First Nat. Bank v. Harvey

• Decision Date: 25 June 1912
• Citation: 137 N.W. 365,29 S.D. 284
• Parties: FIRST NAT. BANK OF WEST MINNEAPOLIS v. HARVEY.
• Court: South Dakota Supreme Court

137 N.W. 365

29 S.D. 284

FIRST NAT. BANK OF WEST MINNEAPOLIS v. HARVEY.

Supreme Court of South Dakota

June 25, 1912

Appeal from Circuit Court, Spink County; Alva E. Taylor, Judge.

Action by the First National Bank of West Minneapolis against Lizzie E. Harvey. Judgment for defendant, and plaintiff appeals. Affirmed.

Whiting J., dissenting.

Bruell & Morris and T. C. Clary, for appellant.

L. W Crofoot and A. W. Campbell, for respondent.

McCOY P. J.

Plaintiff brought this action to recover of defendant the amount claimed to be due upon two alleged promissory notes, viz one note for $700, dated March 31, 1906, due one year after date, payable to the order of plaintiff, and purporting to be signed by Lizzie E. Jones as maker thereof, and which note had indorsed on the back thereof, "Paid by J. G. Lund 9-5-'06, $200.00," and "For value received I hereby sell and assign to the First National Bank of West Minneapolis, Minn., or order, the principle and interest of the within, and guarantee same waiving demand, notice and protest. J. G. Lund"; and one other note for $2,000, dated June 16, 1906, due one year after date, payable to the order of J. G. Lund, and purporting to be signed by Lizzie E. Jones and Stella A. Beam, by L. E. Jones, which note had indorsed thereon, "Without recourse, J. G. Lund," and "For value received, I hereby guarantee the payment of the within note at maturity, or any time thereafter, with interest at the rate of _____ per cent. per annum, until paid, waiving demand, notice of non-payment and protest. J. G. Lund." The defendant, Lizzie E. Jones, who is now, Mrs. Lizzie E. Harvey, denied that she ever made, gave, or executed either of said notes, and that the same are forgeries; and, if the signatures thereto of Lizzie E. Jones are in fact her genuine signatures, the same were procured by means of some fraud, circumvention, or legerdemain unknown to her. The jury found with defendant upon all the issues. Plaintiff appeals.

Appellant first contends that the evidence is insufficient to justify the verdict, but we are of the opinion that there was ample evidence submitted to justify the verdict. It will serve no useful purpose to set out the voluminous evidence herein. Many alleged errors are assigned based upon the reception or rejection of evidence. Mrs. Harvey was examined as a witness in her own behalf, and on direct examination was asked to testify in relation to a certain conversation had with J. G. Lund in the spring of 1908, the exact date of which conversation is not shown by the record, but the same occurred during a settlement between her and Lund of their business transaction concerning a real estate contract, the final settlement of which was evidenced by a written memorandum bearing date June 24, 1908. Mrs. Harvey was permitted to testify, over the objections of plaintiff, that the same was hearsay and not within the issues; that during the progress of said settlement she asked Lund what the mention of a $700 note appearing in her contract meant, and to which Lund replied, "I do not know, but guess somebody else's contract got mixed up with this." It is contended by appellant that this testimony should not have been admitted because the conversation took place long after the said note had been transferred and assigned to plaintiff; that as to plaintiff the said conversation and statements of Lund were hearsay and not binding upon plaintiff.

It is a general rule that the statements of a former owner of negotiable paper made concerning the same, after a transfer thereof to a third party, are not binding upon such third party and are hearsay, but there are some well-recognized exceptions to this general rule, and we are of the opinion this testimony is clearly within the exceptions. It seems to be held by many courts that, where a note is obtained by fraud or circumvention and is transferred to a party who participates in such fraud, and where the transfer itself was fraudulent and made for the purpose of cutting off the defense of the maker of the note as against such fraud and circumvention, then and under such circumstances the original payee of the note is still deemed to be the owner thereof, and statements made by him are competent and proper evidence to go to the jury on the question of fraudulent intent in the inception of the note sued upon.

