(209 P.) from the alleged deceit practiced upon the defendant by the agents of the mortgage corporation. Section 7848, Or. L., reads thus: "To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith." The answer abundantly pleads actual knowledge of the infirmity or defect alleged to be inherent in the instrument. It goes so far as to charge that the officer of the plaintiff knew in advance that the selling agents of the corporation intended to make the false and fraudulent representations at the time the letter was issued, and that the plaintiff had actual knowledge that the note was so procured; that the cashier of plaintiff wrote the letter for the purpose and with the intent of causing the defendant to have faith and confidence in the statements of the agents; and that the latter agreed to and did pay to the cashier $1,000 for writing the letter. This is ample in averment, but in all the testimony there is not a syllable of proof thereof. The evidence imputes no knowledge whatever on the part of the plaintiff that there was any illegality whatever in obtaining the note in suit. According to the only testimony on the subject, the note described in the complaint is the only one offered to the bank or exhibited to it at the time the bank took title to it. There is no evidence in any way indicating that the bank ever had the $10,000 note in its possession or that it had any knowledge of it until long after it had purchased the note sued upon in this action. The defendant, having alleged “actual knowledge of the infirmity or defect," must prove his averment as alleged. He has not averred the other alternative of the section, namely, "knowledge of such facts that his action in taking the instrument amounts to bad faith"; and, moreover, the testimony discloses no such situation. [8] When a maker publishes his note to the world, negotiable in form, it is not incumbent upon any one to whom it is offered, unless there be circumstances of suspicion, to busy himself inquiring about infirmities. He has a right to purchase the note, provided he acts in good faith, without searching for defects, of which there is no indication on the face of the note, unless he has knowledge of such facts as would make his purchase a matter of bad faith. Nothing of that kind appears in the evidence. On the contrary, the proof is uncontradicted that the transaction of taking the note was the ordinary negotiation of commercial paper in the usual course of business, without any thing whatever to indicate that it originated in fraud. If properly applied to, the court might well have directed the jury to find a verdict in favor of the plaintiff for the full amount of the note with interest at the date of the verdict, together with such sum as the jury might determine reasonable for an attorney's fee. Other errors are assigned of minor importance, but it becomes necessary to notice them because the case must be reversed and remanded for further proceedings. [9] The witnesses Miller and Looney, respectively the cashier and assistant cashier of the plaintiff at the time the note was negotiated to the bank, described the transaction of the purchase of the note, saying nothing whatever about the letter upon which the defendant claims he relied. Over the objection of the plaintiff, the defendant was permitted to cross-examine them about the issuance of that letter. It was not proper cross-examination, but was part of the defendant's case in chief. Under such circumstances, the defendant is not at liberty to prove his own case by cross-examination of opposing witnesses. The two agents mentioned appeared at the bank as holders of the note. It was indorsed in blank, negotiable by delivery, and they were in possession thereof, constituting them holders, who are deemed prima facie to be such in due course. It is charged, and there was evidence to sustain the allegation, that their title was defective in that they perpetrated a fraud upon the maker of the note in seeking its execution. If they participated in that fraud and acquired possession of a note so indorsed as to make it payable to bearer, their title was defective. The defendant was entitled to show this, in order to cast upon the plaintiff, as the. present holder, the burden of proving that it acquired the title as a holder in due course. [10] In view of the uncontradicted evidence in behalf of the plaintiff that it acquired the title to the note in due course, it was error to allow the defendant to show that he had never received any stock or other consideration for the note. As against a holder in due course for value, failure of consideration is no defense. The court was likewise wrong in permitting the defendant to cross-examine the assistant cashier as to whether or not he had brought into court any stock in the mortgage corporation for the defendant. There is nothing in the pleadings to show that any obligation to do so was ever assumed by or imposed upon the plaintiff. [11] Instruction numbered 3 in the bill of exceptions submitted to the jury the question of whether or not the plaintiff was the owner of the note. This was erroneous, be cause the answer itself imputes ownership of the note to the plaintiff, but attacks its right to recover on the ground that it acquired that ownership with knowledge of the alleged defect. [12] By instruction numbered 11 the court submitted to the jury the question