cipal and agent, it was held in the case of Minnesota Linseed Oil Co. v. Montague & Smith, 65 Iowa, 67, 21 N. W. 184: "Where a principal gives to his agent instructions which are susceptible of two meanings, that meaning which the agent in good faith attaches to them and acts upon is to be adopted; and, if loss occurs thereby, the principal, and not the agent, must bear it, and it matters not whether the principal had reason to believe or not that the agent so understood the instructions." In Craighead v. Peterson, 72 N. Y. 279, 28 Am. Rep. 150, it is said that "letters of instruction, etc., in commercial transactions, ** * are interpreted most strongly against the writer, especially when they are susceptible of two interpretations, and the agent has acted in good faith upon one of such interpretations." in closing up the James Shelton loan accord | instructions and interpretation between prining to attorneys requirements, etc., which would leave the impression that we were only closing up the loan and while further on you say that you wish your loan to be a first lien, 'and title good in purchaser, Mr. Kik,' this in itself might lead one to think that the money was to be held for the purpose of perfecting Mr. Kik's title, although you nowhere stated that this money was for that purpose or that you expected me to be concerned in any way about Mr. Kik's affairs or that Mr. Kik had any claim on this money. And in your letter of January 20th you again speak of completing your loan and say, 'Do not retain the abstract until all the judgments are cleared up. We are not interested in these matters.' It does seem to me that from all the correspondence that passed between us that I could not be held either legally or morally for this money, as you intimated over the telephone. If you expected any more than your loan closed or anything out of the regular course of business I would surely have expected you to have told me before the loan was closed." This seems to be the general rule, and. there being no question of the good faith of the agent involved in this case, and as we think it intelligently acted upon the instructions given it, the judgment of the lower court will be affirmed. PARKER, MOUNT, FULLERTON, and GOSE, JJ., concur. (62 Wash. 534) MOYSES et al. v. BELL. 1. BILLS AND NOTES (§ 362*) BONA FIDE Rem. & Bal. Code, § 3449, providing that a holder of negotiable paper deriving title through a holder in due course, and not a party to any fraud or illegality affecting the instrument, has the rights of the former holder, enacts a rule which exists in favor of all persons other than the original payee who become purchasers from a bona fide holder, though such purchasers have notice of an infirmity in the paper as between the original parties thereto. Notes, Cent. Dig. §§ 937-943; Dec. Dig. § 362.*] BONA FIDE Considering all the circumstances of this case the fact that this money had been sent in connection with the mortgage loan desired by Bevis Bros.; that that, and that alone, had been the subject of all the correspondence, excepting the letter of January 7th, in which the title of Mr. Kik had been incidentally mentioned; that the agent had been expressly informed the principal was not interested in judgments subsequent to the execution or his mortgage; that it appears from the record the respondent never had money enough in its possession to perfect the title so far as the mortgage was concerned and also pay off the judgments which were subsequent liens on the land-we think it would be hard and unjust to hold the agent responsible for the payment of the money to Shelton, with whom the respondent had been instructed to close up the business, and in a transaction which it had been so often urged to bring to a culmination. The United States Supreme Court, in Very v. Levy, 15 How. 345, 14 L. Ed. 173, in discussing this question, lays down this rule: "But if the words in question touch only the particular mode in which an object, admitted to be within the power, is to be effected, and they are ambiguous, and with a reasonable attention to them would bear the interpretation on which both the agent and a third person have acted, the principal is bound, although upon a more refined and critical examination the court might be of opinion that a different construction would be more correct. Such an instrument is generally to be construed, as a plain man, acquainted with the object in view, and attending reasonably to the language used, has in fact construed it." In discussing the question of ambiguous 497.*] *For other cases see sarae topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep'r Indexes 114 P.-13 3450, defining a holder in due course, and de- 3. BILLS AND NOTES (§§ 92, 97*)-CONSIDERA- | holders in due course. The appellant adTION-FAILURE OF CONSIDERATION. A note given by the maker to the payee in consideration of the payee's agreement to furnish water for irrigation on the maker's land is supported by a valuable consideration, and no failure of consideration can occur until after the date fixed in the agreement to furnish the water. [Ed. Note.-For other cases, see Bills and Notes, Cent. Dig. §§ 190, 1372; Dec. Dig. §§ 92, 97.