First National Bank v. Grow

MR. JUSTICE HOLLOWAY delivered the opinion of the court. The allegations of the complaint, omitting merely formal parts, are to the effect that on June 13, 1912> the defendants executed and delivered their certain promissory note for $1,500, payable to the order of J. E. Blakeley; that prior to the maturity of the note Blakeley “for a valuable consideration sold, assigned and transferred the said note to the plaintiff herein; that the plaintiff is now the lawful owner and holder of the said note, and that the same is wholly due and unpaid.” A copy of the note is set forth in the complaint. The answer admits the execution of the note, and by way of affirmative defense alleges that it represented the purchase price of a stallion purchased by defendants from Blakeley under a special written guaranty; that the note and guaranty were executed contemporaneously and constituted parts of the same trans [378] action; and that the terms of the guaranty were breached by Blakeley. The trial of the cause resulted in a general verdict for defendants, and from the judgment entered thereon and from an order denying a new trial, plaintiff appealed. Twelve specifications of error are assigned, but they involve but a single fundamental question, and may be considered upon the objections to instruction No. 7, given by the court. That instruction follows: “You are instructed that the plaintiff bank [1] claims to be the holder of the note by assignment and transfer, and that in this case such claim does not cut off equitable defenses against the payee thereof, and if you find from the testimony in this case, by a preponderance thereof, that the defendants were deceived, or that the note was obtained from them by misrepresentation or fraudulent practice on the part of J. E. Blakeley, the payee therein, or that he failed to live up to his contract alleged to have been given contemporaneously therewith, then your verdict must be for the defendants in this case.” Do the allegations of the complaint set forth above admit of the interposition of the special defense against Blakeley? We think they do. In Cornish v. Woolverton, 32 Mont. 456, 108 Am. St. Rep. 598, 81 Pac. 4, this court said: “A negotiable instrument, payable to order, must be indorsed by the payee, in order to preserve its negotiability in the hands of a subsequent holder. A transfer without indorsement destroys its negotiable character, and the assignee takes it subject to all such defenses as might have been available against it in the hands of the payee. ’ ’ Appellant insists that the allegation that ‘ ‘ plaintiff is now the [2, 3] lawful owner and holder of said note’ ’ is sufficient to show prima facie a right in plaintiff as a holder in due course, and that the .mode of acquisition may be supplied by proof, and 8 Corpus Juris, 890, is cited in support of the contention. If that allegation stood alone, much might be said in support of the argument, particularly in view of the provisions of sections 5900 and 5907, Revised Codes (N. I. L. 51, 59). But since the general allegations of ownership and possession are modified by special allegations disclosing the mode of transfer, plaintiff nar [379] rows the issues and limits itself to the particular mode alleged. This follows from the general rule of pleading that, where both general and specific allegations are made respecting the same matter, the latter control. (31 Cyc. 85.) This is not a case in which the complaint fails to state the mode of transfer; on the contrary, the allegations of the complaint, taken together, disclose affirmatively that whatever title ■or right of possession plaintiff has is dependent upon a transfer by assignment from Blakeley, the payee. Under the rule announced in Cornish v. Woolverton, above, the note was non-negotiable in the hands of the plaintiff, and subject to any defense which would have been available against Blakeley had he brought the suit. We do not pass upon the sufficiency of the answer. It was not tested by demurrer or otherwise, but the cause appears to have been tried upon thq theory that a defense is pleaded, and under that view of the case the court was correct in admitting evidence of the special defense and in submitting instruction No. 7 above. The judgment and order are affirmed. Affirmed. Mr. Chief Justice Brantly and Associate Justices Hurly, Matthews and Cooper concur. Rehearing denied May 29, 1920.