Bank of Jordan Valley v. Duncan

• Decision Date: 18 July 1922
• Citation: 209 P. 149,105 Or. 105
• Parties: BANK OF JORDAN VALLEY v. DUNCAN. [*]
• Court: Oregon Supreme Court

209 P. 149

105 Or. 105

BANK OF JORDAN VALLEY v. DUNCAN. ^[*]

Supreme Court of Oregon

July 18, 1922

Appeal from Circuit Court, Malheur County; Dalton Biggs, Judge.

Action by the Bank of Jordan Valley against P. O. Duncan. Judgment for defendant, and plaintiff appeals. Reversed and remanded with directions.

Wells W. Wood, of Ontario, for appellant.

P.J. Gallagher, of Ontario (W. H. Brooke, of Ontario, on the brief, and John L. Rand, of Salem, and J. A Hurley, of Anchorage, Alaska, of counsel), for respondent.

BURNETT C.J.

The plaintiff, Bank of Jordan Valley, admittedly a banking corporation organized and existing under the laws of this state, avers in substance that on August 22, 1914, at Jordan Valley, Or., the defendant for value made and executed his promissory note in writing for the sum of $3,000, payable to his order in six months after date without grace, with interest at the rate of 7 per cent. per annum from date until paid, with the usual provisions for reasonable attorney's fees in case suit or action should be instituted to collect the note; that immediately upon the execution of the note he indorsed the same in blank by writing his name across the back thereof; and that afterwards, prior to its maturity, the note was duly sold, assigned, transferred, and delivered to the plaintiff for value, and the plaintiff is now the legal owner and holder thereof. It is alleged that $45 was indorsed as payment thereon on August 22, 1914, which the evidence shows was prior to the purchase of the note by plaintiff, and that there is now due and owing to the plaintiff from the defendant $2,955, with interest from August 22, 1914, at the rate mentioned, which the defendant fails and refuses to pay. Claiming $500 as a reasonable attorney's fee, the plaintiff demands judgment against the defendant for the principal, interest, and attorney's fee.

For answer the defendant first "denies each and every allegation of the complaint of the plaintiff not herein expressly admitted." Further answering the complaint the defendant pleads substantially that about the date of the note two men representing themselves to be agents of the Bankers' Mortgage Corporation appeared at his residence in possession of a letter from the cashier of the plaintiff bank, addressed to the defendant, stating in substance that "the bearers thereof were seeking to sell the stock of said corporation, that they were persons whose statements were entitled to full faith and credit, and that said persons were in every way responsible." The answer goes on, stating in substance that the men proceeded to describe the condition and prospects of the mortgage corporation, the plan upon which it would carry on its business, saying that the par value of its shares of its stock was $100 per share, but that they would sell to the defendant stock in the company at $65 per share, and that he informed them that he would subscribe and pay for so much of the stock at $65 per share, par value $100 per share, as would amount to $3,000, which was the largest sum he would invest in said stock. He goes on further to state that, relying upon these statements, he "signed the promissory note alleged in the complaint in payment for stock in said mortgage corporation at $65 per share, par value $100 per share"; that the two men requested him to sign other papers which they represented contained nothing but the terms of purchase; that he signed the same without reading them or otherwise informing himself about their contents, but it transpired that the papers were actually another note for $10,000 with interest due December 31, 1914, and a contract to purchase 200 shares of stock amounting to $13,000, but that he was not aware of the fraud practiced upon him by said agents until about January 1, 1915, when the note was presented to him for payment.

