Manhattan Chamber of Commerce v. Gallagher

• Decision Date: 12 March 1927
• Docket Number: 27,221
• Citation: 123 Kan. 155,254 P. 345
• Parties: MANHATTAN CHAMBER OF COMMERCE, Appellee and Appellant, v. CLIFFORD GALLAGHER, Appellant and Appellee
• Court: Kansas Supreme Court

254 P. 345

123 Kan. 155

MANHATTAN CHAMBER OF COMMERCE, Appellee and Appellant, v. CLIFFORD GALLAGHER, Appellant and Appellee

No. 27,221

Supreme Court of Kansas

March 12, 1927

Decided January, 1927.

Appeal from Sedgwick district court, division No. 3; GROVER PIERPONT, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. BILLS AND NOTES--Possession of Unindorsed Note as Prima Facie Evidence of Ownership. The rule existing in this jurisdiction previous to the adoption here of the uniform negotiable instruments act, that a plaintiff in an action against the maker upon a promissory note which is payable to the order of another and has not been indorsed, makes a prima facie case of ownership by showing possession of it, is not changed by that enactment.

2. EVIDENCE--Contemporaneous Oral Agreement Affecting Writing. The enforcement of a note given by a student in exchange for money furnished to enable him to continue his course is not to be defeated by showing an oral agreement at the time of its execution that it need not be paid, its purpose being to conceal the fact of gratuitous aid having been given him because of his skill as an athlete, in violation of an intercollegiate agreement.

3. EXEMPTIONS--Automobile Used in Trade--Evidence. It is held that no error is shown in the overruling of a motion to release funds from garnishment on the ground that they were the proceeds of an automobile used by the owner in his business as athletic director and referee, and intended to be used for the purchase of another for the same purpose.

L. A Hasty, Robert R. Hasty and George E. Hasty, all of Wichita, for the appellant and appellee.

R. P. Evans and George Clammer, both of Manhattan, for the appellee and appellant.

Mason J. Harvey, J., dissents from the first paragraph of the syllabus and the corresponding part of the opinion.

OPINION

MASON, J.:

The Manhattan Chamber of Commerce sued Clifford Gallagher upon five causes of action, each based upon a note signed by him. Upon the first four a demurrer to the evidence was sustained, final judgment being rendered in favor of the defendant. Upon the fifth judgment was directed for the plaintiff. Both parties appeal.

Of the four notes on which no recovery was allowed one was made payable to F. C. Frank, as chairman of a student loan fund, and the other three to F. W. Jenson, as acting chairman of such fund. None of them was indorsed and there was no evidence other than the fact of the possession of the note introduced showing its transfer to the plaintiff. The case as to these four notes turns upon whether the possession by some one else of an unindorsed note made payable to the payee or order is prima facie evidence of ownership as against the maker. Before the passage of the uniform negotiable instruments act there was a difference of judicial opinion on the question. This court held that such possession raised a presumption of ownership. (O'Keeffe v. National Bank, 49 Kan. 347, 30 P. 473.) Since that enactment we have applied the same rule, but without making reference to the statute. (Reynolds v. Bank, 104 Kan. 215, 178 P. 605; Nuzman v. Bennett, 115 Kan. 766, 224 P. 900.) The conflict that existed before the adoption of the negotiable instruments act still continues, but we think as a result rather of the different views taken of the general question than of a supposed change brought about by the statute, although in some instances the doctrine that there is no presumption of ownership from such possession is undertaken to be supported by its language.

This court is already so fully committed on the subject as to make a change of ruling inadvisable unless for the most cogent reasons. The question has to do rather with a general rule of procedure--of evidence or burden of proof--than with the qualities of negotiable instruments. Ordinarily possession of property, either real or personal, is regarded as some evidence of ownership. It is true a note on its face imports ownership in the payee, but the title has always been regarded as capable of passing without any writing and we do not interpret the negotiable instruments act as preventing this. We think the presumption should favor a rightful rather than a wrongful possession of a note, although unindorsed and made payable to some one other than the possessor. On these grounds we adhere to the prior rulings of the court.

The question we are discussing is reviewed in Brannan's Negotiable Instruments Law, 4th ed., pp. 341-344, where cases prior and subsequent to that statute are cited, the conclusion reached being contrary to our own. Briefly stated the argument is this:

The possessor of an unindorsed note made payable to another is not a "bearer," because that term is used in the statute as meaning one in possession of a note payable to bearer; nor is he a "holder," because to be that he must be either the bearer or the payee or indorsee and possessor. (R. S. 52-102.) And while the statute expressly recognizes the transfer of title, without indorsement, of a note payable to the order of the payee, this is only where the transfer is for value, the burden of proving which should be on the transferee. (R. S. 52-420.)

To us a sufficient answer to this appears to be that the definitions of "bearer" and "holder" are of those terms as used in the act. One may be the possessor and owner of a note, competent to sue upon it, without being either a bearer or holder within the statutory definitions. The power of the payee of a note to transfer the equitable title by delivery without indorsement is not created by the statute just cited, which reads:

"Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferrer had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferrer; but for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made." (R. S. 52-420.)

We read the section quoted not as granting a right of transfer, but as providing that such transfer, if made for value, shall entitle the transferee to a subsequent indorsement. No statute is needed to authorize the transfer of the equitable title to a note without writing any more than in the case of any other personal property. It exists because not forbidden. The plaintiff here is asking nothing by reason of the negotiable form of the notes. If they were nonnegotiable the possession would be prima facie evidence of ownership under our...