of whether or not the plaintiff had actual knowledge of the infirmity alleged to exist in the paper. This was erroneous, for a careful examination of the record discloses that there is no evidence whatever that the plaintiff had any such knowledge. Instruction numbered 12 reads thus: "Now the knowledge of the plaintiff of either of two things would constitute an infirmity in this note. If the plaintiff had knowledge of the fraud in the inception of the transaction, or knowledge of such circumstances as would amount to bad faith, in that respect he would not be a holder in due course; or if plaintiff had actual knowledge that the note given was subject to a contract between the defendant and the Bankers Mortgage Corporation, or of such circumstances as made it amount to bad faith in taking the note without taking it subject to that contract, then this would constitute a knowledge of such infirmity as would prevent | the holder of the note from being a holder in due course. It is for you to take these circumstances and determine from the circumstances detailed in evidence whether or not the plaintiff was a holder in due course, as this term has been defined to you in these instructions; and if you find that the plaintiff was a holder in due course, under these instructions, then the defense of fraud is not available to the defendant; neither is the defense of failure of consideration available to the defendant. In other words, if you find in this case that the plaintiff is the holder in due course, under the definition which I have given you, then you must find for the plaintiff in this case; there is no defense to it. If, however, you fail to find that he [it] was a holder in due course, or find that he [the bank] was not a holder in due course, you may consider the defense of fraud." When a man publishes his negotiable promissory note and launches it into commercial operations, he must expect to pay it absolutely and at all events, unless the one who acquires it before maturity takes the paper with actual notice of its infirmities or under circumstances indicating bad faith. By his act he places it in the power of those with whom he deals to defraud other people. Hence he must bear the blame and the consequences himself, who inaugurated the means of subsequent fraud. While there is a wealth of averment that the plaintiff had notice of the alleged fraud, and of the circumstances upon which it is predicated, there is not a line or syllable of testimony tending in the least to establish that knowledge or bad faith which would impeach the plaintiff's title. As the defendant gave his note for the amount named, and there is no evidence that the plaintiff is not a holder in due course, but, on the contrary, all the evidence is uncontradicted that the plaintiff did take the same in due course, for value, and in good faith, he should be required to pay his note according to his engagement. On the record there is really nothing in dispute except the reasonableness of the attorneys' fees, which question should be left to the jury for its determination. Otherwise a verdict ought to have been directed for the plaintiff for the full amount of the note. The judgment is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion. RAND, J., did not participate in the hearing or decision of this case. DUBY et al. v. HICKS. Court of Oregon. July 25, 1922.) The instruction was wrong in leaving it to the jury to determine whether or not the plaintiff had knowledge of any fraud in the transaction; for there is no evidence whatever that the plaintiff had any such (Supreme knowledge until long after the negotiation of the note to it. Again, the instruction is er-1. roneous in that it allows the recovery of the plaintiff to be defeated, if it had actual knowledge that the note was given subject must affirmatively allege the facts upon which Liens 22-Complaint to enforce must allege facts on which validity depends. A complaint which seeks to enforce a lien the validity of the lien depends. to a contract between the defendant and the There are other errors assigned, but they are not of sufficient importance to merit extended consideration. Livery stable and garage keepers ~8(4) — Complaint failing to allege that lien notice contained every statement which by statute must appear upon face did not state good cause of suit. In a suit to enforce a lien for supplying materials and repairing an automobile, under Or. L. §§ 10272-10278, it was necessary to alall the essential requirements of the statute, lege and prove a substantial compliance with and that the lien notice, as required by section 10273 as filed, contained every statement which must appear upon the face of the lien notice, and, where the complaint failed to allege such facts, it failed to state a good cause of suit. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes (209 P.) 3. Livery stable and garage keepers 157 8(1)— | claimed to have performed work and furnished material. Plaintiffs had decree as objection made in the lower court to the sufprayed for. No demurrer was interposed or ficiency of the complaint, nor was the same amended. The answer contained no reference to the lien except to refer to it in the following words: It is essential to the validity of a lien against an automobile upon which claimants have performed work and furnished material that the lien shall be a charge upon the property for the payment of a debt, under Or. L. § 10273, a valid lien notice must disclose that a debt does exist, and must show the amount of the debt for which the lien is claimed, and, if graphs * "Admits the allegations contained in parait fails to disclose these facts, the lien is in-plaint." * 5 of plaintiffs' comvalid. 