Farmers' State Bank v. West

152 P. 238, 77 Or. 602, 1915 Ore. LEXIS 158

• Court: Oregon Supreme Court
• Decided: October 19, 1915
• Status: Published

Opinion

Mr. Justice Eakin

delivered the opinion of the court.

Section 5885, L. O. L. (Negotiable Instruments Act), declares that a holder in due course is, inter alia, a holder who has taken under the condition that it is complete and regular upon its face.

Section 5958 provides:

“Any alteration which changes * * the sum payable, either * * principal or interest, * * is a material alteration.”

In Mahaiwe Bank v. Douglas, 31 Conn. 181, a case where the instrument had been changed, and the bank was claiming as an innocent holder in due course, the Supreme Court of Connecticut said:

“Any material alteration in a bill after it is complete, made without consent of the parties whose names are on it, releases them, * * whether such alteration would operate to their prejudice or not.”

This court further held in this same case that, notwithstanding the erasures, unmistakable evidence of the original character of the instrument remained, and that it was amply sufficient to excite distrust and make it the duty of anyone to whom the paper was offered to inquire when, by whom, and by what authority such erasures and alterations had been made. This case is quoted with approval in Angle v. Northwestern Mutual Life Ins. Co., 92 U. S. 340 (23 L. Ed. 556):

“A person who takes a bill which upon the face of it was dishonored cannot be allowed to claim the privileges which belong to a bona fide holder without notice”: Andrew v. Pond, 13 Pet. 79 (10 L. Ed. 61).

“The evidence showed that the check in suit had been changed before it reached the plaintiff, and that a mere inspection of the check showed such change. There is no evidence showing that the defendant authorized or assented to tbe alteration, but the appellant says that he is ‘ a holder in due course, ’ and not a party to the alteration, and that, under Section 205 of the negotiable instruments law, * * he may enforce payment on the check according to its original tenor. Section 91, page 732, of the negotiable instruments law states what constitutes a holder in due course. According to that section, a holder in due course is a holder who has taken an instrument that is complete and regular on its face. This instrument was not complete and regular on its face at the time plaintiff took it. As we have stated before, a mere inspection of the instrument showed its defect, and therefore, under subdivision 41 of the negotiable instruments law, plaintiff had notice of an infirmity in the instrument at the time he took it”: Elias v. Whitney, 50 Misc. Rep. 326 (98 N. Y. Supp. 667).

The alteration of the note in this action was made by authority of the defendant,' but the plaintiff took it with only the explanation of Emery, whom he very slightly knew, when the alteration was vital if unauthorized. Notice may be actual or it may be inferred from facts proved.. The cashier knew that Emery was selling stock in a concern of which he knew nothing to farmers in the vicinity. This would give at least an inference that he knew what was the consideration of the note. There were other circumstances, on which we will not comment as the case must go back for retrial, from which reasonable men might infer notice.

Under the facts and the law, we think there was enough in the case to have been submitted to the jury.

The judgment is reversed and a new trial granted.

Reversed.

Mr. Justice Harris concurs in the result.