Fisk Rubber Co. of New York v. Pinkey

• Decision Date: 06 February 1918
• Docket Number: 14246.
• Citation: 170 P. 581,100 Wash. 220
• Parties: FISK RUBBER CO. OF NEW YORK v. PINKEY.
• Court: Washington Supreme Court

170 P. 581

100 Wash. 220

FISK RUBBER CO. OF NEW YORK v. PINKEY.

No. 14246.

Supreme Court of Washington

February 6, 1918

Department 2. Appeal from Superior Court, Whatcom County; William H Pemberton, Judge.

Action by the Fisk Rubber Company of New York against James Pinkey. Judgment for defendant, and plaintiff appeals. Reversed in part, and remanded, with directions.

Walter B. Whitcomb, of Bellingham, for appellant.

Hadley & Abbott, of Bellingham, for respondent.

CHADWICK J.

This is an action upon two promissory notes. The defense is that there was no consideration for the notes, that they were fraudulently obtained, and that appellant is not a holder in due course.

On August 1, 1912, respondent entered into an executory contract with the Benton Realty Company for the purchase of a certain tract of land in Benton county. He paid $1,500 in cash, and executed a series of eight notes--seven for $500 each, and one for $600. At the time the contract was made the Benton Realty Company had no title or written contract to purchase the land it agreed to sell. On September 12, 1912, it entered into an executory contract with the owner of the land for its purchase. It was the intention of the company that the payments made by respondent should take care of the amounts falling due under its contract with the owner. No further payments were made. On November 3, 1913 the owner began suit to forfeit the contract, making respondent a party to the suit. A decree forfeiting the contract and quieting the title in the owner was entered on the 5th day of January, 1916. Summons was served on the 2d day of February, 1914. Shortly after these transactions were had, all of those who had been in any way connected with the active management of the affairs of the Benton Realty Company retired, leaving the business, such as it was, to the active management of F. P. Maguire, its president.

The company owned a Hudson automobile. One Tuttle was engaged in the automobile business at Walla Walla under the trade name of Franklin Motor Car Company. Maguire who so far as the record shows was a man of good standing had been accustomed to patronize Tuttle, paying him for goods and services with checks drawn by the 'Benton Realty Co.' In the spring of 1913 Maguire sought to trade the Hudson automobile for a Franklin car, valued at approximately $1,000. He offered the Hudson car and one of the notes of the respondent. The trade was made, and the note was paid when due. Before taking the note, which was indorsed, 'Benton Realty Co., by F. P. Maguire, Pres.,' Tuttle made inquiry of a brother-in-law of respondent, then living in Walla Walla, who informed him that the note was 'as good as gold' and 'absolutely gilt-edged.' On June 26, 1913, Maguire bought back the Hudson car, giving a second one of respondent's notes as collateral. The memorandum of the sale is as follows:

'Franklin Motor Car Co. Invoice.

'Walla Walla, Wash., 6/26/13.

'Sold to F. P. McGuire,

'Benton Realty Co., Kennewick Co.

'Hudson 20 Model 21 $500.

'Settled by note due Aug. 23, 1914.

'Secured by Jas. Pinkey note of $500, due Aug. 23, 1914.

'Jas. Pinkey note to be mailed us from Kennewick.

'O. K. R. H. Tuttle.'

At a later date Tuttle sold Maguire another Franklin machine, for which he took Maguire's notes, $300 payable October 1, 1914, and $700 payable February 1, 1915. Maguire agreed to send two notes made by respondent as collateral. One of them, due August 1, 1915, is the second note sued on, and described in the second cause of action. The note was indorsed. 'Benton Realty Co., by F. P. Maguire, Pres.' The following is the memorandum of this sale:

'Franklin Motor Car Company, Walla Walla, Wash.

'Sold to F. P. Maguire, Kennewick, Wash.

'Franklin Model D #14165 Torpedo.

'Settled by two notes $300. Oct. 1, 1914.

$700. Feb. 1, 1915

'James Pinkey 500.00 due Aug. 1, 1914.

600.00 due Feb. 23, 1915.

'To be sent as collateral.

R. H. Tuttle.'

The notes were used by Tuttle as collateral to his account with the Northwest Auto Company and later with the Fisk Rubber Company, the appellant. The notes were dishonored when due. A motion for a nonsuit was made at the close of appellant's case, and for a directed verdict when all the evidence was in. Because of the great hardship to one who is called upon to pay an unrighteous debt, we have considered the statement of facts with more than ordinary care. We shall first consider the note due August 1, 1914. Although it is plain that respondent is the victim of the evil machinations of Maguire, we find no evidence upon which a recovery can be denied.

Respondent executed the note and gave it currency. His signature is not denied. The note had been given for a good consideration, which at that time had not failed. The transaction was not out of the ordinary, and the note was fair upon its face. If there was any duty upon Tuttle to make inquiry, it was fully performed when he made independent inquiry as to the financial standing of respondent. If Tuttle had inquired, he would have been told that the note was a binding obligation for at that time respondent had no notice of any defect of title, if indeed it can be said in law that there was any at that time, all of which is evidenced by the fact that he paid the note given for the first machine when it fell due. Tuttle took the note for value, in good faith, and before maturity. He became a holder in due course.

'A holder in due course is a holder who has taken the instrument under the following conditions:

'1. That it is complete and regular upon its face;

'2. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such is the fact;

'3. That he took it in good faith and for value;

'4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.'

Rem. Code, § 3443.

While this court has been liberal to the extent of generosity in its construction of the Negotiable Instruments Law, we have never held that a mere denial of liability, or a plea of no consideration, or failure of consideration, would put a holder to a greater burden than to show that the instrument was acquired in due course. Rem. Code, § 3450.

When this is done, and it may be done by the unimpeached testimony of the holder, the burden is met, and it is then upon the maker to show, not a defect in title, for that is not in itself a defense (Daniel's Negotiable Instruments, § 814), but that the holder is not a holder in due course. A court may inquire into all the facts, and when a course of dealing, or other circumstance, tending to impeach the instrument is shown it is for the jury to say whether the holder knew, or ought to have known, of an infirmity in the paper. Rohweder v. Titus, 85 Wash. 441, 148 P. 583; Ireland v. Sharpenberg, 54 Wash. 558, 103 P. 801; Union Investment Co. v. Rosenzwig, 79 Wash. 112, 139 P. 874. On the other hand, if there be no showing of fact or circumstance amounting to bad faith, or from which the jury can say the holder should have inquired, a recovery may be bad.

Great reliance is put upon the remark of this court in Rohweder v. Titus, 85 Wash. 441, 148 P. 583:

'He was an interested party and, under repeated holdings of this court, his credibility and the truthfulness of his statements, although undisputed by the evidence of any witness, were for the consideration of the jury.' When read in connection with the context, and a positive holding that there were 'circumstances surrounding the parties which tended to dispute appellant's claim,' the quoted portion of the opinion is tolerable, but it is not in itself a correct statement of the law. Similar expressions are to be found in Coey v. Darknell, 25 Wash. 518, 65 P. 760, and Keene v. Behan, 40 Wash. 505, 82 P. 884. But there were circumstances sufficient to put the holder on inquiry. No case is cited, nor do we find any, where a recovery has been denied where the testimony of the holder is in no way impeached by fact or circumstance. To so hold would be to write the Negotiable Instruments Law off the books and practically declare that the mere taking of the stand as a witness by the holder would be enough to carry a case to the jury solely because of the interest of the witness. If that were so, it would permit a jury to return a verdict against a holder in due course for no other reason than that the consideration had failed; whereas, in the case relied on, we

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