Farmers' Sav. Bank v. Neel
| Decision Date | 08 April 1922 |
| Docket Number | 34327 |
| Citation | 187 N.W. 555,193 Iowa 685 |
| Parties | FARMERS SAVINGS BANK, Appellant, v. J. W. NEEL, Appellee |
| Court | Iowa Supreme Court |
Appeal from Humboldt District Court.--JAMES DE LAND, Judge.
ACTION upon two promissory notes, dated November 6, 1918, for $ 800 and $ 2,000 respectively. Verdict and judgment for defendant and plaintiff appeals.
Reversed.
Lovrien & Lovrien and Mitchell & Files, for appellant.
F. M Miles and Healy & Breen, for appellee.
I.
The petition is in the usual form of actions upon promissory notes, wherein it is alleged that the purchase and transfer thereof were made before maturity and without notice of infirmities. Defendant, in his answer and amendments thereto, admitted that he signed the instruments, but averred that his signature was obtained thereto by the false and fraudulent representations of the Daniel Hayes Company, Incorporated, of Idaho, or its agent. He further alleged that, at the time the said notes were executed, he also signed a contract in writing, by the terms of which he agreed to purchase certain real estate in Madera County, California, subject to inspection within 90 days; and that said contract further provided that, in the event that the defendant did not desire to purchase the land after inspection, written notice might be given to the said company of such fact at its office in the Daniel Hayes Building, Chicago, and the contract would be canceled, and the notes returned to him. The notes were made payable "to myself," and indorsed by the maker in blank. The contract was signed "The Daniel Hayes Company of Idaho, by Colby and Vaughan, Authorized Representatives."
Defendant further alleged in his answer that he inspected the land, and found that its location and quality had been misrepresented to him, and that, within the time allowed by the contract, he gave notice by letter to the Daniel Hayes Company of his election to cancel the contract, and demanded the return of his notes. All of the notes, the total amount of which was $ 8,000, were returned to him, except the notes in suit. The defendant also denied that plaintiff purchased the notes before maturity and without notice of the infirmities therein, and, in substance, alleged that the notes were negotiated in violation of the agreement between the parties, and in breach of faith. The requisite amount of revenue stamps was affixed to the notes, but these were canceled by the appellant's cashier, after the notes were transferred to it.
The court below held that, because of the failure of the proper parties to cancel the revenue stamps affixed to the notes before the same were transferred, the notes were not regular upon their face, and that they were subject to the defenses pleaded. The case was submitted to the jury upon the theory that the failure of the maker to cancel the stamps rendered the notes nonnegotiable. This ruling and the instructions given by the court upon this question are the principal propositions relied upon for reversal. Other rulings assigned as error will be hereafter considered.
The question of the negotiability of notes from which the stamps required by the laws of Congress were omitted, has several times been considered by this court. It was held in Blackwell v. Denie, 23 Iowa 63, that the defense that a negotiable note was not stamped when issued was not available as against a bona-fide holder for value who received it without notice that the stamps were placed thereon after it was issued. To the same effect, see Anderson & Co. v. Starkweather, 28 Iowa 409; Gage v. Sharp, 24 Iowa 15; Sperry v. Horr, 32 Iowa 184. But we held, in First Nat. Bank v. Dougherty, 29 Iowa 260, that a purchaser who admits that he knew the note was not stamped by the maker, as required by law, is not protected. The law as thus declared remained until Lutton v. Baker, 187 Iowa 753, 174 N.W. 599, wherein we held that a note from which the stamps were omitted was incomplete and not regular upon its face, and that a purchaser thereof was not a holder in due course, and that, therefore, the same was subject to defenses.
