Court Opinion

ID: 5172182
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:57:53.728032+00
Date Added: 2024-06-11T08:26:08.299464
License: Public Domain

MCCARTHY, C. J.,
Specially Concurring. — I concur in the result in this case but on other grounds than those set forth in the opinion. C. S., sec. 5905, provides that a qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. The indorsement upon which the suit is brought is a qualified indorsement. C. S., see. 5932, provides:
“Every person negotiating an instrument by delivery or by a qualified indorsement, warrants:
“1. That the instrument is genuino and in all respects what it purports to be.
*426“2. That he has a good title to it.
“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.
“The provisions of subdivision 3 of this section do not apply to persons negotiating public or corporate securities, other than bills and notes.”
At common law one who indorsed an instrument without recourse was not liable on the instrument itself in case the maker did not pay it, but was liable on an implied warranty like the vendor of any other chattel. In my judgment see. 5932 is but a codification of this rule of the common law. I think the rule to apply in this case is the rule which applies to implied warranties in general. That rule is that no warranty will be implied when the defects in the article are known to the buyer. (35 Cyc. 409, xi; 35 Cyc. 396, iii.) But one case has been cited which treats of this aspect of the matter: Smith v. Barner, 95 Or. 486, 188 Pac. 216. The majority opinion takes a view contrary to the one above expressed, holding that under the Negotiable Instruments Law the warranties mentioned in the statute become part of the written agreement evidenced by the note, and to admit evidence that the person to whom the note was indorsed without recourse knew of the defects would be varying the terms of a written agreement. On the other hand, the view which I favor is expressed in the concurring opinion of Justice Bennett.
In International Harvester Co. v. Beverland, 37 Ida. 782, 219 Pac. 201, this court held:
“One whose signature on a negotiable instrument clearly shows that he signed in the capacity of a maker may not show an oral agreement that he shall be deemed to have signed in a different capacity.
“Where the question is in what capacity a party signed a negotiable instrument, parol evidence is admissible only if *427an ambiguity appears in the body of the instrument, or in connection with the signature.”
It does not seem to me that this is inconsistent with the position which I take in the present case. If the correct view is that the. warranties mentioned in sec. 5932 are in- ■ corporated into the indorsement in such a sense as to make them express warranties it follows that admitting oral evi'dence that the holder knew of the defects is a violation of the parol evidence rule. (International Harvester Co. v. Beverland, supra.) Moreover, this court has held, in accordance with the weight of authority, that one who purchases a chattel with an express warranty is not barred from suing on the warranty by the fact that he knew of defects in the article. (Wilson v. Sunnyside Orchard Co., 33 Ida. 501, 196 Pac. 302.) However, I take the view that the warranty created by C. S., sec. 5932, is not an express warranty but an implied one. Before the passage of the Negotiable Instruments Law such a warranty was implied by operation of law, to wit, the common law. Since the passage of the Negotiable Instruments Law such a warranty is implied by the statute. In both cases the warranty is implied by operation of law, and is to my mind an implied, not an express, warranty. I think that both justice and logic support the view that the warranty, being implied, is not available to one who takes with knowledge of the defects.
In the present case the evidence was conflicting as to whether respondent knew of the defects in the note when he took it. This question should have been submitted to the jury with the instruction that knowledge of the defects complained of would bar recovery on the warranty.
The judgment should be reversed, and the ease remanded for a new trial in accordance with the views herein expressed.
Justice ¥m. E. Lee authorizes me to state that he concurs in this opinion.