114 Wash. 156 | Wash. | 1921
Lead Opinion
— Respondent, having a judgment in the superior court of Spokane county for $420, with legal interest from date of judgment, February 19, 1919, sued out a writ of garnishment, on October 23, 1919, against, and had the same served upon, appellant, on the next day. Appellant answered in due time, denying any indebtedness to defendant, admitting that he had in his possession promissory notes signed by Charles Frazier, payable to the order of R. J. Coad; and alleged that he held the notes as the property of one Charles Babbitt. Respondent controverted this
A prior writ of garnishment had issued and been served against Charles Frazier, on March 5, 1919. That garnishee defendant answered in due time, admitting the execution of seventeen promissory notes to defendant Coad, the first of which fell due February 13, 1919, and one on the same day of each month thereafter, each bearing interest at the rate of seven per cent per annum. He also alleged that Coad had left the state of Washington, and was, as he believed, at the time residing in Colorado, and had the notes in his possession, or had transferred the same.
This answer was controverted and, upon the issues framed, a hearing was had in the superior court on September 22, 1919, but not concluded, the hearing having been continued by order of the judge in order to get further evidence to discover who then owned the notes so that the maker of the notes might not have to pay them twice. The deposition of defendant Coad had been taken in this prior proceeding, wherein he testified that, about May of that year, he had transferred and indorsed the notes to Charles Babbitt, of Milwaukee, Wisconsin, in payment of a pre-existing indebtedness of approximately $500, incurred in 1911 or 1912, for money loaned him by Babbitt, and interest; that no additional sum was paid him by Babbitt at or about the time of the transfer; that he knew, at the time of the transfer, that a judgment had been obtained by respondent in Spokane county, Washington; that he was informed by letter from Frazier, about June or July, 1919, of the garnishment against Frazier; that he never informed Babbitt of the judgment, nor of the Frazier garnishment; that he transferred the notes to Babbitt to pay his long-existing debt to him, and considered it paid; that he was in
No other evidence was taken at the hearing of the garnishment proceeding against appellant, except the evidence of Frazier and the deposition of Babbitt taken in the Frazier hearing. There was no evidence controverting the testimony of any of those witnesses.
The court, however, consolidated the two proceedings and gave permission to appellant to intervene on behalf of Babbitt, if he desired, but Babbitt did not desire to do so. However, the interests of justice were best subserved by consolidating the two proceedings. The object of both was, of course, to impound the notes, or the proceeds thereof, for application to the judgment of respondent against Coad. In the interests of justice, Frazier should have been protected, and was protected, by the court against double liability on the notes. The question properly to be determined was, Who, at the time of the second garnishment, was the legal owner of the notes in question? And that could not be determined without taking the testimony of those having primary knowledge of all transactions relating to the notes. It was a matter of discretion, therefore, for the court to consolidate the two garnishment proceeding's, continue the first one, and consider all the testimony in the last one; and of this appellant has nothing to complain.
The decisive question in this case is, as appellant states it, Were the notes in the hands of appellant, at the time the writ of garnishment was served upon him October 24,1919, the property of Coad or Babbitt?
The trial court found that, at the time of the transfer of the notes from Coad to Babbitt, Coad was indebted to Babbitt for over $500, besides several years’ inter
Now, it is true that Babbitt is a brother-in-law of Coad’s; that the debt from Coad to Babbitt upon open account was seven years old at the time of the transfer; that Coad himself knew that there was a judgment in Spokane county against him for $420 and interest; and that a writ of garnishment had been issued out of the superior court of Spokane county against Frazier, the maker of - the notes, seeking to impound the notes, or the proceeds thereof. But there is no dispute on the fact that, when Coad transferred the notes to Babbitt, he did not inform Babbitt of the existence of any judgment against Coad, or of any
The trial court, in deciding the case, said that he would,
“ . . . have grave doubts whether the assignment of these notes by Mr. Coad to Mr. Babbitt was a bona fide transaction. In the first place, the original indebtedness was not insisted upon by Mr. Babbitt. He said that he did not ask Mr. Coad to pay it, running on from year to year, the relation of brother-in-law, in fact, existed between them, there was never a note taken, never a memorandum required, never a written account made of the advances made from time to time. Under the circumstances it might almost be regarded as a gift by Mr. Babbitt to Mr. Coad. Yet even assuming that there was an indebtedness originally from Coad to Babbitt, it seems to me that the assignment of these notes, or rather the surrender of these notes by Coad to Babbitt was such that they could not be considered as an assignment of the notes, but that they were merely handed over to Babbitt — I think so far as Coad is concerned undoubtedly for the purpose of avoiding this garnishment — so far as Babbitt is concerned that he might get out of them what he could. There was no previous correspondence between them at all. Babbitt did not look into the solvency of the maker, did not see whether the notes were worth anything or not, simply took them, . . . ”
The trial court further suggested that, where there is a series of notes, such as existed here, a party who takes some of them overdue would take the rest of them with notice of the defect that exists with reference to all of them. .
