Court Opinion

ID: 9542385
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:33:41.356599+00
Date Added: 2024-06-11T15:07:49.470332
License: Public Domain

Ott, J.
(dissenting) — The undisputed facts in this case are these: Stevens-Norton, Inc., is an investment broker corporation doing business in Seattle. On or about April 21, 1961, the broker, as agent for Maude K. Henderson, offered for sale at a 6 per cent discount an installment note, in which she was designated as payee. The note, signed by Arthur M. Russell, Jr., and Jane H. Russell, his wife, as makers, was in the principal sum of $6,000, and bore interest at the rate of 10 per cent per annum. It was dated April 14, 1961, and the first monthly payment of $100 was due and payable May 28, 1961. The note was secured by a second mortgage on certain real estate belonging to the Russells. The mortgage was recorded in the office of the county auditor April 21, 1961.
William L. Baske and wife accepted the offer and paid Stevens-Norton, Inc., $5,640 for the $6,000 note. May 2, 1961, 26 days before the maturity date of the first install*274ment payment on the note, Maude K. Henderson endorsed the note as follows:
For Value Received and without recourse this note is assigned together with mortgage securing the same to William L. Baske & Lilliam [sic] A. Baske, his wife.
May 3rd, she executed a written assignment of her mortgage, which was recorded in the office of the King County Auditor on May 5, 1961.
December 22, 1961, the Russells being in default in'the payment of the monthly installments, the Baskes commenced this action to recover from the Russells the balance due on the note in the approximate sum of $5,751.66, and to foreclose the mortgage.
. The trial court held that the note was subject to the defense of usury and, after deducting the penalties for a usurious contract, entered judgment in favor of plaintiffs for $1,808.01, and ordered that the mortgage lien be foreclosed. The majority sustain the judgment.
I do not agree with the conclusion of the majority for the following reasons:
(1) The majority concede that William Baske and wife were innocent purchasers of a negotiable instrument for which they paid a valuable consideration before maturity, and that they were unaware of the transactions between the Russells and Maude K. Henderson, and Stevens-Norton, Inc. The majority opinion disregards and ignores the negotiable instruments law of this state.
RCW 62.01.057 provides:
A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. (Italics mine.)
A negotiable instrument purchased before maturity in due course of business is, by statute, not subject to the defense of usury. Motor Contract Co. v. Van Der Volgen, 162 Wash. 449, 298 Pac. 705, 79 A.L.R. 29 (1931); Fry v. Knouse, 142 Wash. 500, 253 Pac. 802 (1927); American *275Sav. Bank & Trust Co. v. Helgesen, 64 Wash. 54, 116 Pac. 837 (1911).
One is a holder in due course of a negotiable instrument when (1) it is complete and regular on its face, (2) it is purchased before maturity, (3) it is purchased in good faith, and (4) it is purchased without knowledge of infirmity in the instrument. Garner v. F. T. Crowe & Co., 138 Wash. 584, 244 Pac. 970 (1926).
The note, as well as the mortgage, in the instant case is complete and regular on its face. The note and mortgage were executed by the makers, payable to Maude K. Henderson, were delivered to Stevens-Norton, Inc., for sale, and were sold prior to maturity.
All of the elements necessary to establish that the Baskes were holders of a negotiable instrument in due course are here present. The uniform negotiable instruments act provides that instruments purchased in due course are “free from any defect of title of prior parties, and free from defenses available to prior parties among themselves.”
(2) The majority, after ignoring the negotiable instruments law of this state, embark upon a new concept of the law of contracts. They say that William Baske “was unaware that the money which he was advancing was to he the original consideration for the note and mortgage.” (Italics mine.) They conclude that Mr. Baske was in fact the lender, “although he was unaware of it.” (Italics mine.)
The majority, by this opinion, have not only wrecked the negotiable instruments law of this state but the law of contracts as well. How is it legally possible to enter into a binding contract and be “unaware of it”?
