Meyer v. Lovdal

Action on a promissory note alleged by defendant to have been fraudulently obtained from him by the payee. Plaintiffs claim to be the purchasers thereof in good faith before maturity and for value. The court took the case from the jury and directed a verdict for plaintiffs for the amount of principal and interest. Defendant appeals from the judgment and from the order denying his motion for a new trial. Plaintiffs constitute a copartnership doing a banking business in San Francisco under the name and style of Daniel Meyer.

1. It is urged that plaintiffs did not comply with the law as declared in sections 2466 and 2468 of the Civil Code, under which persons doing business by a designation that does not disclose the names of all the partners interested therein are required to file with the clerk of the county a certain certificate as in said sections pointed out and cause it to be acknowledged and published. The certificate of the copartnership was introduced without objection and showed due acknowledgment when filed. The affidavit of publication was next offered and showed publication of the certificate for the required period and the following statement appended thereto: "Duly acknowledged on the 20th day of October, 1891, before Louis Meininger, a Notary Public, in and for the City and County of San Francisco. Indorsed: Filed October 20, 1891. Wm. J. Blattner, Clerk, by John H. Harney, Deputy Clerk." This affidavit of publication was also filed in the office of the clerk of said city and county.

The objection to the affidavit was that the statute requires the certificate to be acknowledged and that when acknowledged it becomes part of the certificate and is filed with the certificate; that the publication was insufficient because the full acknowledgment was not published with the certificate and the certificate was therefore irrelevant, immaterial and incompetent. The court overruled the objection.

Section 2466, Civil Code, provides that partners doing business under a designation as in this case: "Must file with the clerk . . . a certificate stating the names in full of all the members of such partnership and their places of residence, and publish the same for once a week for four successive weeks in a newspaper published," etc. Section 2468 provides: "The certificate filed with the clerk, as provided in section twenty-four hundred and sixty-six, must be signed by the partners and acknowledged before some officer. . . . The certificate must be filed and the publication designated in that section must be made. . . . Persons doing business as partners contrary to the provisions of this article shall not maintain any action upon or on account of any contracts made or transactions had in their partnership name . . . until they have first filed the certificate and made the publication herein required." The claim of appellant is that the certificate is not complete until signed and acknowledged by all the partners; that the acknowledgment is a necessary part of the certificate and also a necessary part of the publication. Section 2466 says that the certificate therein mentioned must be published, but this section does not require any acknowledgment to complete the certificate. Section 2468 provides that the certificate referred to in section 2466 must be signed by the partners, and acknowledged before some officer authorized to take the acknowledgment of conveyances of real property, and it also provides that the certificate must be filed, and the publication designated in section 2466 must be made. It is not entirely clear whether, reading the two sections together, the legislature meant to require the publication of the certificate as acknowledged (sec. 2468) or as designated in section 2466 It seems to us, however, that the purpose of the statute is fully met by the publication of the certificate and a statement, as was done here, showing that it was acknowledged before such an officer as the statute refers to and was filed, giving the date. The purpose of the acknowledgment was probably to authenticate the genuineness of the signatures. The principal facts of which the certificate was intended to give publicity were the designation of the partnership, the full names of the partners and their residences. The acknowledgment adds nothing to the facts required to be shown by the certificate and we think a reasonable construction of the two sections justifies us in holding that the publication was sufficient. It was held in Fabian v. Callahan, 56 Cal. 159, that no particular form of acknowledgment is required by the code.

