McCornick & Co., Bankers, v. Tolmie Bros.
| Decision Date | 23 July 1928 |
| Docket Number | 4879 |
| Citation | 46 Idaho 544,269 P. 96 |
| Parties | MCCORNICK AND COMPANY, BANKERS, a Corporation, Appellant, v. TOLMIE BROTHERS, a Copartnership, Consisting of GEORGE E. TOLMIE, JOHN A. TOLMIE and DONALD TOLMIE, and GEORGE E. TOLMIE, JOHN A. TOLMIE and DONALD TOLMIE, Respondents |
| Court | Idaho Supreme Court |
APPEAL AND ERROR-LAW OF THE CASE-PRIOR APPEAL-BILLS AND NOTES-LAW GOVERNING-INTENT OF PARTIES-NONCOMPLIANCE WITH BLUE SKY LAW-EFFECT ON NOTE IN HANDS OF HOLDER IN DUE COURSE.
1. Doctrine of the law of the case extends only to questions actually presented and distinctly passed on or necessarily involved on former appeal.
2. In the absence of clear proof evidencing a different intention the presumption is that parties to note intended that the law of the place of payment should govern.
3. Where note payable in Utah was negotiable under the laws of that state, it will be accorded that quality within state in accordance with rule that the law of the place of payment controls.
4. The fact that a note was executed in a transaction which offended the "Blue Sky Law" (C. S., secs. 5305-5324) is not available as a defense against note which is negotiable and in the hands of a holder in due course.
APPEAL from the District Court of the Sixth Judicial District, for Bingham County. Hon. Ralph W. Adair, Judge.
Action on promissory note. Judgment for defendants. Reversed and remanded.
Judgment reversed, with costs to appellant, and cause remanded with instructions.
Gustin & Pence and O. A. Johanessen, for Appellant.
A promissory note is to be construed according to the law of the place where it is agreed payment shall be made.
That stock of a corporation not having complied with Blue Sky Law is sold and notes given therefor is no defense against a bona fide holder without notice of the infirmity. (Evans v. Wood, 41 Idaho 679, 241 P. 609; Butte Machinery Co. v. Jeppesen, 41 Idaho 642, 241 P. 36; Ashley v. Brady, 41 Idaho 160, 238 P. 314; McMann v. Walker, 31 Colo. 261, 72 P. 1055; Hopmeyer v. Frederick, 74 Ill.App. 301; New v. Walker, 108 Ind. 365, 58 Am. Rep. 40, 9 N.E. 386; Henry v. State Bank, 131 Iowa 37, 107 N.W. 1034.)
W. A. Ricks and F. A. Miller, for Respondents.
The foreign law will not be observed and applied when to enforce a foreign contract, according to the provisions of the foreign laws, will contravene some established rule of public policy of the state of the forum. (Taylor v. Leonard (Tex. Civ. App.), 175 S.W. 134; Union Trust Co. v. Grossman, 245 U.S. 412, 38 S.Ct. 147, 62 L.Ed. 368; 1 Wharton on Conflict of Laws, 3d ed., 275; Winward v. Lincoln, 23 R. I. 476, 51 A. 106, 64 L. R. A. 160; Hunt v. Jones, 12 R. I. 265, 34 Am. Rep. 634; 8 Fletcher, Cyc. Corp., sec. 5730, p. 9356.)
The defense that the note was given for shares of stock in a corporation which had not complied with the Blue Sky Law may be set up against the immediate parties, but not against a holder in good faith and for value. (Katz v. Herrick, 12 Idaho 1, 86 P. 873; Ashley & Rumelin, Bankers, v. Brady, 41 Idaho 160, 238 P. 314; Butte Machinery Co. v. Jeppesen, 41 Idaho 642, 241 P. 36.)
Since the note sued on in this action is non-negotiable, and was given for stock in a corporation which had not complied with the provisions of the Blue Sky Law, the enforcement of payment thereof would be in violation of our constitutional statutes and therefore against public policy. (C. S., sec. 5305 et seq.; 6 R. C. L. 702, secs. 108, 109, 114, 115, 120; Veazey v. Allen, 173 N.Y. 359, 66 N.E. 103, 62 L. R. A. 362; Hall v. O'Neil Turpentine Co., 56 Fla. 324, 16 Ann. Cas. 738, 47 So. 609; Franklin Sugar Refining Co. v. William D. Mullin Co., 7 F.2d 470; 5 R. C. L. 911, 941.)