4. Livery stable and garage keepers 8(4) Where defects of complaint to enforce lien not supplied by defendant's pleadings, no cause of suit stated. Where, in a complaint to enforce a lien on an automobile it appeared that in the notice filed there was no statement of the amount for which the lien was claimed, or that the plaintiffs were entitled to a lien for any amount, and no allegation or fact was stated in any pleading of defendant by which the allegation missing from the complaint was supplied or the defect cured, and neither the original lien notice nor a certified copy thereof offered in evidence, there being neither allegation nor proof that the notice contained the statements, which by Or. L. § 10273, were essential to the existence of a lien, the complaint did not state a cause of action. 5. Pleading 433 (3, 5)—Defective allegations of complaint cured by verdict, but failure to state cause of action not cured. There is a distinction between defective statement in a pleading of the facts which go to make up a cause of action and a pleading which fails to state some material and essential fact which goes to the gist of the action, and must be pleaded in order to constitute a cause of action, in that, in the first instance, if the pleading is not moved against or demurred to, the defect will be cured by verdict, while in the other the defect is not cured by verdict. Appeal from Circuit Court, Grant County; Dalton Biggs, Judge. Suit by J. J. Duby and another, partners under the firm name of Duby & Caul, against Errett Hicks. From decree for plaintiffs, defendant appeals. Reversed and remanded, with directions. * shall be verified, and "shall state the name Section 10273 provides that the lien notice of the claimant, the name of the owner, or reputed owner, a description of the chattel, sufficient for identification, upon which the claimant has expended labor, skill, and material, the amount for which the lien is claimed, and the date upon which such expenditure was completed." It also provides that the lien notice "may be in substantially the following form." The form set forth by the statute closes with these words: "That the amount claimant demands for said labor, skill, and materials so expended is $- -; that no part thereof has been paid except $ing unpaid thereon, after deducting all just and there is now due and remaincredits and offsets, the sum of $- in which amount he claims a lien upon said property." The only reference to the lien sought to this language: be foreclosed to be found in the complaint is "5. That thereafter, and on the 23d day of July, 1919, less than sixty days after the rendition by plaintiffs of said labor, skill, and material upon said automobile, and the delivery thereof to the owner, or his duly authorized agent, plaintiffs prepared and caused to be filed in the office of the county clerk of Baker county, Or., in which said county said labor, skill, and material were expended on said automobile, a lien notice, which said notice did state the names of the plaintiffs as lien claimants, the name of the owner or reputed owner of said automobile, a description of the same sufficient for identification, and the date upon which such expenditure was completed, which said notice was duly verified by oath of these plaintiffs and by which the lien of these plaintiffs for said labor, skill, and material became effectual." Geo. H. Cattanach, of Canyon City, for appellant. Nichols & Hallock, of Baker, for respond ents. RAND, J. (after stating the facts as above). The defendant contends that the complaint does not state facts sufficient to constitute a cause of suit. The plaintiffs contend that the complaint is good after decree, and this This suit was brought pursuant to the pro- is the only question necessary for decision. visions of sections 10272-10278, Or. L., to foreclose an alleged lien against an automobile a lien must affirmatively allege the facts up[1] A complaint which seeks to foreclose belonging to defendant, upon which plaintiffs on which the validity of the lien depends. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 158 209 PACIFIC REPORTER "It must affirmatively appear from the complaint that the notice filed contained all the essential provisions required by statute; that it was proper in form, verified as required, and filed within the time prescribed." Pilz v. Killingsworth, 20 Or. 432, 437, 26 Pac. 305, 306; Coffey v. Smith, 52 Or. 538, 540, 97 Pac. 1079; Equitable Savings & Loan Ass'n v. Hewitt, 55 Or. 329, 335, 106 Pac. 447; Craig v. Crystal Realty Co., 89 Or. 25, 32, 33, 173 Pac. 322; Christman v. Salway (Or.) 205 Pac. 540, 547. [2] It was therefore necessary for the complaint to allege, and for the plaintiffs to prove, a substantial compliance with all of the essential requirements of the statute, and that the lien notice, as filed, contained every statement which, by the terms of the statute, must appear upon the face of the lien notice. If the complaint failed to allege any such fact, then the complaint failed to state a good