Dakota National Bank v. Kleinschmidt

144 N.W. 934 | S.D. | 1914

SMITH, J.

On August 11, 1910, the Northern Casualty Compony -was a corporation doing business in the city of Aberdeen. One M. E. Eel-ty was solicited by a financial representative of,the corporation to subscribe to its capital stock. On August il, 1910, Felty signed a stock subscription, the material part of which is as follows: “I, M. E. Felty, of B-lunit, S-. D., hereby subscribe for fifty shares1 of the capital -stock of -the Northern- Casualty Company, fully pai-d and nonassessable, and agree to pay therefor the sum of twenty -dollars- ($20.00) per share.”

In -consideration of said -stock -subscription, and as- a part .of the -transaction, Felty -executed- and- -delivered to itihe representative of .-the Casualty 'Company his promissory note as- follows1:

“$1,000.00. Blunt, S. D., Aug. 11, 191-0.

“On -the 31st day of Dec. 1910, for value received, I promise to pay to the order- of Northern Casualty -Co. of Aberdeen, S. D., the -principal -sum- of one -thousand dollars, with interest thereon at the rate of six per cent, per annum' after maturity. T-he respective makers and indorsers hereof severally -waive- presentment for payment, protest, notice of nonpayment, and protest of this note. Both principal and interest are payable at the Hughes County Bank, Blunt, S. D.

“P. O.

No. Receipt 207. (Signed) M. E. Felty.”

As a part of the same transaction, the representative of -the Casualty Company executed and delivered to Felty a receipt or paper in the following form:

“No. 207. $20.00 per share.

“$1.000.00. $ro.oo par; $10.00 Surplus.

“Receipt.

“Northern Casualty Company.

“Citizens’ Bank Building, Aberdeen, S. D.

“Received of M. E. Felty note due Dec. 31st, 1910, -for -o-ne thousand dollars in full for fifty shares of -capital -stock of -the Northern Casualty Company at the price -of $20.00 pe»- share. In case Mr. Eelty can’t pay this note, it is to be extended or cancel-led at his pleasure.

“John H. Davies,

“Financial Representative.”

On the 2d -day of December, T910, the Northern Casualty-Company, for a full and valuable consideration, sol-d, indorsed, and1 delivered said promissory note to -the plaintiff, Dakota National! Bank. At the time of the indorsement and transfer the secretary of the Casualty 'Company informed the cashier of the plaintiff bank that-the note had been given by Mr. Felty for a -purchase of stock in the .Casualty Company. It -appears undisputed that the plaintiff bank .'had no actual knowledge of the elau-se in the receipt given by the financial representative of -the Casualty Company, stipulating that, “in case Mr. Felty can’t pay this note, it is to be extended or cancelled at his pleasure,” -and was an innocent purchaser in due coúrse; .unless the indorsement at the foot of the note, “No. Receipt 207,’’ when considered in connection with ithe information communicated -to the bank, that the note was given- by Mr. Felty in purchase of -stock of the corporation, w-as sufficient -to put the bank upon inquiry, and charge it with n-o-ti-ce of any facts which might be legitimately -inferred' therefrom.

It is undisputed that the stock subscription contract and the note were -delivered by its agent to the Casualty Company on or about August 13, 1910, and accepted and entered on the s-t-ock records o-f the -company, and a stock certificate thereafter issued in the name of Felty. This stock certificate; appears not to have been delivered to Fe-lty, b-ut to the plaintiff bank," along with the note. The record is silent as to the reason why the stock certificate was delivered to th-e -bank. The record further shows that on or about De'cem-ber 14, 1910, and after the transfer of the note -to- the plaintiff bank, Fe-lty caused a letter to be written to- the Casualty Company advising -them that he desired to cancel his stock 'subscription, and Would surrender the receipt upon return of his note. No action appears -to have been taken on -this request. There is no -evidence -showing that the Casualty Company had actual knowledge that Davis, their financial agent, had inserted- in the re.ceipt the ■clause permitting cancellation of the note at -th-e pleasure -of Felty; -but we do not consider this fact material up-oh this, appeal, because it cannot affect the rights of appellant -bank, if an innocent purchaser for value 'before maturity.

Felty -died in- January, 1911, -and Kleinschmidt was appointed administrator of his estate. On- or about May 8, 1911, plaintiff presented the note to Kleinschmidt, as administrator, for payment, accompanied by an affidavit of Collins, cashier o-f th-e bank, which affidavit is sufficient to -comply in all respects with section 171 of the Probate Code, except that it does not state that there are “no. offsets to the same to the knowledge of the claimant or affiant.” The claim was rejected by the administrator, as appears by an indorsement thereon, “for the reason -that the said note -was obtained by fraud and misrepresentation from the deceased during his lifetime ; that there was no consideration for said note; that the said note is now and at all times has been the property of the Northern Casualty Company; and that any assignment which may exist has been entered into for the purpose of defrauding the estate of the deceased, and that the said claimant and the Northern Casualty Company have entered into a conspiracy to defraud' this estate.”

