Commercial Bank & Trust Co. v. Hauf

• Decision Date: 02 December 1924
• Docket Number: 1126
• Parties: COMMERCIAL BANK & TRUST CO. v. HAUF
• Court: Wyoming Supreme Court

230 P. 539

32 Wyo. 127

COMMERCIAL BANK & TRUST CO. v. HAUF

No. 1126

Supreme Court of Wyoming

December 2, 1924

APPEAL from District Court, Platte County; WM. A. RINER, Judge.

Action by the Commercial Bank & Trust Company against C. J. Hauf and another to enforce a collection of certain notes from a judgment for defendants, plaintiff appeals.

Affirmed.

Joseph Garst & J. E. Jacobson for Appellant.

Appellant was the holder of the notes in due course; 8 C. J. 847. A lien holder is a holder for value to the extent of his lien; 3960 C. S. An instrument payable to order is negotiated by endorsement of the holder completed by delivery, 3963 C. S.; except where instrument bears date after maturity. Every negotiation is deemed prima facie to have been effected before the instrument was over due, 3978 C. S. Knowledge by its cashier is not imputable to appellant, for the reason that he was a director and agent for Wyoming Commerical Co. Hummel v. Bank (Ia.) 37 N.W. 954; Bank v. Bevin (Conn.) 455 A. 954; Louisville Co. v. Louisville Co., 75, Fed. 433; Bank v. Seldomridge, 240 F 111; in re U. S. Hair Co. 239 F. 703; Real Est Co. v. R. R. Co., 191 F. 566; Carlisle v Norris, 109 N.E. 564; Lilly v. Bank, 178 F. 53.

Marion A. Kline and Oscar O. Natwick for respondents.

Alleged errors not mentioned or discussed in the briefs are waived; R. R. v. Lampman, 18 Wyo. 106; Phillips v. Brill, 15 Wyo. 539. The holder of negotiable paper as collateral is a purchaser for value in due course, but in the present case the notes were obtained by fraud and breach of faith, which required appellant to prove that it was a holder in due course; 3985-3988 C. S. It failed to sustain the burden and cannot complain of the judgment; Holdsworth v. Fargo Co. 23 Wyo. 52. The contention that the cashier's knowledge is not imputable to the bank, for the reason that the cashier was director and agent of the Wyoming Commercial Co. is not sustained by the authority cited by appellant. In fact Louisville Trust Company v. Railway Co. supports respondents' position. Appellant is chargeable with the defect in the title to the notes in question, which its cashier required while acting as director of Wyo. Com. Co. in re U. S. Hair Co., 239 F. 703. It is true that a principal will not be charged with knowledge of his agent where the agent is engaged adversely to his principal; 31 Cyc. 1595. The evidence fails to disclose that the cashier was acting adversely to the bank. The jury was the sole judge of the credibility of the witness, in re Conroy v. State, (Wyo.) 211 P. 100; Beachy v. Jones (Kans.) 195 P. 186; Bank v. Hall (Idaho) 169 P. 399 Matlock v. Sheurman (Ore.) 93 P. 823.

TIDBALL, District Judge. BLUME and KIMBALL, JJ., concur.

OPINION

TIDBALL, District Judge.

This action was commenced in the trial court by appellants as plaintiffs against respondents as defendants to enforce the payment of two promissory notes, each in the sum of $ 2,500, payable one year from date to "ourselves," signed by defendants, and endorsed and delivered by defendants to Wyoming Commercial Company, and by the latter company endorsed and delivered to plaintiff before maturity and for value. The notes were given for the purchase of stock in the Wyoming Commercial Company.

The third defense of defendants' answer alleges in substance that at the time of the execution and delivery of the two notes it was agreed and understood between defendants and Wyoming Commercial Company that if defendants were unable to pay the notes when due, or for any reason did not wish to pay them when due, defendant should have the privilege of renewing them for another year, and that defendants should not be required to pay the notes or the interest for two years, and that if at any time within such two years defendants should become dissatisfied with the stock purchase or with the management of the Wyoming Commercial Company, or should wish to cancel their subscription for stock in that company, defendants should have that privilege, and in that case their notes would be returned to them. It was further agreed that during the two-year period above referred to, the notes should not be negotiated but should remain in the possession of the Wyoming Commercial Company, and that the stock subscribed for by defendants should not be issued until the two-year period had expired. It is then alleged that during the two-year period, defendants became dissatisfied with their subscription and so notified the Wyoming Commercial Company and demanded a cancellation of their subscription and the return of the notes in question, and at the same time tendered back the stock that had been mailed to them by the Wyoming Commercial Company in violation of the agreement. Defendants further alleged that they had received no consideration for said stock and had received no dividends thereon, so that the exchange of the stock and notes as demanded would place the Wyoming Commercial Company in possession of everything it had parted with on account of the transaction. It is further alleged that plaintiff had knowledge of this agreement at the time it purchased the notes.

The jury returned a verdict for defendants, judgment was entered thereon, and plaintiff has appealed.

There is substantial evidence in the record to show that such an agreement as pleaded by defendants was entered into, it being partly oral and partly in writing. There is also testimony to show that one C. D. Zimmerman, who was cashier of the plaintiff bank at the time the notes were taken by that bank, had knowledge of the agreement between defendants and the Wyoming Commercial Company. Zimmerman was also a director and fiscal agent of the Wyoming Commercial Company and was the sole acting agent of the plaintiff bank in the matter of the bank's acquisition of the two notes. Plaintiff, in its brief filed in this court, admits there was a conflict in the evidence as to Zimmerman's knowledge of the agreement between defendants and Wyoming Commercial Company, but claims that this knowledge cannot be imputed to the plaintiff bank because Zimmerman was at the same time cashier of the plaintiff bank and a director and financial agent for the Wyoming Commercial Company. And, although the specifications of error contain fifteen assignments of error, the only point relied on by plaintiff in its brief for a reversal of the judgment of the lower court as to the defense above set forth is that knowledge of Zimmerman cannot under the circumstances of this case be imputed to the bank and that, therefore, the defense of negotiation in breach of faith must fail. It must be conceded, we think, that except for this defect, the title of plaintiff was good under the Negotiable Instruments Law, and that unless the knowledge of Zimmerman of the negotiation in breach of contract between defendants and Wyoming Commercial Company can be imputed to the bank, the plaintiff is entitled to judgment, for the notes were complete and regular on their faces, the plaintiff became the holder of them before maturity, and paid value for them.

The rule of law relied upon by plaintiff is stated in 31 Cyc. 1595, as follows:

"The rule that notice to an agent is notice to the principal, being based upon the presumption that the agent will transmit his knowledge to his principal, the rule fails when the circumstances are such as to raise a clear presumption that the agent will not perform this duty, and accordingly where the agent is engaged in a transaction in which he is interested adversely to his principal or is engaged in a scheme to defraud the latter, the principal will not be charged with knowledge of the agent acquired therein."

The rule is also stated in 2 Pomeroy's Eq. Jur 3d Ed....