Yakima Valley Bank v. McAllister

• Decision Date: 23 March 1905
• Citation: 37 Wash. 566,79 P. 1119
• Parties: YAKIMA VALLEY BANK v. McALLISTER.
• Court: Washington Supreme Court

79 P. 1119

37 Wash. 566

YAKIMA VALLEY BANK v. McALLISTER.

Supreme Court of Washington

March 23, 1905

Appeal from Superior Court, Yakima County; Frank H. Rudkin, Judge.

Action by the Yakima Valley Bank against Charles McAllister. From a judgment for defendant, plaintiff appeals. Affirmed.

Snyder & Preble, for appellant.

DUNBAR, J.

This action was brought by the Yakima Valley Bank, a corporation against the respondent, upon a promissory note for $790.20 dated November 20, 1902, signed on the face thereof by the defendant, Charles McAllister, payable to the order of said Charles McAllister, and purporting to bear his indorsement upon the back thereof. The complaint is the ordinary complaint for recovery upon a negotiable promissory note alleges execution and delivery of the note by defendant to one J. B. Pugsley, and the transfer before maturity to plaintiff, for a valuable consideration, in the ordinary course of business. The answer denies the execution of the note, and alleges, by way of affirmative defense, that the note was without consideration, in that it was signed on the face thereof by the said defendant in the sum of $790.20, the amount of the annual premium upon a $10,000 life insurance policy upon defendant's life, which said Pugsley and one E. R. Place, associated with Pugsley in business, agreed to thereafter deliver to defendant, upon the express understanding between defendant and said Pugsley and Place that the note was not to be binding, and was to be returned to defendant, if, upon an examination of the said policy, defendant would not accept the same, and that defendant did not accept said policy; that the defendant did not intend to sign his name upon the back of said note but that, as a part of said transaction with Pugsley and Place, he signed his name to a contract releasing the insurance company from liability in case of his death while said policy was in his custody for inspection, and before he had accepted it; and that, in signing said contract, his signature penetrated through the paper upon which said contract was written, and appeared as an indorsement on said note. This is the substance of the answer. The answer, however, also alleged that the plaintiff had notice of the infirmity of the note before he paid for the same. This was denied by the reply of the plaintiff. Upon these allegations the case went to trial. The testimony of the defendant was to the effect that Pugsley and Place solicited him to take insurance in the Home Mutual Life Insurance Society of New York City, and that he agreed to take a policy for $10,000 on the condition that, when he had examined the policy and had submitted it to his legal advisers, it corresponded with the representations made by the solicitors, and that he was to have until the 1st day of January to determine, the application being made upon the 20th of November, 1902; that the solicitors or agents of the company represented to him that it would be necessary for him to draw up a note payable to himself, and signed by himself, as an earnest of his intention to do business with the company, and that it was also necessary for him to sign a contract releasing the company from liability to him in case he should die before the final consummation of the contract, they representing to him that the note could not be collected off of him without an indorsement, and that he would be safe in giving them the note; that the transaction occurred in the corral of a farm in Yakima county; that he was instructed to sign the application and the release, and that he did so; that a book with several papers upon it, placed there with the ostensible purpose of making it smooth, was handed him to write upon, and a fountain pen furnished by the agents, with the instruction to bear on hard, as the pen was stiff; that he was afterwards informed by the bank, the plaintiff, that they had purchased a note signed by him in the sum of $790.20 in favor of himself, and indorsed by him on the back thereof. This indorsement he denied having made; his theory being that, by the fraudulent manipulation of the solicitors, the ink had been transmitted through the agreement which he signed onto the back of the note which had been placed there for the purpose of receiving the signature, and that he knew nothing about the note having been indorsed until he was notified by the bank; admitting that the signature was his, or very much like his, and alleging that it was a trick and a fraud; insisting that the signature had been obtained through the perpetration upon him of a trick and a fraud, and that it was not in fact his signature. Judgment was rendered in favor of the defendant.

A demurrer was interposed to the affirmative answers of the defendant, which was overruled, and the action of the court in overruling the demurrer is the first error assigned; the appellant contending that the allegations of fraud do not amount to a denial that the defendant indorsed the note; that the answer, in legal effect, admits the execution of the note, and, at most, only tenders issue as to its validity; that the charges of mala fides are not distinctly set forth, so that plaintiff may know the charges he has to meet; and that, if the note was indorsed through the physical act of the defendant, he is responsible for the payment of the note, and for the results of that physical act, to an innocent purchaser. This we think is not the law under any authority. It is not the physical act which constitutes a transaction of this kind, but it is the intention of the parties to the contract. It is true that, if a party by any negligent act is the cause of an investment made by an innocent person on the strength and credit of that act, he cannot escape liability; but, if the matters set forth in the answer are true, there was no action on the part of the defendant at all, so far as indorsing the note was concerned. The indorsement was the effect of a fraudulent device and trick, which the defendant was in no way responsible for.

Several succeeding assignments are based upon the action of the court in admitting over the objection of the appellant the testimony of numerous witnesses to the effect that Pugsley and Place had perpetrated, in the judgment of the witnesses the same fraud upon them, in like...