Glendo State Bank v. Abbott

• Decision Date: 17 July 1923
• Docket Number: 1067
• Citation: 216 P. 700,30 Wyo. 98
• Parties: GLENDO STATE BANK v. ABBOTT, EXR
• Court: Wyoming Supreme Court

216 P. 700

30 Wyo. 98

GLENDO STATE BANK v. ABBOTT, EXR

No. 1067

Supreme Court of Wyoming

July 17, 1923

APPEAL from District Court, Platte County; HON. WM. C. MENTZER Judge.

Action by Glendo State Bank against George E. Abbott as executor of the estate of P. J. Hall, deceased, upon a promissory note. There was judgment for defendant and plaintiff appeals.

Affirmed.

Kinkead Ellery and Henderson for appellant.

The record establishes that the note in controversy was executed and delivered by respondent to Dix and thereafter transferred to appellant in due course; appellant's bank was allowed authority to engage in the sale of stock of other corporations; Reitter its cashier was interested in the note but in this transaction did not, and could not legally act for the bank since the bank was without power to act for itself. (3 R. C. L. 457; Grow v. Cockrill, 36 L. R. A. 89; Bank v. Armstrong, 65 F. 932; Rock Sprgs. Bank v. Luman, 6 Wyo. 123; Com. Bank v. National Bank, 104 Am. St. Rep. 879.) The powers of a State Bank are enumerated by Sec. 5135, Comp. St. all other powers are prohibited. (3 R. C. L. 419-422; 7 C. J. 585-589; Preston v. Bank, (Mich.) 81 N.W. 920.) Appellant was not bound by knowledge possessed by Reitter, as to the nature of the transaction. (Simmons v. Cissina, 100 P. 200; Bank v. Herstein, 149 P. 1109; Richardson v. Watson, 26 So. 422; Jones v. Bank, 90 N.W. 912; Bank v. Cromwell, 173 P. 826.) The defense of fraud and failure of consideration is not available as against appellant; Reitter being individually interested in the note sold to appellant bank, the knowledge or notice which he had of the manner in which the note was procured is not imputable. (Hummell v. Bank, 37 N.W. 954; Bank v. Bevin, 45 A. 954; Trust Co. v. Louisville Co., 75 F. 433; Harriman Bank v. Seldomridge, 240 F. 111; In re U. S. Co. 239 F. 703; Trust Co. v. R. R. Co., 191 F. 566; Carlisle v. Norris, 109 N.E. 564; Hilliard v. Lyons, 180 F. 685; Lilly v. Bank, 178 F. 53; Bank v. Forsyth, 108 P. 914; Bank v. Thompson, 118 F. 798.) Knowledge of an agent concealed from his principal while the agent is dealing with the principal on his own account, is not to be imputed to the principal even though the agent, assuming to act as such, did whatever was done on the part of the principal in the transaction with himself, if disclosure would defeat his purpose. (Finley v. Cowles, 61 N.W. 998 (Ia.) Bank v. Martin, 150 P. 320 (Colo.) Levi Co. v. Kauffman, 114 F. 170; Corroran v. Co. , 23 N.E. 727; Am. Surety Co. v. Pauley, 170 U.S. 133; Bank v. Jackson (Utah) 160 P. 287; Bank v. Ozias, 209 S.W. 580; Bank v. Payne, 25 Conn. 444.) A payee of a promissory note may be a holder in due course. (Armstrong v. Bank, 133 U.S. 433; Brill Co. v. Norton, 75 N.E. 1090; Bank v. Trust Co., 122 N.W. 547; Merchants Bank v. Smith, 196 P. 523.) Though it must be conceded that a conflict of authorities exists which did not obtain prior to the adoption of the Uniform Negotiable Instruments Law, and the rule that a payee may not be a holder in due course has not been followed by the majority of the later cases. (Bank v. Smith, (Mont.) 196 P. 523; Brown v. Rowan, 154 N.Y.S. 1098; Trust Co. v. Tilton, (Mass.) 105 N.E. 605; National Inv. Co. v. Corty, 111 N.W. 357; Lilly v. Farrer, 17 Blanc DuRoi, (Quebec) 554; McDonald v. Cook, 19 Ontario 267.) The Wyoming Statute provides that a payee may become a holder in due course. (3963, 3985, 4124 Comp. St.) The court erred in permitting the witness Hall to testify as to representations made after the note was signed and that he had confidence in Dix.

