Case ID: ohio-st_156/html/0191-01.html
Source: Caselaw Access Project
Author: {"author": "Weygandt, C. J. Taet, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The First Discount Corp., Appellee, v. Hatcher Auto Sales, Inc., Appellant.
    (No. 32536
    Decided November 14, 1951.)
    
      
      Messrs. Shaman, Winer & Shulman and Mr. Paul Ziegler, for appellee.
    
      Mr. Joseph W. Sharts and Mr. Harold H. Singer, for appellant.
   Weygandt, C. J.

Among the defendant’s numerous contentions, the only one requiring consideration by this court is whether the plaintiff is a holder in due course under the provisions of Sections 8119 and 8157, General Code.

The first of these reads as follows:

“When the instrument is wanting in any material particular, the person in possession thereof ha& a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that such an instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if such an instrument after completion is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.”

Section 8157 reads:

“One is a holder in due course 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 previously had been 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 be had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. ’ ’

The gravamen of the defendant’s complaint is that the blank spaces in the note had not been filled completely at the time it was negotiated to the plaintiff.

The uncontradicted evidence is that the defendant made a practice of discounting its notes with the plaintiff ; that whenever a sale was in prospect the defendant reported the matter to the plaintiff and the latter would investigate the prospective purchase for the purpose of determining whether the note would make an acceptable investment; that if the plaintiff approved the transaction, the defendant would proceed to have the purchaser sign the form note; and that the defendant then would take the note to the plaintiff ’s office where the agreed figures' would be inserted in the proper spaces, and the note would be indorsed by the defendant.

That procedure was followed in this instance, and the correctness of the figures is not questioned.

Clearly the plaintiff is a holder in due course under the provisions of the foregoing statutes.

. Furthermore, although the indorsement is a qualified- one, being without recourse, the defendant warranted the capacity of the maker, Lynch, to contract. The following provision of Section 8170, General Code, makes it equally clear that the qualified indorsement did not have the effect of relieving the defendant of its liability:

“Every person negotiating an instrument by delivery or by a qualified endorsement warrants:
l i * * *
“3. That all prior parties had capacity to contract.
# * 7 J •

Neither the plaintiff nor the defendant was aware of Lynch’s minority at the time he signed the note.

Under the circumstances the judgment of the Court of Appeals must be affirmed.

Judgment affirmed.

Zimmerman, Stewart, Middleton, Matthias and Hart, JJ., concur.

Taet, J.,

concurring. I concur in the judgment and in paragraph two of the syllabus but regret that I can not concur in the balance of the syllabus or in the majority opinion because they are based upon the theory that the plaintiff was a holder in due course. In my opinion, it was not necessary in the instant case for the plaintiff to establish that he was a holder in due course. Furthermore, I doubt whether the evidence would justify the conclusion that the plaintiff was a holder in due course.

As the majority opinion states, defendant had the maker sign the form note, took this note to the plaintiff’s office where the proper figures were inserted in the proper places, and the note was then indorsed by the defendant. To use the words of plaintiff’s brief in this court, “the note was taken to plaintiff, where plaintiff caused the same to be filled in as regards the amount and the payee. ’ ’

Under sueh circumstances I can not see how it can be held that the plaintiff is one who, to use the words of Section 8157, General Code, “has taken the instrument under * * * conditions * * * that it is complete and regular upon its face.’? While the plaintiff might thereafter be able to negotiate the note to a holder in due course, plaintiff was certainly not such a holder.

However, since the note was, to use the words of Section 8119, General Code, “filled up strictly in accordance with the authority given and within a reasonable time,” the note “when completed may be enforced against” even one “who became a parly thereto prior to its completion.”

By reason of the provisions of Section 8170, General Code, the defendant warranted “that all prior parties had capacity to contract. ’ ’

The statutory language used in that section of the Uniform Negotiable Instruments Act clearly indicates that the right to enforce that warranty may be asserted by a holder who is not a holder in due course.

Thus, Section 8170, General Code, provides in part:

“Every person negotiating an instrument by delivery or by a qualified indorsement warrants:
í í ^ w
“3. That all prior parties had capacity to contract.
“4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.
“But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee.
“* * V’ (Emphasis added.)

On the other hand, Section 8171, General Code, provides in part:

“Every indorser who indorses without qualification, warrants, to all subsequent holders in due course-,
“1. The matters and things mentioned in paragraphs numbered one, two and three of the next preceding section.
“2. That the instrument is at the time of his indorsement valid and subsisting.
“In addition, he engages that * * (Emphasis added.)

It is obvious from a comparison of the two foregoing sections of the General Code that the warranties provided for in Section 8170, General Code, are available to other holders than those in due course. Section 8170, General Code, states that every person negotiating an instrument “warrants” and also recognizes the warranty as extending in favor of a “holder,” whereas Section 8171, General Code, states that the more extensive warranties there involved are only to “holders in due course.” There is no language in Section 8170, General Code, which indicates that the warranties there provided for are only to holders in due course.

As the majority opinion states, the plaintiff had no notice of any incapacity, by reason of minority, of the maker of the note. By paying the defendant for the note, it is clear that the plaintiff relied on the defendant’s warranty that the maker did have capacity to contract. It necessarily follows that the plaintiff may, as a holder of the note although not a holder in due course, enforce the defendant’s liability on the warranty provided for by Section 8170* General Code; and that therefore the judgment must be affirmed.