Shultz v. Crewdson

• Decision Date: 13 March 1917
• Docket Number: 13535.
• Citation: 95 Wash. 266,163 P. 734
• Court: Washington Supreme Court
• Parties: SHULTZ v. CREWDSON.

163 P. 734

95 Wash. 266

SHULTZ v. CREWDSON.

No. 13535.

Supreme Court of Washington

March 13, 1917

Department 2. Appeal from Superior Court, chelan County; Wm. A Grimshaw, Judge.

Action on a note by Frank W. Shultz against charles N. Crewdson. Judgment for plaintiff, and defendant appeals. Affirmed.

Samuel R. Stern, of Spokane, for appellant.

Kemp &amp Baker, of Wenatchee, and Hamblen & Gilbert, of Spokane, for respondent.

FULLERTON J.

On March 26, 1914, and for some time prior thereto, one Valentine was indebted to the respondent Shultz, in the sum of $4,800; the indebtedness being represented by some five several promissory notes two or more of which were then due and payable. The respondent had been pressing Valentine for payment of the due notes or, in the alternative, security for the entire indebtedness in some form so that he could, as he expressed it, pledge the notes elsewhere and obtain money upon them. Valentine on the date named, in compliance with the request, indorsed to him a note executed by the appellant, Crewdson, and one R. F. Outcalt, for the sum of $5,500. The principal of this indorsed note was not then due. The interest on the principal sum was, however, payable annually, of which $60 appeared to have been paid, leaving a balance of unpaid interest overdue at the time of the indorsement in a sum equal to the interest for one year less the amount of the credit.

In August, 1915, the respondent began the present action against the appellant and Outcalt to recover the interest delinquent upon the note, which at that time amounted, after deducting the credit of $60, to the sum of $930. Outcalt was not served with process, and the appellant alone appeared. In his complaint the respondent set forth the manner in which he became possessed of the note and averred that he was a holder in due course. In his answer the appellant put in issue this allegation, and set up five affirmative defenses, none of which were available to him if the respondent was in fact a holder in due course. The issues were tried by the court sitting without a jury. The court found that the respondent acquired the note by indorsement in good faith before maturity and without notice of any infirmity or defect in the title of his indorser, and concluded as matter of law that he was a holder in due course and entitled to recover the overdue interest. Judgment was entered accordingly, and this appeal is prosecuted therefrom.

The appellant contends that the note was dishonored at the time it was received by the respondent, if not alone by the fact that interest was overdue thereon and unpaid, then by this fact and other facts and circumstances surrounding the transaction properly to be considered in connection with it. Upon the question whether a negotiable instrument becomes overdue by failure to pay an installment of interest where the principal of the note itself is not due, the authorities are by no means uniform, yet the weight of authority seems to be in favor of the negative of the proposition. This court has heretofore had occasion to notice the question and has perhaps adopted an intermediate rule. In the case of Ireland v. Scharpenberg, 54 Wash. 558, 103 P. 801, the contention was made by counsel that default in the payment of interest was of itself notice of dishonor. Noticing the contention, it was said:

'We do not agree with this contention. Spencer v. Alki Point Transp. Co., 53 Wash. 77, 101 P. 509 . Such facts, appearing by the instrument, might or might not be sufficient for such showing of dishonor. The weight to be given to such facts might be largely influenced by the length of time such interest had remained unpaid after its maturity. While we hold mere nonpayment of interest after maturity thereof does not of itself show the paper as being dishonored, it nevertheless is a circumstance of some weight to be considered by the jury in determining the good faith of the purchaser, as we have above indicated.'

But applying this rule and giving to the appellant the benefit of every unfavorable circumstance, we cannot conclude that the trial court erred in holding that the note in question was not dishonored. The circumstances under which it was taken we have in part stated. Others pointed out by the appellant are that the installment of interest was due on August 10, 1913 and the note indorsed on March 26, 1914; that the relations between the respondent and Valentine were intimate and friendly; that Valentine apparently had other property sufficient to satisfy the note; that there were serious business differences between Valentine and the appellant; and that the $60 credited on the note...