Respecting the knowledge of and connecttion with the transaction attributed to the plaintiff, the answer contains this allegation:

"The defendant further alleges that the said bank of Jordan Valley, through its said officer, knew of the false and fraudulent representation hereinabove alleged, and know that the said selling agents of said corporation intended to make such false and fraudulent representations to the defendant, at the time the said officer of the said bank issued the letter stating that the two selling agents of said mortgage corporation were reliable and trustworthy, as herein-before alleged and set forth, and that the said Bank of Jordan Valley had actual knowledge at the time it received the promissory note set forth in the complaint that said note was procured from the defendant by means of false and fraudulent representation of the said selling agents of said mortgage corporation as aforesaid. Defendant further alleges that the said cashier of the plaintiff was aware of the false and fraudulent statements which the said Masse and Funnell intended to make, and which said persons did make to defendant concerning the sale and purchase of said stock, at the time said cashier gave to said persons the letter of recommendation as aforesaid; that said cashier of plaintiff wrote said letter of recommendation for the purpose and with the intent of causing defendant to have faith and confidence in the said statements of said Masse and Funnell in their proposal to sell the said stock to defendant, and defendant alleges that the said letter of cashier did cause him to believe as true all of the statements made to defendant in reference to the sale and purchase of said stock. Defendant further alleges that as a consideration for the said letter from said cashier to defendant the said Masse and Funnell agreed to give said cashier a large sum of money in case the defendant was induced to purchase any of said stock, and defendant alleges on his information and belief that the said cashier of the plaintiff received the sum of $1,000 from said Masse and Funnell for writing said letter to defendant; that said cashier of plaintiff knew at the time he wrote said letter to defendant that said Masse and Funnell were intending to make an attempt, by false and fraudulent statements to defendant, to induce defendant to purchase a portion of the capital stock of said mortgage company; that plaintiff at all times since the promissory note involved herein was procured from defendant by means of the fraud and deceit as aforesaid has had actual knowledge that the said note was procured from the defendant by means of the false statements, acts, and conduct of said Masse and Funnell as aforesaid; and that the plaintiff, through its cashier as aforesaid, was a party to the fraud and deceit practiced upon the defendant as aforesaid."

Continuing, the answer repeats largely the alleged fraudulent representations of the two agents as stated, and declares that, on being presented with the notes by the plaintiff, the defendant advised the plaintiff bank through its president that the agreement to purchase 200 shares of the stock was fraudulently obtained; that he would not pay the note for $10,000 or the note sued upon, and that he would not purchase the 200 shares of stock; that he has never received anything of value for the notes; and that no stock of the corporation was ever issued or delivered to him.

The reply puts in issue the matters alleged in the answer, except as stated. It avers that the letter referred to was one which the cashier of the plaintiff bank gave to the agents, stating in effect that certain business men in and about Jordan Valley, Or., were owners of stock in the mortgage corporation, and that they would have no objection to being associated with the defendant, in the event said defendant should become a stockholder therein, which statements were and are true, but said letter contained no personal recommendation of said agents or either of them and did not state that they were reliable or responsible or entitled to full or any faith or credit. The reply concludes with an averment to the effect that on August 23, 1914, the plaintiff, in due course of business, before maturity of the note, purchased the same from said agents for its full face value; that they then and there transferred and delivered the note to the plaintiff as its property; that at the time neither the plaintiff bank nor any of its officers or agents had any knowledge whatever of the circumstances under which the note was executed by the defendant, and did not know or have any reason to suspect that there was any infirmity in said instrument or any defect in the title of the bearers thereof, but that plaintiff purchased the said note in good faith, and, if said note was procured from the defendant by fraud or misrepresentation, neither the plaintiff bank nor any of its officers or agents knew anything about such fraud, were not parties to it, and had no reason to suspect that any such conditions existed in the execution of said note.

A jury trial on these issues resulted in a verdict for the defendant, and the plaintiff appeals.

At the close of all the evidence on both sides of the case, when both parties had rested, the plaintiff moved the court to direct the jury to find a verdict for the plaintiff for the face of the note and the interest due thereon, and such reasonable attorney's fee as the jury should determine because the defendant had failed to prove a case sufficient to be submitted to the jury, in that he had "failed to show or introduce any evidence to show that the plaintiff bank does not own the note or that it is not a holder in due course, or that the paper was procured by fraud, or that the plaintiff had any knowledge of any fraud in the procuring of the note or any other cause sufficient to constitute a defense to plaintiff's complaint and...