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

Section 3985 Comp. St. defines a holder in due course; the note was procured by fraud; Hall was induced to execute a paper different from what he intended to sign and the note thus obtained was and is null and void in the hands of a holder in due course. (Chapman v. Rose, 56 N.Y. 137; Biddeford Nat. Bank v. Hill, 102 Me. 346, 66 A. 721; Jewelry Co. v. Darnell, 135 Ia. 555, 113 N.W. 344; Freedly v. French, 154 Mass. 339, 28 N.E. 273; Green v. Wilkie, (Ia.) 66 N.W. 1046; Whitney v. Snyder, (N. Y.) 2 Lansing 477; Walker v. Ebert, 29 Wis. 196; Anderson v. Walter, 34 Mich. 113; Bank v. Lierman, 5 Neb. 247; Puffer v. Smith, 57 Ill. 527; Trambly v. Ricard, 130 Mass. 259; Gibbs v. Linabury, 22 Mich. 479; Foster v. McKinnon, L. R. 4 C. P. 704; Western Mfg. Co. v. Cotton & Long, (Ky.) 104 S.W. 758; Whipple v. Brown, (N. Y.) 121 N.E. 748; Wilcox v. Amer. Tel. Co., 176 N.Y. 115, 68 N.E. 153; Smith v. Ryan, 191 N.Y. 452, 84 N.E. 402; Lottes v. Knospe, 144 Wis. 426, 129 N.W. 614; Binck v. Railway Co., 111 Ill. 351.) The bank had no right or power to pay the proceeds of the note to Dix. (Kuder v. Greene, (Ark.) 82 S.W. 836; Apostoloff v. Levy et al., 170 N.Y.S. 930; Bowles Co. v. Fraser, (Wash.) 109 P. 812; Vore v. Rosenberg, (Neb. ) 11 N.W. 879; Camp v. Sturdevant, (Neb.) 21 N.W. 449; Chariton Plew Co. v. Davison, (Neb.) 20 N.W. 256; Hathaway v. Delaware Co., (N. Y.) 78 N.E. 153.) Error is never presumed. (O'Brien v. Clark, 4 Wyo. 443.) The three propositions advanced by appellant do not apply; Reitter and Dix were not engaged in the perpetration of a fraud upon the bank but upon Hall. They merely used the bank in their fraudulent designs upon Hall; the question whether a payee named in a note may become a holder thereof in due course is not here involved; the question is whether the plaintiff was a holder in due course; the weight of authority is against the proposition that a payee may become a holder in due course. (Bank v. Walch, (Ore.) 147 P. 534; Bowles Co. v. Fraser, (Wash.) 109 P. 812; Bank v. Edwards, (Mo.) 147 S.W. 978; Long v. Shafer, (Mo.) 171 S.W. 690; Long v. Mason, (Mo.) 200 S.W. 1062; Hagan v. Bigler, (Okla.) 49 P. 1011; Empire Trust Co. v. Manhattan Co., 162 N.Y.S. 629; Hathaway v. Delaware Co., (N. Y.) 78 N.E. 153; Herdman v. Wheeler, 1 K. B. 361; Lewis v. Clay, 67 L. J. Q. B. (N. S.) 224; Van Der Ploeg v. Van Zuuk, (Ia.) 112 N.W. 807; So. Realty Corp. v. Bank (Ky.) 198 S.W. 546; Builder's Lime & Cement Co. v. Weimer, (Ia.) 151 N.W. 100; Devey & Kuhn Co. v. Huttig, (Ia.) 156 N.W. 412; Miller v. Campbell, 160 N.Y.S. 834; Wood v. Finley, (N. C.) 69 S.E. 502; First Nat. Bank v. Exchange Nat. Bank, (Kan.) 164 P. 138; Bank v. Vaughn, (Kan.) 151 P. 118; Nelson v. Southworth, (Kan.) 144 P. 835; Bank v. Utterback, (Ky.) 197 S.W. 534; 184 N.W. 265 (S. D.), 212 P. 598 (Okla.) As appears from the record appellant, if he became a holder of the note in due course did so by transfer from Dix, but it was not negotiated within the provisions of the statute, the finding of the trial court is based upon competent evidence and should not be disturbed. (Colemans Exr. v. Meade, 76 Ky. 358; Browns v. Lutin, 64 P. 674.)

KIMBALL, Justice. POTTER, Ch. J., and BLUME, J., concur.

OPINION

KIMBALL, Justice.

This appeal is for review of a judgment for defendant in an action on a promissory note. The present respondent is the executor of the will of defendant who died pending the appeal.

The plaintiff is named as payee in the note. At the trial it introduced the note, and rested. The defendant then introduced evidence tending to prove that he signed the note and delivered it to one Dix, who was soliciting subscriptions for shares of stock in a corporation called the Western Life and Casualty Company; that Dix took the note for the purpose of delivering it to that company with the understanding that the company would issue and send to defendant 500 shares of its capital stock, or return the note; that the defendant did not receive the shares of stock, and later was informed that plaintiff's assistant cashier held the note. This evidence was not contradicted, and we think it was sufficient to establish that the note, if negotiated at all, was negotiated in breach of faith, and, therefore, that the title of the person who negotiated it was defective within the meaning of the Negotiable Instruments Law. Wyo. C. S. 1920, § 3988, N. I. L. § 55; Holdsworth v. Blyth & Fargo Co., 23 Wyo. 52; 146 P. 603; McNight v. Parsons, 136 Iowa 390, 113 N.W. 858, and note thereto as reported in 22 L.R.A. (N.S.) 718; 125 Am. St. Rep. 265, 15 Ann. Cas. 665; Pierson v. Huntington, 82 Vt. 482; 74 A. 88, 29 L. R. A. (N. S.) 695, 137 Am. St. Rep. 1029; Kennedy v. Spilka, 72 Misc. 89, 129 N.Y.S. 390; Beach v. Nevins, 162 F. 129; 89 C.C.A. 129, 18 L.R.A. (N.S.) 288; College v. Thomas, 40 Wis. 661.

The trial was had without a jury and there were no special findings. As we think the pleadings and evidence were sufficient to support a finding for defendant on the question of negotiation in breach of faith, we deem it unnecessary to refer to other evidence in support of the claim that the note was obtained by fraud. The important issue, as we shall see, was whether the plaintiff was a holder in due course.

How it happened that the plaintiff bank was named as payee in the note was not explained. Only Dix and defendant were present when the note was signed. Dix did not testify, and defendant, who was unable to read, stated that he relied on Dix's representations as to the contents of the note, and believed when he signed it that it was payable to the casualty company.

The defendant contends that no payee can be a holder in due course. The point thus raised we do not decide, but for the purposes of this case shall assume that an instrument may be negotiated to a payee under such circumstances that he becomes a holder in due course.

The plaintiff claimed a right to recover, not as payee, but as transferee, and thus asserted that the instrument was negotiated. If so, it was negotiated by one whose title was defective and the burden was on the plaintiff to prove that it or some person under...