Shepard v. Hanson

83 N.W. 20, 9 N.D. 249, 1900 N.D. LEXIS 135

• Court: North Dakota Supreme Court
• Decided: May 2, 1900
• Status: Published

Opinions

Young, J.

This action was originally commenced by Frank W. Herline, as guardian of the estate of Ralph W. Shepard and Fred L. Shepard, minors, to recover for his wards the amount due upon a certain promissory note executed by the defendant, and which it is alleged is the property of these minors,' and is wholly unpaid. After the issues in the case were joined, and some time prior to the trial of the action, Hefline resigned as guardian; and the County Court of Cass county, which had appointed him, appointed in his place W. C. Resser, who, by stipulation of counsel, was substituted as plaintiff. At the close of the case, the District Court, upon motion of plaintiffs’ counsel, directed a verdict in plaintiffs’ favor for the full amount claimed, and judgment was ordered and entered on the verdict. Defendant’s appeal is from the judgment, and, in a settled statement, he presents for review numerous alleged errors of law. Among these, the only one we shall have occasion to notice is the order directing a verdict for the plaintiffs. The defendant’s answer admits the execution of the note, but specifically 'denies that it is or ever was the property of the plaintiff’s wards, and alleges that the note ever was and is the individual property of Frank W. Herline, the payee named in the note, and that any transfer or indorsement thereof by him was wdthout consideration and in bad faith. For a further defense the defendant then set up three several counterclaims as existing in his favor and against Herline, as guardian, and his two wards, arising out of work, labor, and services alleged to have been done apd furnished for them at their request. The amount of these claims exceeds the amount of the note sued upon. The following is the note, in full: “Mapleton, North Dakota, July ist, 1892. Ninety days after date I promise to pay to the order of F. W. Herline one hundred and fifty-four dollars, at Red River Valley National Bank of Fargo, value received, with interest at the rate of 12 per cent, per annum. I hereby agree to pay the further sum $-as attorney’s fees, should the collection of this note be enforced by law. Ole K. Hanson.” The following indorsement appears upon the back: “Pay to the guardian of Ralph W. and Fred L. Shepard, F. W. Herline, without recourse.” The motion for a directed verdict was based upon the ground “that defendant had failed to show any defense by way of nonownership of-the note by plaintiffs, or counterclaim or payment.” This motion was granted, and, we hold, improperly granted. The ownership of the note by plaintiff’s wards was specifically controverted by the answer. It was therefore incumbent on the plaintiff to establish by evidence the ownership and title to the notes in his wards, as a basis for recovery. The present guardian testified that it had been turned over to him by his predecessor, Mr. Herline, and that he had it in his possession. The note was then received in evidence. This is all the evidence offered to establish title to the note in the wards. This was insufficient. It is true that the possession of a negotiable instrument payable to bearer or payable to order, and indorsed in blank or indorsed to the holder, is prima facie evidence of ownership, and that the holder acquired it bona fide for full value, in the usual course of business, before maturity, and without notice of any circumstance impeaching its validity. See Daniel, Neg. Inst. § 812. But it is equally true that the possession by one not the payee of such an instrument, which is not indorsed and 'is not payable to bearer, is not prima facie evidence of ownership by the party having possession, where the ownership is controverted. In Van Eman v. Stanchfield, 10 Minn. 255 (Gil. 197), the court said: “Where a negotiable note, payable to order, is transferred without indorsement, the holder takes it as a mere chose in action; 'and, while he may maintain an action upon it in his own name, he must prove the transfer to himself, and mere possession is not prima facie evidence of the fact.” See, also, in support of the doctrine 'that the possession of an unindorsed promissory note by one not the payee is no evidence of the ownership of the holder, Cavitt v. Tharp, 30 Mo. App. 131; Dorn v. Parsons, 56 Mo. 601; Merlin v. Manning, 2 Tex. 351; Ross v. Smith, 19 Tex. 171; 4 Am. & Eng. Enc. L. (2d Ed.) 319; Daniel, Neg. Inst. § 812; Rand Com. Paper, § 792. The note, it will be seen, is payable to order, and not bearer; and it is not indorsed by the payee, either generally in blank, or specially to any person by name. The words on the back of the note, “Pay to the guardian of Ralph W. and Fred L. Shepard,” are not a direction to pay either to the wards themselves or to their estate. If the language used has any effect, it is as an indorsement to some person, not by name, but by description. The person described was F. W. Herline, the payee in the note, so that no new feature was added to the note by these words. It was already payable to himself, and was at best no more than a direction to pay to himself. As to the effect of words descriptio personae, see Thornton v. Rankin, 19 Mo. 194; Jeffries v. McLean, 12 Mo. 355; Mellen v. Moore, 68 Me. 390; Shaw v. Smith, (Mass.) 22 N. E. Rep. 887, 6 L. R. A. 348.

There being no evidence of ownership of the note in suit by plaintiff’s wards, it was therefore error to direct a verdict in his favor, and the judgment must accordingly be reversed. But, inasmuch as a new trial must be had, we wish to refer to the counterclaims set up by defendant. Counsel for the respective parties have spent considerable time discussing the evidence, to determine whether or not there is any evidence that the contracts with the defendant which are the basis of the counterclaims were made by Herline as guardian, and for and on behalf of his wards. It is the contention of plaintiff’s counsel that he acted individually. It may be conceded that defendant’s contention is true, and that Herline acted as guardian and that the services were for him as guardian, yet it is entirely immaterial. It was still Herline’s personal contract, for the law is well settled that the guardian of an estate of minors cannot as such make a contract which will bind the wards personally or their estate. He is bound personally. Rollins v. Marsh, 128 Mass. 116; Hospital v. Fairbanks, 132 Mass. 414; Sperry v. Fanning, 80 Ill. 371; Adams v. Jones, 8 Mo. App. 602; Dalton v. Jones, 51 Miss. 585; Tenney v. Evans, 14 N. H. 343; Phelps v. Worcester, 11 N. H. 51. In Reading v. Wilson, 38 N. J. Eq. 446, the court said: “A guardian has no authority whatever to bind either the person or the estate of his ward by contract. It is his duty to see that his ward is maintained and educated in a manner suitable to his means, and if, in the performance of this duty, it becomes necessanr for him to enter into contracts, such contracts impose no duty on the ward, and do not bind his estate, but bind the guardian personally and alone. For any reasonable expenditure made by a guardian, out of his own means, for the benefit of his ward, he is, of course, entitled to be reimbused out of. the ward’s estate; but this is the limit of the ward’s liability, whether measured by rules of law or rules of equity. A guardian is without the least capacity or authority to impose contract obligations on his ward.” Whatever causes of action the 'defendant has, then, arising out of 'his alleged services to Herline as guardian of those wards, exist against Herline individually. The District Court is directed to enter an order reversing its judgment and granting a new trial.

All concur.