*] 4. BILLS AND NOTES (§ 332*) BONA FIDE HOLDER-EXECUTORY CONTRACT OF PAYEE.. Knowledge by an indorsee of a note that it was given in consideration of an executory agreement by the payee, which the latter subsequently fails to perform, does not deprive the indorsee of his character of a bona fide holder in due course, unless prior to its acquisition by him he had notice of the breach of the contract. [Ed. Note. For other cases, see Bills and Notes, Cent. Dig. §§ 805, 815, 816; Dec. Dig. § 332.*] 5. BILLS AND NOTES (§ 164*)-RIGHT TO NE GOTIATE-CONTRACTS. A contract binding a payee not to negotiate a note to any bank or mercantile institution of a designated city limits the right to negotiate the note only to the extent that it shall not be negotiated to the enumerated parties in the designated city.. [Ed. Note.-For other cases, see Bills and Notes, Cent. Dig. 88 411-417; Dec. Dig. 8 164.*] 6. MARSHALING ASSETS AND SECURITIES (5*) -RIGHTS OF PARTIES-SUBROGATION. A debtor gave to his creditor notes as collateral. A third person purchased the indebtedness from the creditor, and obtained an assignment of the collateral, the face value of which was in excess of the indebtedness, but the actual value of the collateral was not shown. A receiver was appointed for the debtor. Held, in an action against the maker of one of the collateral notes by the third person, that the court could not grant to the maker, equitable relief by requiring the third person to first exhaust other collateral, or to subrogate him thereto. [Ed. Note. For other cases, see Marshaling Assets and Securities, Cent. Dig. § 10; Dec. Dig. § 5.*] Department 2. Appeal from Superior Court, King County; Boyd J. Tallman, Judge. Action by Ben Moyses and another against Charles N. Bell. From a judgment for plaintiffs, defendant appeals. Affirmed. Peters & Powell, for appellant. Richard Saxe Jones, for respondents. CROW, J. Action by Ben Moyses and Charles B. Smith against Charles N. Bell. to recover principal and interest alleged to be due upon a promissory note. On trial without a jury, judgment was entered in plaintiffs' favor from which the defendant has appealed. The note reads as follows: "$3,200.00. Mountain Home, Idaho, February 7th, 1908. On or before one year after date I promise to pay to the order of the Great Western Beet Sugar Company thirty-two hundred & 00/100 dollars. Value received. Interest - per cent. Due February 7, 1909. Chas. N. Bell." The respondents alleged they were mitted the execution of the note, denied that respondents were holders in due course, and affirmatively pleaded that the note was executed and delivered to the Great Western Beet Sugar Company, a corporation, in part payment for a perpetual water right for the irrigation of 320 acres of land in Elmore county, Idaho; that the water was to be furnished in stipulated quantities on April 15, 1908, and at all times thereafter during irrigation seasons; that the payee failed to furnish the water on April 15, 1908, or at all; that the payee, being hopelessly insolvent, is in process of liquidation, and that these facts were all known to respondents when they acquired the note. Appellant's contention, in substance, is that the consideration for the note has failed; that it was transferred to respondents after its maturity and after such failure; that the payee's title was defective, and that respondents, not being holders in due course, cannot recover. The evidence was sufficient to show that the Great Western Beet Sugar Company was constructing an irrigation system in Idaho; that on February 7, 1908, it entered into a written contract with appellant, whereby, in consideration of $9,600, it sold him a perpetual water right for the 320 acres of land; that this contract recited the fact that the company had executed its warranty deed conveying the water right, the same to be placed in escrow with the Citizens' State Bank of Mountain Home, Idaho, together with a copy of the contract itself; that the bank was instructed to surrender the deed to appellant upon payment of the note; that the company was to deliver water to appellant's land after April 15, 1908, in quantities stipulated; that appellant paid $6,400 in cash, and at the same time made and executed the note for the remainder of the purchase price; that the contract contained the following stipulation: "Said party of the first part [the company] agrees that said promissory note shall not be sold, discounted or offered for sale to any banking or mercantile institution in the city of Seattle where the second party [appellant] deals or is acquainted"; that on or about February 8, 1908, the Great Western Beet Sugar Company, being indebted to the Citizens' State Bank of Mountain Home. Idaho, then delivered appellant's note and other notes to the bank as collateral security; that the company did not furnish water to appellant on April 15, 1908, or at any time thereafter; that there was a total failure of consideration for the note at all times after April 15, 1908; that early in October, 1908, respondents Moyses and Smith went from Seattle, Wash., to Mountain Home, Idaho, to investigate the Great Western Beet Sugar Company, and purchase a controlling interest in its capital stock; that for two or three