In re Philpott's Estate
| Decision Date | 17 March 1915 |
| Docket Number | 30025 |
| Citation | 151 N.W. 825,169 Iowa 555 |
| Parties | In the Matter of the Estate of CHARLES B. PHILPOTT, Deceased, v. EVA B. PHILPOTT, Executrix, Appellant ED. LE CLERC, Claimant, Appellee, |
| Court | Iowa Supreme Court |
Appeal from Polk District Court.--HON. HUGH BRENNAN, Judge.
ACTION upon two promissory notes. The action is in the form of a claim filed against the estate of decedent, the notes being the basis of the claim. The plaintiff was not the payee of the notes but claims as a holder in due course. A defense was pleaded, good as against the payee. The trial court directed a verdict for the plaintiff on the ground that he was a holder in due course without notice of infirmity in either note. The defendant executrix appeals.
Reversed.
Mac. J Randall and Read & Read, for appellee.
Clinton L. Nourse, for appellant.
The defendant is the executrix of the estate of her husband, C. H. Philpott. On June 12, 1911, Philpott entered into a contract with the American-Canadian Land Company, a co-partnership, for the purchase of certain Texas lands, and executed his notes therefor to a total of about $ 7,000. October 25, 1911, this contract was cancelled by a written agreement and the land company agreed to return to Philpott his notes. The return was never made. Philpott died a year later. The claim herein is based upon two of said notes, one for $ 1,500 and the other for $ 1,000. The defense here indicated being good as to the payee of the notes, the ultimate question is whether upon this record it conclusively appears that the plaintiff was in good faith a holder in due course, so as to require a directed verdict in his favor. This ultimate question depends upon two or three preliminary ones, viz.: (1) Was each note negotiable on its face? (2) Was the title of the person who negotiated the note to the plaintiff, defective? (3) Upon which party was the burden of proof as to the good or bad faith of the plaintiff?
I. First as to negotiability. The $ 1,500 note is conceded to be negotiable upon its face and due in three years after date. The defendant challenges the negotiability of the other note. It was drawn payable "on or before four after date." It does not appear therein whether it was to become payable in four days, four months, or four years. The defendant contends that, because of this defect, the time of maturity was rendered uncertain and the negotiability of the instrument was thereby destroyed. On the other hand, plaintiff contends that inasmuch as no time of payment was actually expressed, it became a note payable on demand, under Sec. 3060-a7. Adopting for the moment the plaintiff's contention at this point, and reading the note as payable on demand, another difficulty confronts him. Upon the negotiating of such a note an unreasonable length of time after its issue, the holder is not deemed a holder in due course. Sec. 3060-a53. In this case the date of issue was June 12, 1911, and that of negotiating, January 18, 1912. Under the authorities, a reasonable time for the negotiating of a demand note is rather brief. Its dishonor is not long delayed. In the following cases respectively, two days, seven days, and thirty days were held to be a reasonable time: Field v. Nickerson, 13 Mass. 131; Thurston v. M'Kown, 6 Mass. 428; Ranger v. Cary, 1 Metc. 369.
In the following cases respectively, two months and a half, three months and a half, and eight months have been held beyond a reasonable time and sufficient to dishonor a demand note: Losee v. Dunkin, 7 Johns. (N.Y.) 70; Stevens v. Bruce, 21 Pick. 193; Ayer v. Hutchins, 4 Mass. 370; Bank v. Jenness, 2 Metc. 288.
There is, however, no definite rule to be applied, and among other elements "the facts of the particular case" are to be considered. 3060-a193. It is clear, therefore, that the defendant was entitled to go to the jury on this question if upon no other.
II. As to this particular note, there is a further consideration that militates against the plaintiff as a holder in due course. Sec. 3060-a52 is as follows:
This note was not "complete and regular" upon its face. It indicated upon its face that some word had been omitted in an attempted specification of the time of payment.
If it were made to appear that the real contract between the parties was that the note should be payable in four months or four years, the instrument was reformable in equity at the suit of either party. This would not destroy the validity of the note, but it would destroy its negotiability until such reformation was had. The manifest irregularity in this case is not one of the "omissions" specified in Sec. 3060-a6, which section is as follows:
Sec. 3060-a14 provides for the filling of blanks by the holder of an instrument duly signed within the scope of the holder's authority as follows:
Such instrument is thereby rendered negotiable. But it becomes so after the blanks are filled and not before. If the real intent of the parties in interest was to make this instrument payable in four years, it may be that the payee could have lawfully corrected the oversight by inserting the word "years"; and it may be also that this would have rendered the note negotiable to a holder in due course as defined in the section above quoted. The question in that form is not now before us and we need not pass upon it. We think it quite clear that this irregularity upon the face of the note prevented its taker from becoming a holder in due course. It could be deemed a demand note, unless the agreement of the parties was in fact otherwise. If otherwise, such fact was suggested by the incompleteness of the terms actually used.
The controlling fact at this point is, not that the blank was not filled, but that it was filled imperfectly or irregularly. Though we grant that the note was presumptively good as a demand note, yet it was not "complete and regular" within the requirements of Sec. 3060-a52, and therefore was not negotiable.
III. As to the $ 1,500 note, the primary question is, Was the title of the payee defective when he negotiated the same to the plaintiff on January 18, 1912?
"The title of a person who negotiates an instrument is defective within the meaning of this act (Negotiable Instrument Act) when . . . or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud." Sec. 3060-a55.
In this case, the plaintiff took the note in question from the payee. The evidence was abundant to show that such negotiation was in breach of faith on the part of the payee.
Sec. 3060-a59 provides as follows: "Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course."
The defendant, therefore, having introduced sufficient evidence to show that the title of the payee was defective when the negotiation was made, the burden was thereby cast upon the plaintiff to show, notwithstanding, that he was a holder in due course within the conditions specified in Sec. 3060-a52. We find in the record little, if any, attempt to prove these conditions affirmatively. The field of good faith was involved, with its possible ramifications. Likewise the field of notice. The plaintiff was called to the witness stand by the defendant and testified as follows:
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