Court Opinion

ID: 6689013
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:35:46.211665+00
Date Added: 2024-06-11T16:01:03.234606
License: Public Domain

McCOY, J.
On February 2, 1910, defendants, executed and -delivered to one Windherst a series of six promissory notes -for $1,000 each, as part payment for a stock of merchandise sold and delivered to defendants by Windherst. One of said notes was payable on or before Miar-ch 2, 1910; two on or before February 1, 1911; two on- or before February 2, 1911; and one on or before February 2, 1912. One of the notes due on or before February 1, *581911, had indorsed thereon a payment of $200 at the time of its ¡delivery. All these notes were made payable at the James Valley Bank at Huron. Windherst indorsed and delivered to plaintiff, .¡prior to maturity, in good faith, for the consideration of $3,800, four of said notes, namely, the two maturing on of before February 1, 1911, one maturing on or before February. 2, 1911, and ■the one maturing on or before February 2, 1912. Plaintiff instituted this suit to recover on the note maturing February 2, 19x2, alleging nonpayment thereof. Defendants admitted the execution arid delivery of the note, and pleaded as an affirmative partial defense a payment thereon of $511.06. On the trial it appeared, without dispute, that defendants on September 18, 1913, paid on said note to Windherst the siim of $511.06. There was evidence tending to show that Windherst never paid this $511.06 to plaintiff. There was no evidence tending to show that Windherst had actual possession of said note at the time of said payment. At 'the close of the evidence plaintiff moved for á directed verdict on the grounds: (1) That the undisputed evidence shows that the said payment was made to a person not in possession-of the note, ‘arid after defendants' had knowledge that the note had been sold arid'delivered- to plaintiff; (2) that there is' no evidfetlce to show the'relation of principal and agent' between plaintiff and Wind-Tierát ’(’3)-'that the'’note;"'being negotiable, ’could be discharged "diily by 'payment' to the owner or person in possessioh thereof. -The motion to direct a verdict was denied, ánd the issue as to ^udh 'payment was submitted to the jury, and a verdict returned in favor of defendants. The appellant assigns as'error the over-•fiitlmg'of 'such: -motion.'v ■■ r
[1-3] There can be no question /but what .the rule of. law_Js 'th'at a'pegptiabie nóte must be .paid' to .the legal owner and holder 'if the' time -of ''such payment,'' arid that a payment .to .any .other person not in possession of'the rióte will not bind the legaj owri.er and holder, unless the. legal owner has either expressly of by irn-^ficatítíh authorized-such other perso’ir to- ’récélve such payment for 'frimV‘The-person állegingm-uéh 'payment has the brirden 0‘f -slioiw-¡iflg that the-payment was ffiádé fo''a'pér§órí! aüthofized' to receive ;thé same.' Actual authority-df á-'péfsoii'riot the -Owner-or possessor •óf’W-hbfe t<S': receive 'payment riéed-nóTbe éstab'lisliéd':-'by 'dífédt 'testimony, - but"’ may* b-e’ 1'established'-fry dfcümstanceS. ’Reich'.V. *59Kellogg, 8 S. D. 596, 67 N. W. 687; McVay y. Bridgman, 21 S. D. 374, 112 N. W. 1138; Campbell v. Gowans, 35 Utah, 268, 100 Pac. 397, 23 L. R. A. (N. S.) 414, and exhaustive note, 19 Ann. Cas. 660; Bautz v. Adams, 131 Wis. 152, 111 N. W. 69, 120 Am. St. Rep. 1030; Doe v. Callow, 64 Kan. 886, 67 Pac. 824; Hoffmaster v. Black, 78 Ohio St. 1, 84 N. E. 423 ,21 L. R. A(N. S.) 52, 125 Am. St. Rep. 679, 14 Ann. Cas. 877; Doyle v. Corey, 170 Mass. 337, 49 N. E. 651. In this case, as we view the effect of the evidence, the defendants fully met the burden of proof by showing facts and circumstances warranting the trial court in denying plaintiff’s motion to- direct a verdict.
[4] The four notes assigned to plaintiff were executed and delivered at Huron, where defendants and Windherst then resided. Shortly after the making of said notes Windherst -became a resident of Sherman, this state. The plaintiff bank was at all times located in the state of Illinois. The note sued upon in this action was the last to become due of those assigned to plaintiff. The first to- be paid of the notes assigned to- plaintiff was the one due February 1, 1911, on which $200 had been indorsed. On January 30, 1911, defendants paid to Windherst $952, of which $800 was to- satisfy the principal unpaid on this note, and $152 was to apply on the -interest of the other three notes held by plaintiff. Windherst sent this payment to plaintiff, and plaintiff applied1 $800 thereof on the principal of said note, and -the remainder on the interest of the other notes on February 7, 1911, and on that date returned the canceled note to Windherst at Sherman, and thereafter Windherst sent the canceled note by .mail to -defendants. The ether note due February 1, 1911, and' the one du-e February 2, 1911, assigned to plaintiff, were not paid when due, but were paid by -defendants by a check for $2,120 mailed to Windherst at Sherman on February 28, 1912. The plaintiff actually received the payment at its bank in Illinois on .March- 6, 1912, while On March 4th Windherst sent the -canceled notes to defendants from Sherman by mail. Stamped across the face -of each -of these notes appears: “Paid Mar. 1, 1912, Sherman State Bank, Sherman, S. D.” One of the defendants- who had charge of the payment of said notes in substance testified that:
“In making these -remittances to Windherst, I suppose we were making -them- to the owner of -the notes, and did not -know *60anything about the bank’s, ownership' until we received that letter •in March after Windherst’s death.”