The complaint sets out in full ithe 'affidavit accompanying the claim, together with the indorsement of its rejection, as above stated. At the opening of -the trial, the defendant objected to the introduction of any evidence under the complaint, for ithe reason that the claim as presented to the administrator was not supported by the affidavit required by statute, ‘and therefore did not state a cause of action, which objection was overruled-. Later in the trial the claim accompanied by -the affidavit was offered by plaintiff, and received in evidence, without objection.

At -the close of all the evidence, plaintiff -entered a motion for direction1 of a verdict as follows: “Comes no-w the plaintiff at the close of all ¡testimony in this case, and moves the court to- direct a verdict for the plaintiff for the full amount of its claim in this case, on the ground that the undisputed' evidence in -this case shows that the deced'ent, Murwin E. Felty, gave his promissory note for a valuable consideration, that the same was transferred in due course -of 'business for value received without any notice of any defense to the plaintiff, that said note i-s- past -due and wholly unpaid, -ail'd that -the same has been presented ¡to the 'defendant as a claim against the estate and rejected.”

The overruling of -this motion is assigned as error. Verdict and judgment for defendant. From the judgment and -order overruling motion for a new trial, plaintiff appeals. Numerous errors are assigned; h-ut, in the view we take of this case, no-ne of them show prejudicial error.

[1-3] If appellant hank, upon its -own pleadings and evidence, could not recover, regardless of any affirmative -defense interposed it certainly cannot be deemed -to -have been prejudiced in its substantial rights by reason of alleged errors arising from the at•tempt of defendant to interpose 'an affirmative 'defense. The burden was on appellant to allege and' prove in the trial court every fact essential to maintain its action. The allegation and proof of legal presentation of its claim was a necessary condition precedent to its right to maintain the action. Lichtenberg v. McGlynn, 105 Cal. 45, 38 Pac. 541; Barithe v. Rovers, 127 Cal. 52, 59 Pac. 310; In re Smith, 13 N. D. 513, 101 N. W. 890. The allegation of the complaint and the evidence received under it are identical. Objection was made at the trial to the introduction of this- evidence, both on the ground of in,competency of the evidence to establish the fact and insufficiency of the allegations of the -complaint, and respondent urges the same objections on this appeal. An -entire failure to state a -fact -essential to jurisdiction' of the court, or to- state a cause of action^ in the complaint un-ay be urged at any stage of the proceeding or on appeal. Such objection is not waived by a failure to''demur. Code Civil Procedure, § 125.

Section 178, Probate Code, provides that: “No- holder of any -claim ag-ainst an estate shall maintain, any action thereon, unless the claim is first presented ¡to the -executor or administrator.” f4, 5] Legal presentation of a claim can 'be -made only -by a compliance with the requirement's of 'section 171,’ Probate Code, which sa-ys: “Every claim which is -due when presented to the administrator must be. ss-upported by the affidavit of th-e claimant or seme one in his behalf, that the -amount is justly -due, that no payments have been made thereon which are not credited, and that th-er-e are no offsets to -the same, to the knowledge of the claimant or affiant.”

It is-unnecessary to, attempt an analysis of the different clauses of this statute further than, to observe that ample reason exists in the very nature of 'the proceeding itself for each -of said requirements. The entire emission of any -one of them from the affidavit renders it materially 'defective, and the presentation ineffectual, for ■the -purpose of maintaining an action on the claim. It will be observed that t'he affidavit as pleaded and as offered and received in evidence at the trial wholly omits the clause, “ that there are no ■offsets -to th-e same to1 the knowledge of claimant -or affiant.”

In the case of Whittmire v. Powell, 117 S. W. 433, the Court of Civil Appeals of Texas held, under a statute substantially like our own, that: “Th-e affidavit required by th-is statute for the authentication of a claim against -an estate must contain) all the requisites prescribed by said statute. If any, one otE its essential requisites is omitted, the affidavit is fatally defective, and the administrator of the estate is forbidden to -allow the claim. * ~ * To constitute a legal presentation of the claim within the meaning of this statute, it is essential that the claim, when- presented, be verified by an affidavit stating -all -the facts required to. be stated by article 2070. So that the presentation of -the claim to the executor or administrator authenticated in the manner prescribed by law and its rejection by him, either in whole or in part, is a condition precedent to -a suit for its establishment against the estate. Such authentication, presentation, -and Objection must be averred and proved. It is not enough to merely allege its- presentation and rejection; but its proper authentication should also- be alleged (citing Thompson v. Branch, 35 Tex. 21; Walters v. Prestidge, 30 Tex. 74; Gillmore v. Dunson, 35 Tex. 436). Until presented, properly authenticated, -and rejected.by the administrator, the claim hia)s no judicial standing, and cannot be made the foundation for an action having for its purpose the collection of such- claim, out of the assets o-f the -estate.” That -court also holds that the statute requiring the claim to- be authenticated by an affidavit such as the statute prescribes is mandatory, and that the courts! are -inhibited from rendering judgment in favor of a claimant suing on a claim- which h-as not been, legally presented -and -rejected.

