Farmers' Nat. Bank of Tecumseh v. McCall
| Decision Date | 18 January 1910 |
| Citation | 106 P. 866,25 Okla. 600,1910 OK 44 |
| Parties | FARMERS' NAT. BANK OF TECUMSEH v. McCALL. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
A note negotiable on its face does not become nonnegotiable on account of a stipulation in a mortgage securing the same providing for an attorney's fee in the event of foreclosure.
The material alteration of a written contract intentionally made by a party entitled to any benefit under it or with his consent extinguishes all the executory obligations of the contract in his favor against all parties who do not consent to the act. Section 1141, Comp. Laws Okl. 1909.
A note having been executed on November 8, 1905, by M., due at a given time, to B., in the sum of $550, secured by a chattel mortgage of that date, and later, on December 19, 1905, a note in the same amount by the same maker to the same payee being executed in order that the later note may be secured by the former chattel mortgage, it must appear that it was agreed by the parties thereto at the time of the execution of said note of December 19th that it should take the place of that of November 8th, and be secured by said chattel mortgage.
The holder of a negotiable instrument as collateral security for a pre-existing indebtedness and an extension thereon retains the same unaffected by equities between the original parties of which it had no notice.
(a) The mortgage securing same is also unaffected by such equities.
Plaintiff and defendant in the trial court having each verbally moved for peremptory instructions, this did not constitute a waiver of the right to have a verdict returned by the jury.
If it is necessary for the court to weigh the evidence and the facts are such that reasonable minds might disagree, it is a question for the jury.
Error from Pottawatomie County Court; E. D. Reasor, Trial Judge.
Action by the Farmers' National Bank of Tecumseh against J. W McCall. Judgment for defendant, and plaintiff brings error. Reversed for new trial.
B. B Blakeney and J. H. Maxey, Jr., for plaintiff in error.
A. B Honnold, for defendant in error.
The following questions are raised by this record:
(1) Was the note of December 19, 1905, which is claimed to have been secured by the mortgage on the wagon and two mules negotiable in character and entitled to all the privileges and exemptions of negotiable paper?
(2) Was there such an alteration as rendered the same void?
(3) Was said note of December 19th executed in lieu of the one of November 8th, and intended to be secured by the mortgage executed to secure the payment of the said note of November 8th?
(4) The plaintiff in error holding said note of December 19th as collateral security for pre-existing indebtedness and an extension thereon, is it a bona fide holder unaffected by equities between the original parties of which it had no notice?
(5) The plaintiff and defendant in the court below having verbally moved the court to direct a verdict in their favor, did this constitute a waiver of the right to have the jury return a verdict?
1. It was uniformly held by the Supreme Court of the territory of Oklahoma that a note containing a stipulation for the payment of an attorney's fee is not negotiable. Randolph v. Hudson, 12 Okl. 516, 74 P. 946; Cotton et al. v. John Deere Plow Co., 14 Okl. 605, 78 P. 321. This rule has been adhered to by this court. Clevenger v. Lewis, 20 Okl. 837, 95 P. 230, 16 L. R. A. (N. S.) 410. Thorp v. Mindeman,
123 Wis. 149, 101 N.W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003; Frost et al. v. Fisher et ux., 13 Colo. App. 322. 58 P. 872; Morgan v. Martien, 32 Mo. 438; Mason v. Barnard et al., 36 Mo. 384; Thompson v. Field et al., 38 Mo. 320; Owings v. McKenzie et al., 133 Mo. 323, 33 S.W. 802, 40 L. R. A. 154; Wilson v. Campbell, 110 Mich. 580, 68 N.W. 278, 35 L. R. A. 544; Ernest et al. v. Steckman, 74 Pa. 13, 15 Am. Rep. 542; Chicago Ry. Equipment Co. v. Mer. Nat. Bank, 136 U.S. 268, 10 S.Ct. 999, 34 L.Ed. 349. The highest courts of California, Michigan, Missouri, North Dakota, Pennsylvania, and Wisconsin have held that a stipulation in a note for an attorney's fee destroys its negotiability. In the first state the court, basing its decision on a statute, also holds that such stipulation in a mortgage to secure a note negotiable on its face renders the same nonnegotiable. Meyer v. Weber, 133 Cal. 681, 65 P. 1110. In this case, however, the decision was rendered by a divided court, four members supporting and three dissenting. In Michigan, the adjudications are not in harmony. In Missouri, North Dakota, Pennsylvania, and Wisconsin the governing rule is contrary to that of California, and harmonizes with the cases of Thorp v. Mindeman and Frost et al. v. Fisher et ux., supra. The Kansas decisions also seem to be in harmony with them. However, when the provisions of the mortgage by direct stipulation in the note are made a part thereof, the same in that event may be rendered nonnegotiable. But that is not now before this court. See Lockrow v. Cline, 4 Kan. App. 716, 46 P. 720; Chapman v. Steiner, 5 Kan. App. 326, 48 P. 607; Wistrand v. Parker, 7 Kan. App. 562, 52 P. 59. The adjudications of the highest court in Nebraska also seem to be in accordance with the rule announced above as appearing to be supported by the weight of authority. Garnett v. Meyers, 65 Neb. 280, 94 N.W. 803; Consterdine v. Moore, 65 Neb. 291, 91 N.W. 399, 101 Am. St. Rep. 620; Allen et al. v. Dunn et al., 71 Neb. 831, 99 N.W. 680. See, also, section 3598, Wilson's Rev. & Ann. St. Okl. 1903. Eminent authority also supports the rule that a notation on the corner of a note may not render the same nonnegotiable. Howry et al. v. Eppinger et al., 34 Mich. 29; First Nat. Bank v. Mineral Farm Cons. Min. Co., 17 Colo. App. 452, 68 P. 981; Chicago Ry. Equip. Co. v. Mer. Nat. Bank, supra.