2. It is urged that the court erred in receiving in evidence the note over defendant's objection. The note was signed by defendant and made payable to F. V. Allen or order and was dated "Sacramento, Feb. 15th, 1904," and reads: "Thirty days after date without grace I promise to pay," etc. The words "thirty days" show that a pen was drawn through them and directly thereunder the words "Six months" written. It is indorsed as follows: "Arbuckle, Cala., Feb. 18th, 1904. I hereby assign the within note to C. S. Allen for 4,000. F. V. Allen. For value received I hereby sell, transfer and assign the within note to A. Lindsley. C. S. Allen." Then follow the following indorsements: "A. Lindsley, F. W. Voogt, Marshal A. Frank." The only objection argued in the brief at this point is that plaintiff should have explained the alteration as to the maturity of the note before offering it, and that it was error to admit it without such explanation. In many states it is held that an apparent alteration is presumed, in the absence of any explanation, to have been made simultaneously with or before the delivery of the instrument and hence no explanation is required. In other states it has been held that there is no presumption either way; and in still others that the presumption is that the alteration was made after delivery. (See cases collected in 1 Ency. of Ev., p. 810 et seq.) In this state we have a statute on the subject as follows: "The party producing a writing as genuine which has been altered, or appears to have been altered, after its execution, in a part material to the question in dispute, must account for the appearance or alteration." The section then points out how he may do this, and when done "he may give the writing in evidence, but not otherwise." (Code Civ. Proc., sec. 1982.) In the present case it is alleged in the answer that the alteration was made after delivery and that plaintiff took the note after its maturity,i. e., more than thirty days after its execution. The alteration then was material to the question in dispute. We find no case in our reports and none is cited where the meaning of this section, in the particular now under consideration, is clearly stated. When the instrument is offered without explanation as to an apparent alteration, how is it to be known whether or not it "appears to have been altered after itsexecution" unless this may be determined, in the first instance, by an inspection of the instrument itself and the alteration shown therein? The trial judge must, it seems to us, determine when the offer is made whether the alterations are such as, in his judgment, call for explanation. If he admits the instrument and nothing appears in the record to show that the judgment exercised by the trial judge was improper or not justified, it is the duty of the appellate court to accept his conclusion. We must assume that he had the instrument before him and scrutinized its appearance in order to determine whether it was altered after its execution, and unless the record brought up for review shows that he acted without warrant his determination is conclusive upon us. We have nothing before us but a photographic copy of the note, and we can discover nothing from it that would suggest unauthorized action by the trial judge. The erasure shows that it was made with a pen and the words "Six months" appear to be in the same handwriting as the other written parts of the note. It clearly appeared from the undisputed testimony later along in the trial that the change from thirty days to six months as the date of maturity of the note was made at defendant's request and before he signed it and that as thus changed it was delivered to the payee.

3. Defendant, as a witness on his own behalf, was asked whether he did "anything in reference to stopping payment of the note"; also whether he "notified the banks of Sacramento that the note was fraudulent and void"; also whether he "had notices published in any of the daily papers in Sacramento with reference to the manner in which this note was procured." The court sustained objections to the questions. It was not shown or attempted or offered to be shown that any of these steps came to plaintiffs' notice or that it could reasonably be presumed that they were known to plaintiffs. The ruling was not erroneous.

4. At the close of the evidence, on motion of plaintiffs, the court instructed the jury as follows: "Inasmuch as there is no evidence that the plaintiffs had any knowledge or notice of any want of consideration or fraud in the inception of the note sued upon, and the evidence is uncontradicted that the plaintiffs purchased said note for value before maturity, the plaintiffs are entitled to judgment herein and you are instructed to return a verdict for the plaintiffs for the face of the note . . . with interest. . . ." It is contended that the court erred in thus instructing the jury. It appears from the uncontradicted evidence that the note was given at its date in discharge of a debt incurred in a game of poker played between the maker, Lovdal, and the payee, F. V. Allen; that the note was partly printed and that the written portion, except the signature, was filled in by one Albert Lindsley, the only person present at the game except the two players; that it was first written payable thirty days after date, but at the request of Lovdal, who wanted longer credit, the change of time in the maturity of the note was made by Lindsley before the note was signed by Lovdal. The subsequent history of the note is immaterial except as to plaintiffs' connection with it.

