Case Name: Wormer & Sons v. The Waterloo Agricultural Works et al.
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1878-12-13
Citations: 50 Iowa 262
Docket Number: 
Parties: Wormer & Sons v. The Waterloo Agricultural Works et al.
Judges: 
Reporter: Iowa Reports
Volume: 50
Pages: 262–267

Head Matter:
Wormer & Sons v. The Waterloo Agricultural Works et al.
1. Promissory Note: bona fide holder: corporation. Where a note executed by a corporation was subsequently indorsed by the payee without recourse, the consideration therefor never having been paid, and it then came into the possession of the secretary of the company, who in turn negotiated it for value before maturity, it was held that the party taking it from the secretary was entitled to protection as a bona fide holder.
2. -: extension of time. The granting of an extension of time is a sufficient consideration to uphold a note which has been obtained and negotiated in fraud of the maker.
Ajopeal from Black Hawk District Court.
Friday, December 13.
Action to foreclose a mortgage. The plaintiffs claim to be the owners of a certain promissory note executed by the defendant, the Waterloo Agricultural Works, for three thousand dollars, and of a mortgage executed to secure the same upon certain real estate. The plaintiffs received the note as collateral security from one McCall, who was at the time secretary of the defendant company. McCall claimed to be the owner. The company denies that the note was ever rightfully delivered to him, or to any other person. Other facts are stated in the opinion. Judgment for defendants. Plaintiffs appeal.
Boies A Couch, for appellants.
J. L. Husted and Alford A Ehoell, for appellees.

Opinion:
Adams, J.
The note was executed payable* to the order of one Edmund Miller. Negotiations had been had with him fry kfre defendant company, for the purpose of obtaining a loan of money from him. The note, ^ag Qne ^ noj;eg <jrawn f0r three thousand dollars each. At the time they were executed it was expected that Miller would take them. The negotiations with Miller, however, failed, and as the notes had been executed payable to his order he indorsed'them in these words: "Without recourse to me. Edmund Miller." McCall then agreed with the treasurer of the company to take the note in suit, and he gave therefor his own notes amounting to two thousand dollars, and pledged the note in suit before maturity to the plaintiffs, for an antecedent debt, procuring an extension of time by reason of giving such security.
The question presented is as to whether the plaintiffs acquired a good title to the note. The note is negotiable, and they claim to be bona fide holders. In Central Bank of Brooklyn v. Hammett, 50 N. Y. 158, the bona fide holder of a negotiable note is defined to be "one who has acquired title in good faith, for a valuable consideration, from one capable of transferring it, or from one in the possession of paper with an apparent right to transfer it, and without notice of any defect in his title or right to transfer. " The appellants claim, however, that McCall did not acquire a good title, and that the plaintiffs took the note from him with notice. They took the note with notice, of course, of whatever appeared on its face. Now it is said that it appeared on the face of the note that McCall was the secretary of the company. While, then, he held the note, it is said he should have been regarded as holding it as the secretary of the company, as the fact really was. The appellants cite Claflin et al. v. Farmers' & Citizens' Bank of L. I., 25 N. Y. 293. In that case the plaintiff sought to recover upon a check drawn, certified and negotiated by the president of the defendant bank for his own benefit. The plaintiffs claimed to be bona fide holders, but the court held otherwise.
The doctrine of that case is, we think, not applicable to the case at bar. The note was made payable to the order of Edmund Miller, and by him indorsed. The presumption arising from the face of the note and indorsement was that the note had been negotiated to Miller, and by him trans ferred. This certainly must be so unless the presumption is rebutted by the character of the indorsement, together with the fact that the note might be regarded as in the hands of the company when in the hands of its secretary. The indorsement was without recourse. While this is consistent with the fact that the negotiation with Miller had simply failed, yet looking at the indorsement alone that would not be the inference. Where the person named as payee in a note fails to take the note, the more proper course, ordinarily, and we think the most usual course, is for the maker to suppress the note, and not take an indorsement of it from the payee. Nor do we think that the appellant's theory is supported to any great extent by the fact that McCall was the secretary of the company. He claimed to hold the note in his own right, and every circumstance known to the plaintiffs was consistent with such claim. We cannot say that there was a lack of prudence upon their part in not questioning the claim. It is certainly common enough for the officers of a corporation to purchase its paper. We are of the opinion, then, that the plaintiffs are bona fide holders, and entitled to recover to the extent of the debt for which the note was pledged.
The defendant pleads usury, but we omit to pass upon the question. Most of the essential facts touching the plea of usury are similar to those in the case of Pond against this defendant, decided at this term. There must.be usury, we think, if McCall's title to the note were valid. We are inclined to think it was not, and that there is no usury; but McCall is not a party to this action, and we leave the question undetermined.
Reversed.