The basic element involved in making a legal contract is that there must be a meeting of the minds of the parties to the contract. There is not a scintilla of evidence in this record that the Baskes, either expressly or impliedly, ever agreed to loan the Russells any money. Since there was no meeting of minds in this regard, the relationship of borrower and lender, as between the Baskes and the Russells, is not present in this case.
*276The majority’s conclusion that one can enter into a contract to loan money to another and be “unaware of it” finds no support in the law of contracts or of negotiable instruments.
(3) In disregard of the facts, the majority hold that the Russells were offering to borrow money from any lender at a usurious rate of interest. After making this erroneous factual determination, the majority cite 165 A.L.R. at 642, which states that “If a note is offered for discount by the maker ” the stigma of usury attaches. Mrs. Henderson, in the instant case, was not the maker of this note and mortgage. She was the payee, and, as such, she sold her note and mortgage to the Baskes through her broker, Stevens-Norton, Inc.
It is the law of this state that the owner and payee of a negotiable instrument may sell his security at a discount and such transaction is not usurious. Acme Finance Co. v. Zapffe, 161 Wash. 312, 296 Pac. 1050 (1931). In the cited case, the note was discounted 12 per cent, and in the instant case, the discount to the purchaser was only 6 per cent.
(4) It is the established law of this state that factual issues are resolved in the trial court, yet, in total disregard of this well established rule, the majority find that “She [Mrs. Henderson] thought she was an accommodation endorser.” The trial court made no such finding and the evidence is entirely to the contrary. Her name appears in the note as “payee.” She assigned the note, as named payee, to the Baskes. As payee, she executed a separate assignment of the mortgage, which was recorded. These written instruments establish conclusively that Mrs. Henderson knew that she was the payee mentioned. Her conduct certainly was not that of an accommodation endorser, and there is nothing in the record to sustain this factual determination made by the majority.
Whether one has loaned money to another, thereby becoming a lender, is a factual determination. The trial court did not find that the Baskes had loaned any money to the Russells; nor did the Russells testify that they thought *277they had borrowed any money from the Baskes. There is no evidence in this record to sustain the conclusion of the majority that the relationship of borrower and lender existed between the Russells and the Baskes.
(5) The majority put their stamp of approval on deceit and misconduct. It is conceded that the Russells and Mrs. Henderson entered into an illegal transaction, in that the Russells knowingly executed a note and mortgage to Mrs. Henderson for which she gave no consideration. In furtherance of their deceptive conduct, the mortgage was recorded so that it gave notice to the world that Mrs. Henderson was the owner of a second mortgage on the Russells’ property. To accomplish their fraudulent design, they then offered to sell the note and mortgage through their broker, Stevens-Norton, Inc., at a 6 per cent discount. The Baskes were not aware of this subterfuge, and were innocent purchasers for value.
The majority state: “The net amount made available to the defendant [Russell] was $4,750. After the defendant had repaid $550 of this amount, he defaulted.” The court awarded judgment against the Russells in the sum of $1,808. Therefore, the Russells were unjustly enriched, as a result of their own misconduct, in the amount of $2,392.
In Sinnar v. LeRoy, 44 Wn.2d 728, 731, 270 P.2d 800 (1954), we said: “A court will not knowingly aid in the furtherance of an illegal transaction, but will leave the parties where it finds them.”
It has never been the policy of this court to reward dishonesty and penalize the victim. Scroggin v. Worthy, 51 Wn.2d 119, 316 P.2d 480 (1957); Wooddy v. Benton Water Co., 54 Wash. 124, 102 Pac. 1054 (1909).
I agree with the majority that the commission charged by Stevens-Norton, Inc., is an unconscionable fee. However, regulation of these investment brokers is a legislative matter. If the Russells and Mrs. Henderson were overreached by their agent, they have a cause of action against Stevens-Norton, Inc.
*278For the reasons stated, the judgment of the trial court should be reversed.
Hill, Weaver, and Hunter, JJ., concur in the result of the dissent.