Toon v. Wapinitia Irrigation Co. , 117 Or. 374 ( 1926 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Our Code provides that, in cases tried to the court without a jury, "the finding of the court upon the facts shall be deemed a verdict. * *" Section 159, Or. L.

The defendant contends in its brief that the complaint is insufficient to charge it with the execution and delivery of the alleged coupons. The complaint was not carefully prepared. But, if defendant's criticism be just, whatever defects it contains in the matter of the absence of allegations with reference to the existence of the securities have been cured by answer. In 14 Encyclopedia of Pleading and Practice, page 264, note, are quoted comments from the opinion in the case of In re Donaldson v.Butler County, 98 Mo. 163 (11 S.W. 572), which is applicable to the situation here. That was an action predicated upon a municipal coupon. In its decision the court held that the petition should show authority for the issuance of the instruments in suit, but that the defect was cured by answer. The following quotation therefrom is quite pertinent:

"The petition in this case is so defective that it would not support a judgment as against a motion in arrest, unless aided by the answer. The question then is, whether the answer cures the defect. It denies that plaintiff is a holder of the coupons for value, and denies that defendant is, or ever was, liable for the payment of the coupons. It alleges that the bonds were satisfied and defendant released from the payment of them before they became due and before the plaintiff became possessed of the coupons, and inferentially charges him with notice of these alleged facts. The bonds are spoken of as public securities of the county prior to the alleged discharge of the county from liability thereon. Construing this answer as a whole, we take it to admit that the bonds were valid at their inception, but to claim that they ceased to be of any validity by reason of the discharge which was made matter of record in the county court. Not that the answer makes expressly any such admission, but that it is necessarily implied from what is stated. This being so, it cures the defect in the petition: Garth v. Caldwell,72 Mo. 622."

In this jurisdiction it is a well-settled rule of pleading that, where the plaintiff omits necessary averments from his complaint, which averments are supplied by defendant in his answer, the defect is cured: Treadgold v. Willard, 81 Or. 658 (160 P. 803).

Defendant asserts that plaintiff cannot prevail because she failed to allege the circumstances under which she acquired her title. In this the defendant is in error. Under well-supported rules of pleading, this is not a requisite. In an action on an instrument made payable to bearer, it is sufficient if the plaintiff allege that he is the bearer or owner and holder thereof: 14 Am. Eng. Ency. of Plead. Prac. 525.

The defendant treats the coupons sued upon as thirty existing coupons, but makes the defense that they were procured by plaintiff through fraud. It alleges that they were delivered to J.C. Bayer, Trustee, to be held by him in such capacity for the benefit of the persons holding bonds of the Eastern Irrigation Power Lumber Company, and then avers that each of these coupons was delivered to Joseph R. Keep; that, if the plaintiff possessed the coupons, she obtained possession of them from Keep, who was not the lawful owner and holder thereof, and that "she never paid anything whatever for the same or either or any of them, * * on account of the delivery to her of said instruments."

Section 7844, Or. L., defines a "holder in due course" as follows:

"A holder in due course is a holder who has taken the instrument under the following conditions: (1) that it is complete and regular upon its face; (2) that he became the holder of it after it was overdue, and without notice that it had been previously dishonored, if such was the fact; (3) that he took it in good faith and for value; (4) that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."

A holder in due course of an interest-bearing coupon may maintain an action for the collection thereof.

Webster's New International Dictionary thus defines the term "coupon":

"Coupon: A certificate of interest due, printed at the bottom of transferable bonds, given for a term of years, designed to be cut off and presented for payment when the interest is due."

For other definitions and a discussion of the nature and principles of law relating to the collection of coupons, seeAurora v. West, 7 Wall. 82 (19 L.Ed. 42, see, also, Rose's U.S. Notes); Tennessee Bond Cases, 114 U.S. 663 (29 L.Ed. 281,5 Sup. Ct. Rep. 974); Nesbit v. Independent District ofRiverside, 144 U.S. 610 (36 L.Ed. 562, 12 Sup. Ct. Rep. 746);Benwell v. City of Newark, 55 N.J. Eq. 260 (36 A. 668); 2 Daniel on Negotiable Instruments (6 ed.), § 1486 et seq.