weeks they made Section 3443, Rem. & Bal. Code, thus defines a holder in due course: "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 before 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." an examination of its property and affairs; "It is perfectly true as a general rule, that that about the same time they personally the bona fide holder of negotiable paper has agreed to purchase and take over from the a right to sell the same, with all the rights bank the indebtedness of the Great Western and equities attaching to it in his own hands, Beet Sugar Company, together with an as- to whoever may see fit to buy of him, whethsignment of the collateral security, including er such purchaser was aware of the origiappellant's note; that in pursuance of this nal infirmity or not. Without this right he agreement they paid the bank $14,000 on would not have the full protection which the October 28, 1908; that on February 10, 1909, law merchant designs to afford him, and nethree days after the maturity of the note, gotiable paper would cease to be a safe and respondents took over the remainder of the reliable medium for the exchanges of comdebt and the collateral notes from the bank, merce. For if one can stop the negotiability then paying for that purpose the additional of paper against which there is no defense, sum of about $25,000; that the face value by giving notice that a defense once existed of the collateral notes then held by the bank while it was held by another, it is obvious and transferred to respondents was about that an important element in its value is at $80,000, but no evidence was offered as to once taken away." their actual value. The appellant, citing Kost v. Bender, 25 Mich. 515, and other cases, insists that the collateral including his note was returned to the original payee, the Great Western Beet Sugar Company, which again acquired title thereto after maturity, on February 10, 1909; that the payee then assigned the note to respondents as collateral security for a new indebtedness from it to respondents then created, and that respondents, having actual notice of the failure of consideration, then acquired the note, subject to appellant's right to make his defense. We do not think the contention that the note was returned to the payee, or that it again acquired title thereto, can be sustained. The evidence on this subject supports the respondents' position, to the effect that they purchased the existing debt of the company, and took an assignment of the collateral. Assuming, without so finding, that after looking into the affairs of the company for a period of two or three weeks in October, 1908, respondents learned facts sufficient to inform them that the Great Western Beet Sugar Company had then failed to perform its executory contract with appellant, they would nevertheless, under section 3449, Rem. & Bal. Code, have all the rights of holders in due course, if the bank, their assignor, was itself a holder in due course. The section mentioned reads as follows: "In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument has all the rights of such former holder in respect of all parties prior to the latter." This section is only a statutory enactment of a rule theretofore announced by the courts. It is recognized in Kost v. Bender, supra, cited by appellants, as a rule existing in favor of all persons other than the original payee, who become purchasers from a bona fide holder of negotiable paper, even though such purchasers have notice of an infirmity in the paper, as between the original parties thereto. Speaking for the court, Cooley, J., said: Section 3450 reads as follows: "Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. * Our inquiry, therefore, is whether the bank from which respondents acquired title was a holder in due course. It is shown by the undisputed evidence of S. G. Yerkes and B. L. Williams that the note was assigned to the bank on or about February 8, 1908. Section 3446 thus defines a defective title: "The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud." The payee did not obtain this note or appellant's signature thereto by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration; nor can we find from all the evidence that, when it negotiated the note to the bank on February 8, 1908, before its consideration had failed, such negotiation was a breach of faith, or made under such circumstances as amounted to a fraud. If we are correct in this conclusion, the title of the payee was not defective when it negotiated the note to the bank, and under section 3450 no burden could ever be imposed upon the bank, or upon respondents as its assignees, to show that they were holders in due course; and this would be true even though respondents, the assignees of the bank, acquired the note after its maturity, and with notice that there had been a failure of its consideration at all times after April 15, 1908, occasioned by the payee's failure to perform its executory contract to thereafter furnish water. The Our findings are that the note was originally given for the company's agreement to convey the right and furnish water on and after April 15, 1908. This was a valuable consideration. No failure of such