Hale v. Hitchcock

The opinion of the court was delivered.by ' Garver, J. : The note sued on in this case was made payable to John L. Howard, or order, and was, by Howard, transferred by an indorsement as follows : "John L. Howard. I assign this note to W.'. H. Aldaffer, without recourse.” W. H. Aldaffer thereafter, and before maturity of the .note, transferred it to defendants in error (plaintiffs below) and indorsed his name on the back thereof. The defendant below contends that the note lost its negotiable character by being assigned to Aldaffer, and not indorsed, and that the plaintiffs below took it subject to all equities and defenses. We think this contention must be sustained. The transfer was not made by a commercial indorsement. The name of Ploward cannot be separated from the other writing and held to be an indorsement in blank. All must be taken together, and given legal effect, the same as if the name followed the words of assignment. The negotiability of a note, payable to the person named as payee, or order, is preserved in the hands of a subsequent holder only when it comes to him. through regular commercial indorsements. And where a note is transferred [25] without such indorsement the holder is not an indorsee, but an assignee, and, as such, is liable to any defenses existing before the assignment. (Hatch v. Barrett, 34 Kan. 223 ; Briggs v. Latham, 36 id. 205.) It follows that W. H. Aldaffer took the note in question stripped of its negotiable character. In his hands it was the same as a note non-iiegotiable from the first. As against the makers, he could not restore its negotiability by his own act, so as to transfer it to a subsequent holder freed of prior equities and defenses to which it had .become subject. This is not a case where there is merely an immaterial deviation from the ordinary form of an indorsement, as where á note is indorsed to be paid to a certain person, omitting the words “or order.” Counsel for the defendants in error argued at some length that such an indorsement does not affect the negotiability of the note. We fully agree with all that is said on that proposition, and do not regard it as an open question in this court. (Halbert v. Ellwood, 1 Kan. App. 95.) The evidence shows, without serious dispute, that the note was given for a special purpose, and that it was flagrantly misappropriated when, through the actions of Howard and W. II. Aldaffer, it was transferred to the plaintiffs. The purpose for which it was executed had entirely failed. It was to be a factor in a trade between the makers of the note and Howard which was never consummated, and which,by mutual.. consent., was abandoned, of all of which W. H. Aldaffer had actual knowledge before he acquired the note from Howard. We are not unmindful of the well-settled rule which prevents an appellate court from reviewing the findings of fact made by a trial court when they are based upon conflicting evidence. But in this case there is no substantial con [26] flict. The evidence all points the same way. There is nothing which even challenges attention as tending to show that the consideration for the note had not entirely failed,- or that it was not diverted by the payee to an improper use. Under such circumstances, we deem it our duty to hold that the trial court erred in not setting aside the findings of factj when their correctness was challenged by a motion for a new trial. Objection is also made to the rulings of the court upon the matter of the revivor of the action after the death of Lydia Nichols, one of the original defendants. We do not find any error in the record in this respect. The parties interested were before the court when the several orders complained of were made, with ample opportunity to be heard. Formal notice of a revivor, or of the making of any order relating thereto, is unnecessary as to parties present or represented in open court when action thereon is taken. It is doubtful whether some of the matters tried in the district court, and argued in this court, are within the issues made by the pleadings. The general denial of the defendant may not, over objection, permit any inquiry as to the consideration of the note, or as to its misappropriation. But, as the parties and the court seem to have tried the case as though all these matters were properly in issue, we have considered it upon the same theory. The judgment will be reversed, and the case remanded for a new trial. All the Judges concurring.