It is authoritatively settled that a coupon bond payable to bearer, such as the thirty instruments in the instant case, is a negotiable instrument, and that the person who takes it before due, for a valuable consideration, without knowledge of any defect of title, and in good faith, holds it by a good and sufficient title against all the world: 2 Daniel on Negotiable Instruments (6 ed.) §§ 1500, 1503; Murray v. Lardner, 2 Wall. 110 (17 L.Ed. 857).

The testimony of plaintiff, corroborated by that of other witnesses, is to the effect that she is a holder in due course, as that term is defined by the section of our negotiable instruments law just quoted, and her testimony remains undisputed. The defendant alleged that the plaintiff was not a holder in due course, but offered no proof in support of such allegation.

Possession of a coupon payable to bearer raises a presumption of ownership as a bona fide holder: 2 Ency. of Evidence, p. 573. Moreover, the possession of negotiable instruments in due form not only establishes in favor of the holder thereof a primafacie case in an action upon them, but places the burden of proof upon the one attacking their validity in respect to ownership, bona fide holding, consideration, notice and the existence of all conditions necessary to enable him to maintain the action: Abbott, Public Securities, § 400. From a recognized authority on negotiable instruments, we quote the following:

"The mere possession of a negotiable instrument, produced in evidence by the indorsee, or by the assignee where no indorsement is necessary, imports prima facie that he acquired it bonafide for full value, in the usual course of business, before maturity, and without notice of any circumstances impeaching its validity; and that he is the owner thereof, entitled to recover the full amount against all prior parties. In other words, the production of the instrument and proof that it is genuine (where indeed such proof is necessary), prima facie establishes his case; and he may there rest it." 1 Daniel on Negotiable Instruments (6 ed.), § 812.

In view of the record, we have no right to say that the findings of the court were made in absence of sufficient evidence. The answer avers that the identical negotiable securities in controversy came into the possession of J.C. Bayer. Bayer testified that there came into his possession $15,000 worth of the defendant's bonds, numbered 1 to 30, and that the coupons were then attached to the bonds. He further testified that the bonds and coupons were delivered by him into the possession of Keep. The testimony shows that the plaintiff purchased these interest-bearing coupons from Keep and paid him $725 therefor. These coupons purport to have been cut from First Mortgage Bonds of the defendant, numbered 1 to 30, inclusive. The validity of the coupons has never been disputed. They were presented to the payor named therein, who refused payment but never questioned their legality. They were likewise presented to E.E. Miller, treasurer, in the office of the company, and he made no comment but ushered the witness into the presence of the company's attorney, saying "that the Company was a going concern; that they were willing to pay the coupons if the creditors didn't object"; whereupon the attorney for the company said, "I do object." But he raised no question concerning the legal existence of the coupons. These coupons could not prove their own validity over a denial of their execution or existence. But that is not the question at issue. They have been cut from duly executed bonds, and their existence is shown by the record. The defendant's contention is that plaintiff is not a holder in due course of the coupons forming the basis of this action, and that contention has already been met.

The defendant says that the signature attached to the coupons is only a printed signature.

"The term ``signature' includes any name, mark, or sign written with intent to authenticate any instrument or writing." Or. L., § 2400.

Now, taking up the defendant's assertion that exhibit "A," constituting the thirty interest coupons, was not received in evidence: During the trial that question was raised and the court admitted the coupons into the record as evidence, saying, "Yes, I will consider them in evidence, because I am satisfied that was the intention."

That the plaintiff paid less than par value for the coupons is not a valid defense to this action. The fact that the coupons were transferred for a consideration much less than their par value might be an evidentiary circumstance to be considered in determining plaintiff's good faith. Too frequently, however, is the par value of bonds far in excess of their market value, and we are not shown but what the price paid for the coupons was the fair market value thereof.

This case should be affirmed. It is so ordered.

AFFIRMED. REHEARING DENIED.

McBRIDE, C.J., and RAND and BELT, JJ., concur.