cause of suit. An inspection of the complaint discloses that it fails to allege that any of the statements above quoted from section 10273, which said section requires to be stated in the lien notice, were stated therein. The lien claimed was purely a statutory lien, and the sole relief sought was its foreclosure. Being a creature of the statute, its validity depended entirely upon a substantial compliance with the terms of the statute which created it. The statute having expressly directed that certain prescribed statements must be contained in the lien notice, there could be no compliance with the statute unless those statements were contained therein. Without a substantial compliance with the statute the right to a lien was lost. [3] It is essential to the validity of a lien of this character that the lien shall be a charge upon property for the payment of a debt, and the right which the statute confers is to have that debt satisfied out of a particular chattel. It must be obvious to every one that, unless there was some debt to be secured, in the nature of things there could be no lien. Under the provisions of our statute, a valid lien notice must disclose that a debt does exist, and must show the amount of the debt for which the lien is claimed, and, if the lien notice fails to disclose those facts, the lien is invalid. [4] The complaint in this case affirmatively alleged the facts disclosed by the lien notice in question, but from the allegations of the complaint it appears that, in the notice as filed, there was no statement of the amount for which the lien was claimed, or that the plaintiffs were entitled to a lien for any amount. No allegation or fact was stated in any pleading of the defendant by which the allegation missing from plaintiffs' complaint Neither was supplied or the defect cured. the original lien notice nor a certified copy thereof was offered or received in evidence. There is, therefore, neither allegation nor proof that the lien notice contained those statements which, by the statute, are essen- [5] There is a marked distinction between an imperfect or defective statement in a pleading of the facts which go to make up a cause of action, and which, because not properly pleaded, makes the pleading subject to demurrer or motion, and a pleading which fails to state some material and essential fact which goes to the gist of the action, and must be pleaded in order to constitute a cause of action. In the first instance, if the pleading is not moved against or demurred to, the defect will be cured by verdict, while in the other the defect is not cured by verdict, nor is it ever cured at all unless the adverse party in his pleadings has alleged or admitted the omitted fact. The present case clearly falls within the latter class. It was necessary, under the statute, that the lien when filed should contain a statement of the facts recited in section 10273. The complaint alleges that certain other statements required by section 10273 were recited in the lien, but not the ones above referred to. It thus in effect affirmatively appears from the complaint that these statements were omitted from the lien, and, being omitted, the lien was invalid; or, if not omitted therefrom, then, as the complaint failed to allege that these facts were stated in the lien notice, the complaint failed to allege a necessary and material fact, without which it failed to state a cause of suit. The law on this subject is so well settled in this state that the question presented here is no longer open. In fact, we know of no question that has been more frequently considered and discussed, or one upon which the decisions of this court have been more uniform, or where the prevailing law on the subject in other jurisdictions has been more in accord with the decisions of this court, than the one presented in the present case. "A verdict will cure an imperfect statement, or the omission of formal allegations, although it will not supply a total omission to state some fact essential to the cause of action." Madden v. Welch, 48 Or. 199, 200, 86 Pac. 2. "A verdict aids an informal statement of facts in a pleading, but will never supply a material averment that goes to the gist of the action." Philomath v. Ingle, 41 Or. 289, 292, 68 Pac. 803, 804. Where the complaint "fails to state facts sufficient to constitute a cause of action," or suit, the "defect is never waived or cured" by a verdict or decree. Keene v. Eldriedge, 47 Or. 179, 181, 82 Pac. 803, 804. "If a material allegation going to the gist of the action is wholly omitted, it cannot be presumed that any evidence in reference to it was offered or allowed on the trial, and hence the pleading is not aided by the verdict." Madden v. Welch, supra. "The general rule in such case is 'that where (209 P.) ever facts are not expressly stated which are so essential to a recovery that, without proof of them on the trial, a verdict could not have been rendered under the direction of the court, there the want of the express statement is cured by the verdict, provided the complaint contains terms sufficiently general to comprehend the facts in fair and reasonable intendment." Nicolai v. Krimbel, 29 Or. 76, 84, 43 Pac. 865. "Now, a verdict will cure all mere formal defects in the pleadings, and will aid a defective statement of a good cause of action or defense, although it will not cure the