Before proceeding further with the discussion of the propositions involved in the case before us, we desire to briefly call attention to the decisions of the courts in other jurisdictions, in which the question of the power of Congress to impose conditions affecting the validity of various forms of instruments and their admissibility in evidence in the state courts is discussed and passed upon. The great weight of authority is to the effect that Congress has no power to prescribe rules of evidence for state courts, and that the provision of the various revenue acts that unstamped notes and other instruments shall not be admitted in evidence applies to proceedings in the Federal courts only. Craig v. Dimock, 47 Ill. 308; Rockwell v. Hunt, 40 Conn. 328; Crews v. Farmers Bank of Va., 31 Gratt. 348; Cabbott v. Radford, 17 Minn. 320; Forcheimer v. Holly, 14 Fla. 239; Garland v. Gaines, 73 Conn. 662 (49 A. 19); Haight v. Grist, 64 N.C. 739; Long v. Spencer & Co., 78 Pa. 303; Tobey v. Chipman, 13 Allen 123; Knox v. Rossi, 25 Nev. 96 (48 L. R. A. 305, 57 P. 179); Ebert v. Gitt, 95 Md. 186 (52 A. 900); Cassidy v. St. Germain, 22 R.I. 53 (46 A. 35); Dillingham v. Parks, 30 Ind.App. 61 (65 N.E. 300); Hooper v. Whitaker, 130 Ala. 324 (30 So. 355); Rowe v. Bowman, 183 Mass. 488 (67 N.E. 636); Loring v. Chase, 26 Misc. 318 (56 N.Y.S. 312); Davis v. Richardson, 45 Miss. 499; Sammons v. Halloway, 21 Mich. 162; Duffy v. Hobson, 40 Cal. 240; Moore v. Moore, 47 N.Y. 467 (7 Am. Rep. 466); Bumpass & Hicks v. Taggart, 26 Ark. 398 (7 Am. Rep. 623); Green v. Holway, 101 Mass. 243 (3 Am. Rep. 339); Daniel on Negotiable Instruments (6th Ed.), Chapter IV.
This court, however, in its early decisions, announced a contrary doctrine. City of Muscatine v. Sterneman, 30 Iowa 526; Mitchell v. Home Ins. Co., 32 Iowa 421; Barney v. Ivins, 22 Iowa 163; Ricord v. Jones, 33 Iowa 26, In State v. Shields, 112 Iowa 27, 83 N.W. 807, it was held that an improperly stamped forged check was admissible in evidence upon the trial of a party charged with uttering a forged instrument. In State v. Glucose S. Ref. Co., 117 Iowa 524, 91 N.W. 794, the doctrine of the cases cited supra from other jurisdictions was recognized, but without specific approval. The New York court of appeals, in Moore v. Moore, supra, held that it is not within the constitutional power of Congress to declare that a contract of conveyance between citizens of a state affecting real estate is void because of the omission therefrom of revenue stamps. The Supreme Court of Illinois, in Craig v. Dimock, supra, held that Congress is without power to impose a tax upon writs and processes of state courts. In Moore v. Quirk, 105 Mass. 49, the court held that a Federal statute providing that no instrument shall be recorded until stamped did not affect the record thereof under state laws. The court in this case said:
"The clause of the internal revenue act, which provides that instruments not stamped as therein required shall not be recorded, cannot be construed as prohibiting the performance by the officers of the commonwealth of the duties imposed upon them by its statutes, but must be limited in interpretation and effect to records required or authorized by acts of Congress, for the same reasons upon which the prohibition in the same clause against giving unstamped instruments in evidence in any court has been decided to be applicable to the Federal courts only, and not to extend to the state courts."
It was held, in Dawson v. McCarty, 21 Wash. 314 (57 P. 816), that the provision of the Federal revenue law of 1898 requiring stamps to be attached to certain instruments and documents did not apply to proceedings in the state courts, for the reason that the Federal government was without power to impose any burden on procedure in state courts. To like effect, see Stewart v. Hopkins, 30 Ohio St. 502; Hallock v. Jaudin, 34 Cal. 167.
This court, however, in Hugus v. Strickler, 19 Iowa 413, and O'Hare v. Leonard, 19 Iowa 515, held that the failure to stamp a written notice of appeal from a judgment in justice of the peace court was fatal; and in McBride v. Doty, 23 Iowa 122, that a record of an insufficiently stamped instrument did not impart constructive notice. The court, however, in Mitchell v. Home Ins. Co., 32 Iowa 421, following the holding of the Supreme Court of the United States in Campbell v. Wilcox, 10 Wall. (U.S.) 421 (19 L.Ed. 973), overruled Hugus v. Strickler, supra, and held that an unstamped instrument will be regarded as invalid only when the omission was made with the intent to evade the process of the Federal revenue law, or to defraud the government of the stamp duty.
It will thus be observed that, in some of its earlier holdings, this court is not in harmony with the weight of authority in this country. The act of Congress of June 13, 1898, and all prior similar acts differ in one respect from the act of October 22, 1914 (38 Stat. 745), and act of October 3, 1917 (Section 802, 1918 Supplement to the Federal Statutes Annotated 369). All acts prior to the act of 1914 provided that certain instruments and documents, including promissory notes, should be invalid and inadmissible in evidence unless properly stamped. These provisions are omitted entirely from the act of October 22, 1914, so that the present revenue law does not attempt to declare unstamped instruments invalid or inadmissible in evidence. The Supreme Court of the United States, in Cole v. Ralph, 252 U.S. 286 (64 L.Ed 567, 40 S.Ct. 321), held that, under the later act, unstamped instruments are admissible in evidence...
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