consideration could possibly occur until after that date. The bank held the note for more than two months prior to any such failure. courts have repeatedly held that knowledge by an indorsee of a note that it had been given in consideration of some executory contract or agreement of the payee, which the payee afterwards fails to perform, will not deprive the indorsee of his character of a bona fide holder in due course, unless prior to its assignment to him he had notice of the breach of the executory contract, and that such breach had theretofore occurred. Rublee v. Davis, 33 Neb. 779, 51 N. W. 135, 29 Am. St. Rep. 509; Miller v. Ottaway, 81 Mich. 196, 45 N. W. 665, 8 L. R. A. 428, 21 Am. St. Rep. 513; Davis v. McCready, 17 N. Y. 230, 72 Am. Dec. 461; Jennings v. Todd, 118 Mo. 296, 24 S. W. 148, 40 Am. St. Rep. 373; Maas v. Chatfield, 90 N. Y. 303; Tradesmen's National Bank v. Curtis, 167 N. Y. 194, 60 N. E. 429, 52 L. R. A. 430. The deed and contract for the water right were placed in escrow with the bank. Assuming this fact was sufficient to give it notice of the consideration for which the note was given, yet under the above authorities the bank was a holder in due course for value, having obtained the note long prior to the company's breach of its executory contract. In Maas v. Chatfield, supra, a note dated November 24, 1878, maturing in four months, was given in payment for salted hides sold to the maker by the payee, which were to be delivered December 20, 1878, prior to the maturity of the note. In an action against the maker by an indorsee, the court said: "He [the defendant] says, if the hides had been delivered, he should have paid the note. The sale and promise to deliver was not less a consideration than the actual delivery would have been. But applying his argument to the memorandum as part of the contract, the appellant contends that the note was made upon the 'agreement of Rosenbach & Co. to deliver the hides on December 20, or pay the note on that day.' If this is so, it would not, within the rule above stated, relieve the defendant. The condition was not to be performed until December 20th, so that from November 20th to that time it was a good and valid note, even in the payees' hands. The maker could not have reclaimed it. If it matured before December 20th, the was, they had the legal title and the power of disposition. It was negotiable by its terms, and was in fact sold for value and transferred to the plaintiff on the day it was given. A subsequent violation of the agreement on which it then stood would not vitiate the note, or subject it to a defense good only against one for which no consideration had been given." The contract between appellant and the Great Western Beet Sugar Company imposed an express limitation upon the payee's right to negotiate the note, to the extent only that it should not be negotiated to certain parties in Seattle. This would seem to indicate an assent of the appellant to its negotiation to other parties or elsewhere. In giving the note appellant thus relied upon the financial responsibility and integrity of the payee for its fulfillment of the contract. The following observations of the Supreme Court of Missouri, in Jennings v. Todd, supra, are pertinent: "A great part of the improvement of the country, and of business generally, is carried on with money raised by the discount of notes given upon executory contracts, and if the maker could be allowed to defend against such notes, in case of a breach of contract, on the ground that the indorsee, though in other respects bona fide, had knowledge of the transaction out of which the note grew, all confidence in such notes as negotiable paper would be destroyed, and such business would be paralyzed. By making and delivering a negotiable note, the maker is held to intend that it may be put in circulation, and that no defenses against it exist. In purchasing such note no inquiry as to the consideration is required. If a failure of consideration occur, the maker must look to the payee for indemnity." In Miller v. Ottaway, supra, the Supreme Court of Michigan, after citing authorities, said: "From the foregoing authorities, and upon reason, the correct doctrine appears to be that it is not a good ground of defense against a bona fide holder for value that he was informed that the note was made in consideration of an executory contract, unless he was also informed of its breach. If he had knowledge of the breach, the defense may be interposed. A mere collateral agreement or warranty made at the time the note was given does not affect the validity or negotiability of the note, although the purchaser before maturity may know of such agreement." On the facts proven and the authorities cited, we conclude that the bank was a holder in due course, and that the respondents, having derived title from the bank, and not being parties to any fraud or illegality affecting the note itself, have, under section 3449, supra, succeeded to all rights of the bank as its assignee. Appellant, asking the equitable relief that respondents be required to first exhaust other collateral, or that he be subrogated there fendant is informed, and verily believes, the plaintiffs acquired