Court Opinion

ID: 6691262
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:38:07.391345+00
Date Added: 2024-06-11T16:01:07.107861
License: Public Domain

DILLON, J.
(dissenting). On April 15, 1920, the partnership of Young & Engelhard borrowed from and executed their note to plaintiff bank for the sum of $2,000. On August 18, 1920, said note was renewed by the partnership in the name of Young & Engelhard. O'n September 2, 1920, a corporation was formed under the name of Young & Engelhard Creamery Company, with A. J. Engelhard, of the partnership of Young & Engelhard, as manager of the Young & Engelhard Creamery Company. The above note of said partnership matured in November, 1920, and was renewed by a note in the sum of $2,000 payable to plaintiff bank, and'executed in the name of the Young & Engelhard Creamery Company. Said note was again renewed in March 1921, in the name of the Young & Engelhard Creamery Company. The note plaintiff bank seeks to recover upon is a note executed by defendant herein in the amount of $100, and payable on the face of it to' the Young & Engelhard Creamery Company. On June 3, 1920, upon being asked by plaintiff bank to liquidate some of his past indebtedness, A. J. Engelhard indorsed the name of Young & Engelhard Creamery Company on the -back of the note in dispute, together with. 11 other notes of like character. A deposit slip, showing a credit of $1,200, the face amount of these 12 notes, was *474executed, by the plaintiff 'bank through its officers. At the time this deposit slip was delivered, or prior thereto, said A. J. Engelhard executed a check to plaintiff bank in the sum of $1,218, drawn against these 12 notes in the sum of $1,200, and which was applied by the officers of plaintiff bank upon the note dated March 21, 1921, this note being a renewal of the note executed April 15, 19120, by the partnership of Young & Engelhard. Plaintiff bank -brought this action to- recover on the note for $100 executed by defendant to- the Engelhard- Creamery Company, and the trial court found that the plaintiff bank had no- title to this note, dismissed the action, and entered judgment for the defendant. It is from this decision and an order denying a new trial that this appeal is taken.
It is the contention of the appellant that it is a holder in good faith of the promissory note of $100, while respondent contends that appellant has no- title in the note.
The various assignments of error present like- questions, so I have grouped them together, as was done by appellant’s counsel. Appellant first argues that respondent cannot question appellant’s title to the note in dispute, since plaintiff is a bona fide purchaser. The burden of proving ownership of a negotiable instrument is always upon the party alleging ownership, and appellant has wholly failed to prove that it is a bona fide purchaser of said note. The evidence clearly sho-ws that officers of appellant bank were fully aware that the funds of the corporation of Young & Engelhard Creamery Company were being used by the manager of that corporation, namely, one A. J. Engelhard, to- pay on a note executed by the corporation in renewal of a note originaly executed by the partnership of Young & Engelhard. In State Bank of Alcester v. Weeks, 189 N. W. 941, 45 S. D. 639, this court said:
“Title to- commercial paper passes by indorsement, and, when the indorsement is- made by one other than the owner, it is necessary to show that the one making such indorsement had authority from- the owner to indorse the same, and the party asserting ownership by virtue of such indorsement has the -burden of proving such authority.”
Plaintiff bank had the right to- demand that A. J. Engelhard prove his authority to indorse- said note, but no- evidence is offered to show that said A. J. Engelhard ever had authority from the *475corporation of the Young & Engelhard Creamery Company to indorse a note of said corporation in payment of a debt of the partnership of Young & Engelhard. Section 1727, R. C. 1919, provides that—
“Where a signature is forged or made without authority it is wholly inoperative, and no right to retain the instrument or to give a discharge therefor or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.”
Respondent is in no way estopped from setting up a want of authority. The argument of the appellant that the corporation would be estopped to question the acts of its secretary is entirely Without merit. Jenkins v. Planters’ Bank, 126 P. 757, 34 Okl. 607;
“* * * The officer of a corporation is not permitted to divert to his own use the funds of'his principal without authority to do so, and one who purchases such funds without evidence of such authority does to at his peril.”.
Mooney v. O. P. Mooney Co., 128 P. 227, 71 Wash. 263:
“An officer who receives the note * * * of a corporation in payment of the personal debt of the officer with whom he deals does so at his peril. The reason is that such a transaction is not in the regular course [of business] but is presumptively ultra vires.”
The decision of the trial court was made upon the question of appellant’s title to the note after a clear preponderance of the evidence, and I think the judgment and order of the trial court should be affirmed.