Sanderson v. Clark

MORGAN, C. J. The evidence shows that G. C. Leeper and C. L. Powell perpetrated a fraud on respondents whereby they were procured to make, execute and deliver to Leper, without consideration, the promissory note and mortgage sued on; that before maturity Leeper sold the note and mortgage, for a valuable consideration, to appellant, who took them without knowledge of the fraud; that the note was not indorsed, ,but the transfer was made by delivery and by means of an instrument of assignment. Following is a copy df the note: “$2500.00. Pocatello, Idaho, July 19th, 1915. “Fifteen months after date, without grace, for value received, I, we or either of us, promise to pay to the order of G. C. Leeper Twenty-five Hundred ($2500.00) Dollars payable in lawful money of the United States at Rockland, Idaho, with interest at the rate of 8 per cent, per a.nnnm from date, interest payable annually until paid. “And if suit be instituted for the collection of this note I agree to pay a reasonable attorney’s fee for cost of collection. Maker— and, indorser— hereon consent to extension of this note without notice. “Due -, 19 — , “50$ war Rev. Stamps cancelled. “ELVIRA J. CLARK. “C. J. CLARK.” [362] The note was non-negotiable because the time for payment was not fixed as required by C. S., sec. 5868, which provides: “An instrument to be negotiated must conform to the following requirements: .... Must be payable on demand or at a fixed or determinable future time.....” This court, in Union Stock Yards Nat. Bank v. Bolan, 14 Ida. 87, 125 Am. St. 146, 93 Pac. 508, having under consideration a promissory note wherein it was provided, “No extension of time of payment with or without our knowledge by the receipt of interest or otherwise shall release us or either of us from the obligation of payment,” said, in view of the statute above quoted: “The note is nonnegotiable and the indorsee holds it subject to all the equities, counterclaims and defenses that existed between the maker, Bolan, and the payee, Uinta Hereford Cattle Company.” (See, also, Rossville State Bank v. Heslet, 84 Kan. 315, 113 Pac. 1052, 33 L. R. A., N. S., 738; Oyler v. McMurray, 7 Ind. App. 645, 34 N. E. 1004; Merchants & Mechanics’ Sav. Bank v. Fraze, 9 Ind. App. 161, 53 Am. St. 341, 36 N. E. 378.) Furthermore, C. S., 5897, provides: “An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof; if payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder, completed by delivery.” The note under consideration was made payable to the order of G. G. Leeper, and he did not indorse it. Therefore, appellant’s rights are to be measured by C. S., sec. 5916, which is as follows: “Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferrer had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferrer. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.” [363] The note and mortgage having been procured by means of fraud and without consideration were, thereupon and thereafter, in the hands of Leeper and appellant, his transferee without indorsement, subject to a complete defense. We find no error in the record and the judgment-is affirmed. Costs are awarded to respondents. Rice and Budge, JJ., concur.