Inland Mortgage & Loan Co. v. Cady ( 1926 )

This is an action upon a promissory note given to one Dudman for the purchase of mining stock. Similar cases involving the fraudulent transactions of Dudman, by which he procured promissory notes, have been considered by this court in: FirstNational Bank of Medical Lake v. Wiltzius, 122 Wn. 637,211 P. 275; First National Bank of Ritzville v. Gunning,127 Wn. 307, 220 P. 793; Lovell v. Dotson, 128 Wn. 669,223 P. 1061; First National Bank of Ritzville v. Egbers, 130 Wn. 221, 226 P. 492. Dudman, after securing the note from the appellant, procured a written authorization from him allowing the note to be negotiated. The note was dated March 25, 1920, and on the following day the appellant went to the banking rooms of the First National Bank of Ritzville (which will be considered hereinafter as the respondent in this case, the bank having thereafter negotiated the note to the Inland Mortgage Loan Company, a subsidiary organization), and the following incident occurred at that time, as testified to by the appellant.

"I went over there and asked Mr. Greene [the bank president], if Mr. Dudman was in there with that note of mine the night before. He says, ``He was.' I says, ``Don't buy it. If you do I am not going to pay it.' He says, ``If I don't buy it, Downey of Harrington will.' I says, ``That is Mr. Downey's business. I am telling you not to buy it, because your sending out that slip caused you to notify me that Dudman was crooked.'"

It may be assumed from the testimony that thereafter the bank purchased the note. The question for determination is, whether the bank was a holder in due course.

By § 3443, Rem. Comp. Stat., in order to constitute one a holder in due course of a negotiable instrument, he must have taken it when it was complete and regular upon its face, before it is overdue, and for value, in good faith and with no notice of any infirmity in the instrument itself, or defect in the title of the person who has negotiated it. It is confessedly true that the bank, in taking the note here, took an instrument which was complete and regular upon its face, took it before it was overdue and paid value for it. The only remaining question is, whether there was such a notice of infirmity in the instrument or defect in the title of Dudman that the bank cannot be said to be a holder in good faith.

[1] The testimony, which has been quoted, is all the testimony in the record upon which the appellant relies to substantiate his position that the bank is not a due course holder. The mere refusal of the maker of a promissory note to pay it before it is due is not evidence of any infirmity in the instrument or defect in the title of the person then holding it. There was nothing in the appellant's statement to the bank president indicating that the note had been procured from him by any fraud or misrepresentations. He did not state to the bank that he was refusing to pay the note because he had been imposed upon, or that it had been obtained from him in any other than an honest way. He was not objecting at that time to the investment which he had made. His objection was to the fact that the bank, before it would consider the purchase of the note, had insisted that authorization should be secured from the maker for its transfer. This was no notice to the bank of any infirmity in the instrument or defect in the then holder's title, and shows no lack of good faith upon the part of the bank in thereafter buying the note. This actual transaction was considered by this court inFirst National Bank of Ritzville v. Gunning, supra. It was testified to in the Gunning case as being evidence of the bank's bad faith, and inferentially it was there held, by adopting a statement of the trial court in regard to the transaction with the appellant, that there was no bad faith shown in the purchase of this note.

The judgment is therefore affirmed.

TOLMAN, C.J., MAIN, and PARKER, JJ., concur.