Claflin v. Wilson

• Decision Date: 01 June 1879
• Citation: 50 N.W. 578,51 Iowa 15
• Parties: CLAFLIN v. WILSON ET AL
• Court: Iowa Supreme Court

50 N.W. 578

51 Iowa 15

CLAFLIN v. WILSON ET AL

Supreme Court of Iowa, Des Moines

June 1, 1879

FRIDAY APRIL 25.

Appeal from Linn District Court.

ACTION in chancery. There was a decree in the District Court granting the relief prayed for by plaintiff. Defendant Davis appeals. The facts of the case appear in the opinion.

AFFIRMED.

Blake & Hormel, for appellant.

Alexander Campbell, for appellee.

OPINION

BECK CH. J.

I. The petition alleges that defendant Wilson made to plaintiff three promissory notes, and executed a mortgage to secure their payment; that the note first falling due was by plaintiff, in the ordinary course of business, indorsed for collection, and by Wilson, or by some one for him, duly paid, and that defendant Davis, claiming that he had bought the first note, instituted an action to foreclose the mortgage and recovered a decree thereon, and caused the lands to be sold upon an execution. He and his attorney in the case became purchasers, and received a certificate of purchase from the sheriff. Plaintiff alleges that he did not transfer the note to Davis nor authorize any one to do so for him, and had no knowledge of his claim until about the time this suit was commenced, and that Wilson is now insolvent. The relief prayed for is that the foreclosure proceedings on the note and the sale thereunder be set aside, and that the mortgage be foreclosed for the amount due upon the two notes last falling due, which are still plaintiff's property.

The answer of defendant Davis admits the foreclosure proceedings referred to in the petition, and alleges that he bought the note in good faith and for value. Other averments of the petition are denied.

II. The evidence establishes the following facts: Plaintiff sent the note through a bank to another banking house for collection. It was indorsed by plaintiff in blank, and by the bank to whom he delivered it to the bank receiving it "for collection." Neither of these banks were authorized to transfer the note; their power was limited to its collection. The second bank or its successor in business received the amount due upon the note from Davis, and delivered to him the note. Davis understood the transaction as being a purchase of the note, and the banker of whom he received it had the same understanding. But Davis is chargeable with notice that the banker with whom he had the transaction was not authorized to transfer or sell the note. The indorsement upon it expresses that it was transferred to him for collection. The law will not permit him to plead ignorance of the extent of the authority of the holder who delivered it to him. Upon this point there can be no controversy.

It is an elementary rule, which need not be here supported by authority, that a note indorsed for collection cannot be transferred by one receiving it under such indorsement to another who has notice of the limitation upon the authority of the holder. Davis cannot, therefore, be regarded as a purchaser of the note, so...