The letter here referred toi bears1 date “March 2, 1914.” The witness, continuing, further testified:
“We received a letter from, plaintiff bank about March, 1912, asking us if we 'had made payment to Windherst on our note then due. In this letter they did not claim to1 own the notes, and nothing therein to indicate that they had any interest in them, not any more than possibly making collections for Windherst. We answered, and informed them we had sent the money to Windherst, and had expected a reply if it was not all right, and there was no reply, and we supposed it was all right. We had talked with Windherst a couple of times about extending the time of payment. He said he had put some of our notes up as collateral to a man in Illinois, hut that he was looking after the collection of them himself. We never received any word from the bank granting us an extension of time. All our arrangements were with Windherst.”
An officer of plaintiff bank, among other things, in substance testified, when, explaining why Windherst had been, permitted to collect and send the payments to plaintiff, that most of these payments were sent to plaintiff by Windherst before maturity, and that plaintiff could not say anything* about it until it was due. Other written testimony of plaintiff conclusively shows that all the prior payments of principal on all prior notes were made after ■due; the most of them more than a year after due. This witness for plaintiff further testified that the letters asking for an extension of time came through Windherst to plaintiff; and this witness further testified that the two notes paid by the $2,120 payment might have been sent to the Sherman State Bank for collection, but that they were not sent fe> the James aVlley Bank of Huron, where they were payable, and in which city defendants resided. The letter of March 2, 1914, written to defendants by plaintiff after the death of Windherst, referred to in defendants’ testimony, is as follows:
“our note given to Mr. J. H. Windherst was due on the 2d of Feb. Owing to the illness of Mr. Windherst, I suppose he overlooked the payment of the same. Since Mr. Windhurst’s death I suppose that we will have to deal directly with each other, *61and as the property on which the money was loaned is in your locality I think that you had better make arrangements to take up the paper. The date of the last interest payment is Feb. 2, 1913. The interest is 8 per cent. Upon receipt of Chicago or New York Exchange for -the amount due I will mail same to you.”
This testimony shows that plaintiff, without objection, permitted Windherst, the original payee, to collect and receive both principal and interest on all the prior due notes of the series held by plaintiff. The fact that plaintiff wrote defendants making inquiry as to whether defendants had made payments to Windherst, and defendants answered back that they had, and plaintiff made no reply or objection thereto, was something clearly tending- to mislead defendants into the belief that payments so made were all right. When defendants so answered -this inquiry, it was plaintiff’s plain duty, if Windherst was not authorized by plaintiff to receive such payments, to have immediately notified defendants. Plaintiff could not remain silent under those circumstances and not thereafter be bound by the acts of Windherst in- receiving payments of principal and interest on any of said notes. The fact that, when defendants desired an extension of time for payment on the notes held by plaintiff, they applied tO' Windherst, and were granted such extension by and through him, was sufficient to warrant defendants in the belief that Windherst was the owner of said notes or acting as the agent of the person who held them as collateral. Plaintiff authorized such extension of time through Windherst. The clause, “Since Mr. Windherst’s death I suppose we will have to deal directly with each other,” contained -in the letter from plaintiff to. defendants, although written after the payment in question, clearly shows the situation of affairs existing prior to Winidherst’s death'. This letter dearly indicates that plaintiff had been transacting its business in relation to the collection of these notes from defendants1 through Windherst prior to his death. The correspondence between plaintiff and Windherst shows that .plaintiff had knowledge that these notes assigned to plaintiff were given as a part of the transaction of the said sale of the stock of merchandise.
■Such 'circumstances as these were amply sufficient to warrant the jury .in finding that plaintiff authorized Windherst to receive the payment on the note in question. All the cases hereto*62fore cited supra 'bold, under less strong surrounding circumstances than appear in the -case present, that, where the owner and bolder of commercial paper, without objection, permits another person not in possession of such paper to make collections and receive payments of interest and principal from the payor on prior installments of such paper, such facts are sufficient from1 which to imply either actual or ostensible authority from such owner to receive payments of interest and principal thereafter made to such other person by the makers of such negotiable paper. These cases hold that the fact that such person who: received such subsequent payments had nolb at any time the possession of such paper is not conclusive as against the payor, and that, if such person to whom such prior payments were made had no authority to' receive the same, .it was the duty of the owner and holder of such paper to at once notify the payor, thus bringing the case within the rule that:
“Where one of two innocent persons1-must suffer by the act of a third, he by whose negligence it happened muist be the sufferer.”
We are of the view that sections 2442, 1661, and 1675, Civil Code, were intended to meet just such circumstances as appear in the case at ¡bar. Reid v. Kellogg and MeVay v. Bridgman, supra.
Other assignments of error appear in the record relating to the rejection' or reception of evidence and the overruling of the motion for new trial, but, as such assignments of error are based substantially upon Ithe same proposition already disposed of, no further reference thereto: is necessary. Finding no error -in the reocrd, the order and judgment appealed from- are. affirmed.