It is further insisted, however, that section 793, Wilson's Rev. & Ann. St. Okl. 1903, which provides, "Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together," concludes this question in favor of the defendant in error. This section was borrowed by the lawmakers of the territory of Oklahoma from the statutes of Dakota Territory. The same statute was retained in force in the state of North Dakota. In the case of First National Bank of St. Thomas v. Flath, 10 N.D. 281, 86 N.W. 867 (section 3900, Rev. Code N.D. 1899), this section was construed and held to constitute a rule of interpretation merely and united several contracts into a single contract only for such purposes, and that a real estate mortgage and the notes secured thereby did not constitute a single contract, but remained as separate contracts, except for the purposes of interpretation. No authority is cited by the defendant in error construing such provision otherwise. We necessarily conclude that the stipulation in the mortgage regarding attorney's fees does not render the note of December 19th nonnegotiable. It is also a well-supported rule that, if the note is negotiable, the mortgage securing the same shares the same immunity from defenses. First Nat. Bank of St. Thomas v. Flath, 10 N.D. 281, 86 N.W. 867; Carpenter v. Longan, 18 Wall. 271, 21 L.Ed. 313.
2. The defendant in error testified that the clause below his signature on the lower left-hand corner, to wit, "additional security, wagon and two mules," was not on said note when executed by him and was placed there without his authority or consent. The evidence on the part of the plaintiff in error was that such notation was on said note when received by it. As a general rule, the law presumes in favor of innocence, and that an alteration in an instrument is a legitimate part of it until the contrary appears, but there is a conflict of authority as to whether or not this rule extends to negotiable securities. The principle of the English cases is that, where an alteration is so apparent on a bill or note as to raise a suspicion of doubt, it becomes incumbent on the plaintiff to prove that it is still available, and no burden rests on the defendant to disprove it. Johnson v. Duke of Marlborough, 2 Stark. Rep. 313; Henman v. Dickinson, 5 Bing. 183; Bishop v. Chambre, 3 C. & P. 55; Leykariff v. Ashford, 12 Moore, 281. There is an irreconcilable conflict in the American authorities. McMicken v. Beauchamp, 2 La. 290; Hills v. Barnes, 11 N.H. 395; Commercial & R. R. Bank v. Lum, 7 How. (Miss.) 414; Warren v. Layton, 3 Har. (Del.) 404; Beaman v. Russell, 20 Vt. 205, 49 Am. Dec. 775; Davis v. Jenney, 1 Metc. (Mass.) 221; Bailey v. Taylor et al., 11 Conn. 531, 29 Am. Dec. 321; Nat. Bank v. Franklin, 20 Kan. 264; Stoner v. Ellis, 6 Ind. 152; Paramore v. Lindsey et al., 63 Mo. 63; White v. Hass, 32 Ala. 430, 70 Am. Dec. 548; Hunt v. Gray, 35 N. J. Law, 227, 10 Am. Rep. 232; Hayden v. Goodnow, 39 Conn. 164; Gooch v. Bryant, 1 Shep. (Me.) 386; Crabtree v. Clark et al., 7 Shep. (Me.) 337; Nill v. Case & Co., 25 Kan. 510, 37 Am. Rep. 259; Davis v. Carlisle, 6 Ala. 707; Sayre v. Reynolds, 5 N. J. Law, 737; Wilson v. Hayes, 40 Minn. 531, 42 N.W. 467, 4 L. R. A. 196, 12 Am. St. Rep. 754. It is not essential, however, in this case to determine what rule shall govern this jurisdiction, for the alteration on the left-hand corner is not such an alteration or addition as on the face of the note would raise a suspicion of its purity. It is not in conflict with any of the terms of the note, and the only effect it would have would be to evidence the fact that it was the intention and purpose in executing this note that the same should be secured by the mortgage executed to secure the note of November 8th.
The question arises, then, as to whether or not the adding of such a...
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