note, but averred that if they did execute it it was given in renewal of a former note, dated August 3, 1912, which was given for a part of the purchase price of certain pit cars for use in the Coal Company's mines; that said cars were purchased from the Iron Works Co. by the Coal Co. under an agreement that they were to be of the same kind and in all substantial respects like cars formerly purchased by the Coal Co. from the Iron Works Co.; alleged certain defects in the cars which could not be discovered by inspection, but which the Iron Works Co. knew, or should have known, and that the cars were practically worthless. That the cars were delivered during the year...