It is contended by defendant that it having been shown that the note was fraudulent the burden was on plaintiffs to show that they purchased the note before maturity in good faith, for value, in the usual course of business and under circumstances which created no presumption that they knew the facts that impeach its validity. (Citing Jordan v. Grover, 99 Cal. 194, [33 P. 889], and Eames v. Crosier, 101 Cal. 260, [35 P. 873].) The true rule, as we conceive it, is found in the second of these cases and also in Sinkler v. Siljan, 136 Cal. 356, [68 P. 1024]. (See, also, Bell v. Pleasant, 145 Cal. 410, [104 Am. St. Rep. 61, 78 P. 957].) In Eames v. Crosier the note was indorsed in blank and delivered by the payee, Bandholt, and again delivered to one Runels, who, before maturity thereof, assigned and delivered the same to one Talmage and the latter afterward sold and delivered the note to plaintiff, Eames, as we understand the facts, after its maturity. The trial court found that Talmage "purchased and received and paid for the note in good faith without notice," and this finding was challenged as not supported by the evidence. It was admitted that both Talmage and plaintiff acquired the note for value, but it was claimed that proof on the part of defendants that the note was procured from defendants through fraud cast upon plaintiff the burden of showing that the plaintiff or Talmage purchased without notice of the equities set up in the answer. The doctrine, upon the facts, is thus stated: "Upon proof of fraud in the inception of the note, the burden is cast upon the indorsee to show that he is an innocent holder. This the latter may do by showing that he purchased the note before maturity, or from an innocent indorsee for value, in the usual course of business. When this is done, unless the evidence shows that the note was taken by the plaintiff under circumstances creating the presumption that he knew the facts impeaching its validity, the burden is cast upon the defendant to show, if he would defeat the plaintiff in his action, that the latter took the instrument with notice of the defendant's equities." Again, speaking of plaintiff's burden, it is said: "This burden is discharged and a primafacie case is made in his favor, when he shows that he purchased for value in the usual course of business." Mr. Daniel thus states the rule: "He [the indorsee] makes out aprima facie case by proving that the instrument was indorsed to him for value before maturity. Nothing else appearing, a presumption arises that he purchased the note in good faith, without notice of fraud, because it is not likely that he would give full value for a note which he believed to be fraudulent, taking the hazard upon himself, and because it would be difficult to prove good faith in any better way. . . . Unless there were circumstances which seemed to bring home to him notice of the fraud or illegality imputed, the requirement of further proof than the giving of fair value seems unreasonably harsh and exacting." (1 Daniel on Negotiable Instruments, 4th ed., sec. 819.) The circumstances attending the purchase must be something more than "such as to invite inquiry on the part of the purchaser" (Sinkler v. Siljan, 136 Cal. 356, [68 P. 1024]); they must, as was said in Eames v. Crosier, 101 Cal. 260,

[35 P. 873], show "that the note was taken by the plaintiff under circumstances creating the presumption that he knew the facts impeaching its validity," otherwise the burden is upon the defendant to show that plaintiff "took the instrument with notice of the defendant's equities." It was said inCollins v. Gilbert, 94 U.S. 753, that to defeat the rights of abona fide holder of a promissory note, claimed to have been procured by fraud, it must be shown, either directly or by circumstances, that he had notice of such infirmity. "Proof of such facts and circumstances as would have put a reasonable man upon inquiry in relation thereto is not sufficient to constitute a defense to a suit by the holder." In Bell v.Pleasant, 145 Cal. 410, [104 Am. St. Rep. 61, 78 P. 954], it was said in the opinion by Mr. Justice Shaw: "The indorsement carries the legal title to the note and vests it in the indorsee, and if it is shown by him that he bought for a valuable consideration before maturity, his legal title cannot be divested nor his right to recover defeated, without the proof which shows his purchase to have been fraudulent, namely, that he had notice of the lack of consideration or of the fraud, or other defense of the maker."

It appeared, without conflict, that plaintiffs purchased the note in due course and paid its face value, including accrued interest to date of purchase, and under circumstances entirely devoid of semblance of knowledge or notice of the infirmity in the note at its inception. (See Civ. Code, secs. 3122-3124.) We do not feel called upon to state these circumstances in detail. Aside from what appears on the face of the note, there were no circumstances that would give rise to any presumption of knowledge or notice to plaintiffs that the note had its origin in a gambling game. The change of the date of its maturity as appearing on the note was fully explained without conflict, and it appeared that the note was purchased for the firm by one of the partners on the credit of Voogt and Frank, two of the indorsers, as a favor to Frank rather than for any profit, and it was purchased but a short time before maturity when only a small amount of interest would accrue on it before maturity. Both Voogt and Frank were known to the firm and had borrowed money from it and were regarded by the firm as men of considerable means and as entirely responsible for the amount involved. Defendant recounts many independent circumstances from which he claims that sufficient appeared to require the case to go to the jury and that the court had no right to take their consideration away from the jury. It would needlessly prolong this opinion to note these circumstances and show wherein they fail to present facts material in determining whether plaintiffs successfully met the burden cast upon them by the law. The plaintiffs, in our opinion, went further in their explanation of good faith in the transaction than they were required to go, under the rule above stated, and that, at the close of the evidence, there was no material controverted fact to go to the jury of which it can be said that it gave rise to a presumption that plaintiffs knew the facts impeaching the validity of the note; nor were the facts such as would have justified a reasonable inference by the jury that plaintiffs had any such knowledge. Had the case gone to the jury and a verdict been given the defendant, it would have been the duty of the court to set the verdict aside. This being so, as we view the evidence, it was not error for the court to direct the verdict. (See cases cited in Spelling's New Trial, vol. 1, sec. 329.)

No other alleged errors are noticed in defendant's brief. The judgment and order are affirmed.

Hart, J., and Burnett, J., concurred.