Butterworth v. Beach

• Decision Date: 26 June 1923
• Docket Number: 1048
• Citation: 30 Wyo. 46,215 P. 1085
• Parties: BUTTERWORTH v. BEACH
• Court: Wyoming Supreme Court

215 P. 1085

30 Wyo. 46

BUTTERWORTH v. BEACH

No. 1048

Supreme Court of Wyoming

June 26, 1923

APPEAL from District Court, Weston County; H. P. ILSLEY, Judge.

Action by William Butterworth and another as trustees, under the will of Charles H. Deere, deceased, against Cora M. Beach and Alfred H. Beach. Judgment for plaintiffs and defendants appeal. The material facts are stated in the opinion.

Reversed and Remanded.

A. H Beach and Raymond, LaFleiche & Kem for appellants.

The general denial of appellants together with the allegations of failure of warranty and consideration put in issue the bona fides of the purchase of the note. (Hodgson v Mather, 100 N.W. 87.) where the facts are peculiarly within the knowledge of one of the parties, slight evidence may suffice to shift the burden of proof to such party. (Rumley Co. v. Anderson, 150 N.W. 939.) Evidence of the exercise of ownership of notes claimed to have been transferred before maturity, or making statements in relation thereto, is admissible to overcome the presumption in favor of transfer before maturity, where it appears that assignor still retained possession after maturity. (Rumley Co. v Anderson, supra.) This evidence was erroneously excluded; the court erred in excluding evidence of the failure of warranty and consideration; the court erred in excluding testimony as to the status of the note as collateral security, said evidence being material as to the question and time of transfer. (Daniels Neg. Inst. Vol. 1, Sec. 833.) Respondents could claim title to the note in question in due course, only by purchasing the indebtedness for which it was pledged as security. It was proposed to show that they never did this, but the evidence was excluded; The note in question was merely held as collateral; title to it could pass only by a transfer of the principal debt. (Munn v. McDonald, 10 Watts (Pa.) 270; the evidence showed that the debt for which the note in question was given as collateral, was paid at the time of the trial; the court erred in excluding testimony that the principal notes of which the note in question was collateral security, were not sold to respondent. An endorsee unable to specify the transaction with which the transfer of the note was connected, fails to establish himself as a holder in due course. (Carroll v. Peters, 1 McGloin, 88; the holder of collateral notes as security for notes that have been paid, is not a holder in due course. In re Philpot Estate, 151 N.W. 827; and defenses against it can be made as if it were brought in the name of the party for whose benefit it was afterwards prosecuted. (Easter v. Minard, 26 Ill. 494. The judgment of the trial court should have been for appellants.

H. Glen Kinsley for respondent.

The Weston County Bank was a bona fide holder of the note acquired before its maturity; it was acquired as collateral to loans then made to Thoeming Com. Co.; it was not subject to defenses which the maker might have had by reason of transactions with the payee, (Genesee Bank v. Klindt, 7 Wyo. 321, 51 P. 878; 3958 C. S.) Plaintiffs purchased this note from the bank, thus acquiring the same position as bona fide holders, which the bank held. (8 C. J. 466; 3 R. C. L. 1036, 3991 C. S.) Having acquired title in due course, plaintiffs may sue the maker, regardless of whether the original note for which this note was given as collateral has been paid; the testimony shows that plaintiffs did purchase the principal note from the bank. Every holder is termed prima facie to be a holder in due course. The doctrine of judicial notice rests upon the wisdom and discretion of the courts. (23 C. J. 173) Courts will not take judicial notice of the name of a corporation. (Mobile v. Mackay, 158 Ala. 51; King Co. v. Bowen, 7 Ala. 462;) The court did not err in sustaining objections to the notice, no foundation therefor having been laid. The court properly excluded evidence offered as to a warranty on the sale of an automobile, for which the note was given, it having been shown that the note in suit had been acquired by plaintiff in due course. (Exchange Bank v. Coe, 95 Ark. 387; 127 S.W. 453, 31 L. R. A. (N. S.) 287.) The endorsement and delivery of negotiable paper as collateral before maturity, passes the legal title to the holder with power to collect by suit or otherwise, subject to the rights of the endorser as to the application of proceeds. (21 R. C. L. 668; Hall v. Page, 4 Ga. 428; Lamberton v. Windom, 12 Minn. 232, 90 Am. Dec. 301; Bank v. Cannon, 46 Minn. 95, 48 N.W. 526, 28 L. R. A. (N. S.) 980.) A bona fide holder of a note as collateral, may enforce it without first resorting to the original debtor; the liability of the maker being primary and absolute. (Delaware Co. v. Haser, 199 Pa. 17, 85 Am. St. Rep. 763, 48 A. 694; Jones, Pleg & Col. Secur. 2nd ed. Sec. 664; Hulett v. Bank, 106 N.W. 879, 3 R. C. L. 1062; Yellowstone Bank v. Ganon, 19 Mont. 402, 48 P. 762, 61 Am. St. Rep. 620, 44 L. R. A. 243; Logan v. Cassell, 88 Pa. St. 288; Watkins v. Angotti, 65 W. V. 193.) The rule applies where the note was endorsed to the pledgee, so that payment of the debt while re-invested in the pledgor ownership, left the legal title in the pledgee, (Sibley v. Robinson, 23 Me. 70; Banister v. Kenton, 46 Mo.App. 462; Bank v. Rice, 149 A.D. 18, 133 N.Y.S. 622.) There was no variance between the allegations and the proof. (5860 C. S.) There was no suggestion that appellants were misled to their prejudice. An amendment might have been allowed after trial. (C. B. & Q. v. Pollock, 16 Wyo. 321; Kuhn v. McKay, 7 Wyo. 42.) There was no objection to the evidence on the grounds of variance; (Lbr. Co. v. Bank, 22 Wyo. 310; Engen v. Olsen, 22 Wyo. 528.) The only showing that appellants were misled by the pleadings and proof, is the statement of the fact made by their counsel. The judgment should be affirmed.