In Alter v. Kinsworthy, 30 Ark. 756, as stated in -the headnote it is held:

“The -affidavit prescribed -by law for the authentifioation o-f claims -a-gainst estates- is a prerequisite t-o- the right -o-f action against the administrator, which- he -connot waive, -a-n-d may be- taken advantage o-f at -any time -before trial and final judgment, nor can an insufficient affidavit be cured by amendment.” Ross v. Hi-ne, 48 Ark. 304, 3 S. W. 190; Hayden v. Hayden (Ank) 150 S. W. 415.

The Arkansas statute provides that -an action on a claim against an administrator -sh-all be dismissed, unless the -claim has been -presented 'accompanied by the required affidavit. S-u-ch a statute is no different in legal effect from- our own, which declares that 110 holder -o-f any claim sh-all maintain an -action thereon, unless the -claim- be fir'sit presented, for the self-evident reason that, if an action- cannot be maintained without allegation and proof of presentation, a dismissal must follow where there has been no legal presentation. If presentation may not 'be waived by the administrator'under the-Arkansas statute, it is equally clear that it cannot be waived under oiur own. The 'statute does not vest ‘the administrator or executor with authority by waiver to permit an action to be maintained by a creditor in -direct violation of the inhibition in the statute itself.

Courts construing similar statutes have held, almost without exception, either that presentation is jurisdictional or is a condition precedent to maintaining on action. In Whitmore v. Powell, supra, it is stated: “Until presented, properly authenticated, and rejected by the administrator, the claim has no judicial standing and cannot be made the foundation -for .an action having- for its purpose the collection of such claim out of the assets of the estate.” The following decisions are to the same effect: Cheairs v. Cheairs, 81 Miss. 662, 33 South. 414; Walker v. Nelson, 87 Miss. 268, 39 South. 809; Sanders v. Stephenson, 94 Miss. 676, 47 South 783; Leach v. Kendall’s Adm’r, 76 Ky. (13 Bush) 424; Perkins v. Onyett, 86 Cal. 348, 24 Pac. 1024; Worley v. Hineman (Ind. App.) 29 N. E. 570; Clancey v. Glancey, 7 N. M. 405, 37 Pac. 1105, 38 Pac. 168.

Nor is this rule changed 'by section 173 of the Probate Code, which provides in effect that, when a claim has 'been paid by the executor or administrator 'without the necessary affidavit, the probate court, in the settlement of his accounts-, may allow him -credit therefor upon satisfactory proof that the -debt was justly due, and was paid in good1 faith, wa® the true amount of such indebtedness over and above all payments or set-offs, and -that the estate is solvent. In such case, the statute places the burden- on -the executor or administrator of proving the same facts required in the affidavit. This statute is for the benefit of the executor or 'administrator; but it does not authorize him to waive the requirement of legal presentation by a creditor as a condition 'precedent to' the maintenance of an action.. The statute is discussed in Patrick v. Austin 20 N. D. 261, 127 N. W. 109. The affidavit in this case wa-s clearly defective in failing to state that there were no- offsets to tire claim, and the presentation alleged and proved was invalid.

[6, 7] The action should have been dismissed by the trial court for that reason, regardless of any affirmative defense pleaded in the answer. The general denial raised an issue as to presentation, and the burden of proof was on plaintiff to show it as a condition precedent to maintaining the action. If appellant failed to-show legal presentation, no errors in.the instructions, or otherwise, co-uld be substantially prejudicial, because appellant had failed to «how legal rights which could be prejudiced. Without legal presentation, plaintiff ‘had no standing in court, and unless plaintiff ■might have recovered, had no errors been committed by the trial court, it cannot now complain. Section i, c. 178, Laws 1913» is declaratory of a rule which has long been recognized and acted upon 'by this count. That section -directs- that no- exception shall ■be regarded, either upon a’motion for a new trial, or upon appeal to this court,, unless it clearly appears that the error relates to a material point, and- that the effect thereof was prejudicial to -the party excepting.

We ¡think the c-a'se -at bar is ‘clearly within this rule, and the judgment and order of the trial -court must be affirmed.