When the question of the admissibility of this evidence as to said conversation with Lund arose on the trial, it was for the trial court to determine whether the evidence then given was sufficient to authorize the jury in finding that said notes were obtained by fraud and circumvention; whether said Lund, notwithstanding said purported transfer to plaintiff, still had such an interest in said notes as would render his statements admissible; whether said transfer to plaintiff was in bad faith and made for the purpose of cutting off defenses of the maker; whether plaintiff participated in the procuring of said notes by fraud and circumvention and the bad faith transfer thereof to plaintiff; if the facts and circumstances then before the jury were sufficient to warrant them in so finding-then the court committed no error in overruling plaintiff's objections. 1 Ency. Ev. pp. 532 to 537; Holmes v. Roper, 141 N.Y. 64, 36 N.E. 180; Gardner v. Barden, 34 N.Y. 433; McKean v. Adams, 11 Misc. 387, 32 N.Y.S. 281, Hogan v. Sherman, 5 Mich. 60; 6 Ency. Ev. pp. 14-16; Smith v. Livingston, 111 Mass. 342; Mee v. Carlson, 22 S.D. 365, 117 N.W. 1033, 29 L. R. A. (N. S.) 351; Iowa Bank v. Sherman, 19 S.D. 238, 103 N.W. 19, 117 Am. St. Rep. 941.

The defendant, Mrs. Harvey, testified that never to her knowledge did she execute either of said notes sued upon in this action, and that she never saw either of said notes until the same were presented to her for payment at her home in North Dakota in December, 1908; that the first she ever knew or heard anything about a $700 note in connection with her deals with Mr. Lund was in the spring of 1908 when she had said conversation with Lund-the statements contained in which conversation are objected to by plaintiff-and never heard of said $2,000 note until the same was presented to her for payment. It appears that Mrs. Harvey was formerly Lizzie E. Jones, and as such had business dealings with J. G. Lund, at his office in the city of Minneapolis, concerning the purchase and sale of said real estate, and that on March 31, 1906, they entered into what was denominated a "half profit contract of purchase," whereby she was to furnish certain funds to him to be invested in real estate, and whatever profits accrued from the investments were to be divided between them. The said contract contained a clause as follows: "Cash $1,600.00, note $700.00 due one year, and assume mortgage $3,000.00, and by credit $200.00."

Mrs. Harvey testified this clause of the contract had been altered and changed after the execution and delivery thereof by her by writing therein the words and figures: "Note $700.00 due 1 yr., and assume mortgage $3,000.00 and by credit $200.00"-that after the figures $1,600 there was a blank line when she executed and delivered the contract, and that the balance of the clause had been filled in thereafter by some one without her knowledge or consent, and that she first discovered the alteration when making a final settlement of her land dealings with Mr. Lund in 1908, at the time the conversation took place to which plaintiff makes objection. Mrs. Harvey testified that on March 31, 1906, at the time said contract was executed, no mention was made of a $700 note, or the necessity thereof; that all that was required of her was to put up $1,600 cash; that she at that time did not have the cash, but expected to receive the same in a few days from Iowa from a sale of land there; that Lund stated he would let her have the cash; that on that day she did execute and deliver to Lund her note for $1,600, payable on demand, with no payee named therein, payable at the First National Bank of West Minneapolis, Minn., and which note she thereafter within a very short time paid to Lund, but which note was not redelivered to her until long after the commencement of this action; that she at no time ever had any business transaction of any kind or character with plaintiff, and never, as a matter of fact, knew that such a bank existed until long after the time of the purported making of said notes sued upon in this action. Mrs. Harvey further testified that on the 16th day of June, 1906, she was in the office of Mr. Lund in company with Stella A. Beam, a school-teacher; that no business was transacted; they only talked regarding investments. "On June 17th I was again at the office of Mr. Lund and left with him for safe-keeping for Stella A. Beam $100 of her money. I had told her I had confidence in him; he said it was safer with him than in a bank; and he gave me a receipt for the money. He then said he wanted a slip to file away in his office to show by whom this money was left, and then he placed a paper before me and asked me to sign my name and the name of Stella A. Beam, by L. E. Jones, which I did. There was no writing of any kind on this paper. It was five to seven inches long, and from three to four inches wide, colored paper. I never signed the $2,000 note myself or for Stella A. Beam, by L. E. Jones; never saw or knew of such note until December, 1908. There was no talk between me and Lund about executing such a note. There was no talk with Stella A. Beam about executing such a note."

The evidence further shows that at different times after March 31, 1906, in their land dealings, Mrs. Harvey, as Lizzie E Jones, executed three other promissory notes and delivered them to Lund, about which there is no controversy, and all of...