A. H. Beach, Raymond & LaFleiche in reply.

Respondents could secure legal title to the collateral note only by purchasing the principal note, and evidence of such purchase was material and the court erred in excluding it. (Mecum v. McDonald, 10 Watts (Pa.) 270.) When the principal note is paid, title to the collateral reverts to pledgor, the note in suit was not sold to the bank before maturity, and it was not sold to respondent by the bank; the note was a mere pledge, contingent upon payment of the principal note. (Gillet v. Bank, 55 N.E. 293; Van Eman v. Stanchfield, 13 Min. 80.) The bank had no authority to sell the note, (21 R. C. L. 668; 31 Cyc. 839.)

KIMBALL, Justice. POTTER, Ch. J., and BLUME, J., concur.

OPINION

KIMBALL, Justice.

This appeal is for review of a judgment for plaintiffs (respondents) in an action on a promissory note. The defendants (appellants) were the makers of the note which was dated May 12, 1915, for $ 1050, payable one year after date to the order of Thoeming Commercial Company, payee. In the petition the plaintiffs alleged, among other things, that they took the note from the payee for value before maturity in the regular course of business. The answer admitted the making of the note by the defendants, denied generally the other allegations of the petition, and alleged a total failure of the consideration for the note. Trial was had without a jury. The trial court, believing that the plaintiffs had the rights of holders in due course, refused to hear any evidence in support of the defense of failure of consideration, and we must, therefore, view the case as though the defendants have a complete defense to the note in the hands of the payee or any other person not having the rights of a holder in due course.

It was shown by the plaintiffs' evidence that they acquired the note, not from the payee before maturity, but from the Weston County Bank long after it was due. Having acquired the paper after its maturity, the plaintiffs were not in a position to claim that they were holders in due course as defined by the Negotiable Instruments Law (Wyo. C. S. 1920, § 3985,) but if the bank, from whom they derived their title, was a holder in due course at the time of the transfer, the plaintiffs were entitled to the same rights. C. S. § 3991. The important question, then, was whether the bank was a holder in due course when it transferred the note to plaintiffs. Upon this point, the plaintiffs introduced evidence tending to prove that the bank became the holder of the note in good faith before maturity as collateral to secure the payment of notes owed the bank by Thoeming Commercial Company, payee in the collateral note, and Thoeming Mercantile Company; that the plaintiffs, on August 16, 1917, bought all the "Thoeming" notes then held by the bank and at the same time took over the note in suit as collateral to the notes so bought.

The witnesses who testified to these facts were not asked by plaintiffs to give details with respect to the pledge contract between the bank and Thoeming Commercial Company nor to describe the principal indebtedness for which the note in suit was pledged. The president of the bank, who had testified for plaintiffs, was afterwards called as a witness for defendants, and then testified that the note in suit was pledged originally and before maturity as security for eight notes then held by the bank, six of which were made by Thoeming Commercial Company for various amounts aggregating about $ 1700, one by B. H. and L. C. Thoeming for $ 1100, and one by Thoeming Mercantile Company for $ 339, and that all of these eight notes had been paid before the trial. There is no direct evidence in the record to show more definitely...