the note sued upon, if at all, as collateral security to another and principal obligation of the Great Western Beet Sugar Company and along with a large amount of other collateral and securities, the amount or value of which to this defendant is unknown, but which he alleges is largely in excess of the consideration paid by him for said principal obligation, if any was so paid, and also largely in excess of said principal obligation or note." There was evidence that collateral of the par value of $80,000 was transferred to respondents by the bank when they succeeded to its rights, but there is no Appeal from District Court, Morris County. Action by Amy Carey against the Chicago, Rock Island & Pacific Railway Company. Judgment for plaintiff, and defendant appeals. Reversed. M. A. Low, Paul E. Walker, and Nicholson & Pirtle, for appellant. Hamer & Harris and C. A. Crowley, for appellee. MASON, J. G. W. Carey was run over by a Pacific Railway Company, receiving fatal incar of the Chicago, Rock Island & against the company, and it appeals. juries. a judgment His wife recovered workman in a stone quarry two miles west Carey was employed by the defendant as a of Dwight. A spur track 20 rods long ran from the main line in a southwesterly direction to the quarry, curving around an embankment which cut off a view of the main track east of the switch. The spur track was used exclusively for setting in empty cars to be loaded, and shifting loaded cars to the main line. The cars upon it evidence of the actual value of such collateral. The appellant did not urge this defense on the trial below, although pleaded, nor did he ask findings relative thereto. It appears that the Great Western Beet Sugar Company has passed into the hands of a receiver. After respondents have fully satisfied the debt due them from the Great Western Beet Sugar Company by collecting and applying the proceeds of the collateral, the remainder of such collateral, if any, will belong to the were handled only by one train, an eastcompany, or its receiver. The appellant in-bound daily freight, due about 11 o'clock in sists that we should make an order of the morning. Usually the train would stop subrogation, so that he may be enabled to west of the spur, uncoupling the engine to look directly to any surplus collateral now held by respondents, which they may not would pass without stopping, in which case do the necessary switching. Infrequently it need to secure the entire indebtedness due it would stop on its east-bound trip on the them; but, in view of the rights of the reVery ceiver, and of other possible creditors who following morning and do the work. might also be entitled to subrogation and to infrequently it would go through to Dwight, participate in the same collateral, we think and after an interval back up from there no such order should be made in this action. and take out the loaded cars and set in empty ones. On the day of the accident two The judgment is affirmed. crews of workmen were engaged in the quarry. That to which the deceased belonged were stripping or uncovering rock near the switch. Their duties did not require them to be upon the track; they had nothing to do with loading or handling the cars. The other crew were quarrying and loading near the west end of the spur. The freight train referred to was about two hours late. It ran past the switch to Dwight, and later backed up to pick up some cars. Shortly MORRIS and CHADWICK, JJ., concur. (84 Kan. 274) CAREY V. CHICAGO, R. I. & P. RY. CO. (Syllabus by the Court.) A number of workmen were employed in uncovering rock in a quarry operated by a railroad company, their duties not involving loading or handling the cars. Several loaded cars awaiting removal were standing upon a spur track near where they were at work. On account of a rain all but one of them entered the cars; he took shelter beneath a car, and was run over and killed when a freight train backed into the cars in the process of picking them up. His widow recovered a judgment; the jury finding that the railroad company was negligent in failing to give proper warning of the approach of the train. Held, that the defendant owed no duty to the deceased to give such a warning, and that his own conduct constituted negligence as a matter of law. [Ed. Note. For other cases, see Master and Servant, Cent. Dig. §§ 681, 684-686, 701-742; Dec. Dig. §§ 137, 233.*] before this a hard rain had set in. Four loaded cars were standing on the spur near the switch, close to, but not touching, each other. All of the crew to which the deceased belonged, except himself, took refuge in the third car from the switch. He, as found by the jury, took shelter under the fourth. The workmen of the other crew retired to a box car provided by the company, used as a toolhouse and office, situated near the end of the spur, but off the track. The train backed into the nearest of the cars with such force as to push them together and move the furthest one about a car's length. Carey was thereby run over and fatally injured. A special finding stated that the negligence of the defendant consisted in not giving a proper warning signal. We con For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep'r Indexes |