omission of a material allegation." Creecy v. Joy, 40 Or. 28, 32, 66 Pac. 295, 297. "3. Where no motion or demurrer has been interposed to a pleading, every reasonable inference should be invoked in its support, and every legitimate intendment indulged in its aid, after verdict." Syllabus, Patterson v. Patterson, 40 Or. 560, 564, 67 Pac. 664, 666. "The rule is settled in this state that, while a verdict will never supply the omission of a material averment, it will aid informal defects in the pleading that do not go to the gist of the action." Patterson v. Patterson, supra. In McCall v. Porter, 42 Or. 49, 70 Pac. 820, 71 Pac. 976, it was held that, where the de fect is one of form, and not of substance, when no objection is made thereto, either by motion or demurrer, the defect is waived by pleading over. "Findings made by a court upon the facts in an action tried before it without the intervention of a jury are deemed a verdict (B. & C. Comp. § 159), and, though a verdict will not supply the omission to state some fact essential to the cause of action, it will cure all formal defects in a pleading, and establish every reasonable inference that can be drawn from the facts stated. Houghton v. Beck, 9 Or. 325; David v. Waters, 11 Or. 448, 5 Pac. 748; Bingham v. Kern, 18 Or. 199, 23 Pac. 182. The extent and principle of the rule of aider by verdict,' says Mr. Justice Bean in Booth v. Moody, 30 Or. 222, 46 Pac. 884, 'is that whenever the complaint contains terms sufficiently general to comprehend a matter so essential and necessary to be proved that, had it not been given in evidence, the jury could not have found the verdict, the want of a statement of such matter in express terms will be cured by the verdict, because evidence of the fact would be the same whether the allegation of the complaint is complete or imperfect. But if a material allega tion going to the gist of the action is wholly omitted, it cannot be presumed that any evidence in reference to it was offered or allowed on the trial, and hence the pleading is not aided by the verdict.'" Ferguson v. Reiger, 43 Or. 509, 73 Pac. 1041. "Where facts which entitle the plaintiff to the relief sought are set out in the complaint and sustained by the testimony, the relief will, after answer and trial, be granted, notwithstanding the complaint may lack some of the requisites of a technical pleading." Carlyle v. Sloan, 44 Or. 357, 369, 75 Pac. 217, 222. "No demurrer to the complaint was interposed, in the absence of which every reasonable inference deducible from the pleadings will be invoked in favor of a general verdict, which, though it will not supply the omission of a material averment, cures a defective statement, if the issue joined necessarily required proof of the facts imperfectly alleged." Scott v. Christenson, 49 Or. 223, 224, 89 Pac. 376, 124 Am. St. Rep. 1041. "Where an essential fact has been omitted from the complaint, an issue as to such fact made by the answer and reply cures the defect in the complaint." Easton v. Quackenbush, 86 Or. 374, 378, 168 Pac. 631, 632; Treadgold v. Willard, 81 Or. 658, 160 Pac. 803. Mr. Justice Burnett, in Minter v. Minter, 80 Or. 369, 157 Pac. 157, quoted with approval from Bates v. Babcock, 95 Cal. 479, 482, 30 Pac. 605, 16 L. R. A. 745, 748, 29 Am. St. Rep. 133, 136, an excerpt of which a part is as follows: entire absence of averment of fact essential to "It is only when there is in the complaint an a recovery, so that no evidence of that fact in favor of the plaintiff cannot be sustained; could be received at the trial, that a judgment but, if the objection be merely that such fact is defectively alleged, evidence received under such averment, if sufficient, will sustain the judgment." In Portland v. New England Casualty Co., 96 Or. 48, 51, 189 Pac. 211, Mr. Justice Benson quoted with approval an excerpt from Booth v. Moody, 30 Or. 222, 46 Pac. 884, supra, as follows: "A verdict will cure formal defects in a pleading, such as an imperfect statement, or the omission of formal allegations, and establishes every reasonable inference that can be drawn from the facts stated." "It is a general and well-established rule that the failure of a complaint to state a cause of action may be cured by an answer or other pleadings in which the omitted facts are stated; for facts alleged by one party need not be pleaded by the other." 21 R. C. L. p. 492. "If a necessary allegation is omitted from a pleading and the missing allegation is either alleged or admitted by the pleading of the adverse party, the defect is cured but a party's pleading is not aided by his own allegations or admissions appearing elsewhere in the record." 31 Cyc. p. 716. [6] The objection that the complaint does not state facts sufficient to constitute a cause of action, whether demurred to or not, under section 72, Or. L., is never waived. It has always been the law in this state that this objection, whether raised in the lower court or not, could be taken advantage of successfully on appeal. The fact that the objection is raised for the first time on appeal does not in the slightest degree detract from the force of the objection, if the same is well taken. Upon this point it is unnecessary to cite authorities, but see Whitney Co., Limited, v. Smith, 63 Or. 187, 191, 126 Pac. 1000. For the reason stated, the decree appealed from should be reversed, and the cause re |