The question considered and passed upon on a previous appeal in the same case which was necessary or essential to the determination of the case on appeal becomes the law of the case in all subsequent proceedings in the same action from the consequences of which the appellate court cannot depart. (Nampa v. Nampa & Meridian Irr. Co., 23 Idaho 422, 131 P. 8; Hall v. Blackman, 9 Idaho 555, 75 P. 608; Hunter v. Porter, 10 Idaho 86, 77 P. 434; Steve v. Bonners Ferry Lumber Co., 13 Idaho 384, 92 P. 363; Palmer v. Utah & Northern R. R. Co., 2 Idaho 382, 16 P. 553.)
BAKER, Commissioner. Varian and Brinck, CC., concur.
OPINIONBAKER, Commissioner.
Plaintiff sued to recover judgment upon a promissory note executed by defendants at Shelley, Idaho, payable to themselves at the Pingree National Bank of Ogden, Utah by them indorsed and purchased by plaintiff from the holder. Plaintiff alleged it purchased the note before maturity, for value and without notice, and that it claimed the benefit of and relied upon the laws of the state of Utah and the decisions of the supreme court of that state relating to contracts of that character. The defenses urged were: (1) That the note was given for stock in the Pingree Sugar Company purchased by defendants as a result of their reliance upon false representations made to them as to the financial ability of the company and the value of its stock; (2) failure of consideration in that the company was insolvent and its stock valueless; and (3) the failure of the sugar company to comply with the provisions of C. S., secs. 5305-5324, known as the "Blue Sky Law." In each defense it was particularly alleged that the note contained a provision authorizing extension of time for payment and that the note was therefore non-negotiable. Upon the first trial judgment was entered, by direction of the court, in favor of the plaintiff. The defendants were successful on appeal (42 Idaho 1, 243 P. 355), and the cause was remanded for new trial. Upon that appeal the court held that the defense of failure of consideration was not sustained and that defense is now eliminated.
Upon retrial the complaint was amended so as to particularly set out section 4030 of the Compiled Laws of Utah which is identical with C. S., sec. 5868, and reference was made to the decision by the supreme court of Utah in the case of McCornick & Co. v. Nielson, reported in 64 Utah 605, and in 233 P. 122, construing that statute. There was offered at the second trial the transcript of the evidence taken at the former hearing together with some other evidence consisting principally of the Utah statute and decision referred to, a stipulation that the Pingree Sugar Company had not complied with the "Blue Sky Law" and positive testimony of the officer of the plaintiff that when the note was purchased he had no notice of infirmities in the instrument.
At the first trial there was proof of neither the Utah statute nor the decision of the supreme court of that state. When the evidence was submitted the court sustained defendants' motion for directed verdict, which was accordingly returned and judgment was entered. The plaintiff has appealed.
The controlling assignment of error is that the court erred in deciding that the negotiability of the note was determined by the law of the state of Idaho where dated and made and not by the law of Utah where payable. The parties agree that if the law of Idaho controls the judgment should be affirmed and if the law of Utah governs the appellant is entitled to judgment.
The respondents contend that the non-negotiable character of the note was determined by the court at the previous hearing, that such decision has become the "law of the case" and that further investigation of the question is foreclosed. The trial court reluctantly adopted that view. The statement relied upon by respondents is found on page 5 of volume 42 of the Idaho reports and is: "The form of the note has been determined by this court to render it non-negotiable."
The court did not pass upon or determine whether the note was an Idaho contract or a Utah contract. It was not determined whether the law of the place of the execution of the note or the law of the place of payment controlled. There was no proof of the Utah statute or decision, the conflict of the laws of the two states was not apparent and there was no occasion to determine which law governed. A decision that the note is governed by the law of Utah would not be inconsistent with the statement of the court referred to or constitute a re-examination of the question there decided. This court has repeatedly held that the doctrine of the "law of the case" extends only to questions actually presented and distinctly passed upon or necessarily...
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