It requires more than mere doubt to set aside a transfer by one to another — even though a relative— as a transaction in bad faith. In National Surety Co. v. Udd, 65 Wash. 471, 118 Pac. 347, involving .an al
Coad, the payee of the notes, had departed from this state, was residing in another state, and had taken the notes with him at the time of the attempted impounding of the notes or the proceeds thereof by the writ of garnishment on Frazier. It is true that, after notice of the garnishment against Frazier, Coad was in another state, transferred and indorsed the notes to his relative, Babbitt, and delivered them to him, without any notice or information to him that there had been a garnishment issued against the maker of the notes.
Section 3447, Rem. Code, provides:
“To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.”
“Value is any consideration sufficient to support a simple contract. • An antecedent or pre-existing debt constitutes value; . . . ”
With these sections of the statute in view, and it being indisputably established that Babbitt received the notes without any notice of infirmity in them or defect in the title of Coad, or knowledge of such facts that his action in taking them amounted to bad faith, and the statute that an antecedent or pre-existing debt constitutes value, there can be no question but that Babbitt became, before the writ of garnishment against appellant, a bona fide holder for value, without notice, of the notes.
As was held in Citizens’ Bank & Trust Co. v. Limpright, 93 Wash. 361, 160 Pac. 1046:
“There can be no imputation of bad faith from the fact of taking negotiable paper, fair on its face, without active inquiry, nor by mere speculation as to diligence or negligence, and evidence going no further, and showing no actual notice, is insufficient to sustain findings that plaintiff was not a bona fide purchaser f or value. ” (Syllabus)
And, again, in National City Bank v. Shelton Elec. Co., 96 Wash. 74, 164 Pac. 933, we held:
“Under Rem. Code, §3447, providing that to constitute notice of a defect in the title of the person negotiating a promissory note, the person to whom it is negotiated must have actual knowledge of the defect, the rights of the holder are to be determined by the simple test of honesty and good faith, and it is not enough that the holder was negligent or omitted precautions dictated by prudence.” (Syllabus)
To the same effect, see Gray v. Boyle, 55 Wash. 578, 104 Pac. 828, 133 Am. St. 1042; and Scandinavian-American Bank v. Johnston, 63 Wash. 187, 115 Pac. 102.
Ҥ3417. Where value has at any time been given for the instrument, the holder is deemed a' holder for value in respect to all parties who became such prior to that time;
‘ ‘ § 3418. Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien;”
such holder would be entitled to protection to the extent of the amount of his debt against the payee and transferrer of- the negotiable instrument. See, also, cases there cited.
We are therefore obliged to conclude that, under the statutes and the adjudicated cases, the trial court erroneously found and concluded that Babbitt was a holder not in good faith, for value; and the judgment must be reversed. It is so ordered.
Mount, Mitchell, and Tolman, JJ., concur.
Rehearing
On Rehearing.
[Department Two. April 5, 1921.]
— On petition for rehearing filed by respondent in this case, issue was taken with the determination in the decision made herein, that the five notes aggregating $125, which were transferred to
Answering tbe petition for rehearing or for modification, appellant says that be has always been willing to concede, and does concede, that whatever rights respondent acquired by bis writ of garnishment against Frazier would not reach tbe past due notes for $125. Appellant offers that tbe decision herein filed January 19, 1921, be modified as follows:
After tbe clause reading, “There cab be no question but that Babbitt became, before tbe writ of garnishment against appellant, a bona fide bolder for value, without notice, of tbe notes,” adding thereto tbe following clause: “except as to tbe $125 of past due notes, of which be became tbe owner subject to tbe lien of tbe writ of garnishment.”
This modification is adopted by tbe court, and tbe opinion will be modified accordingly, so as to read as follows:
“With these sections of tbe statute in view, and it being indisputably established that Babbitt received tbe notes without any notice of infirmity in them or defect in tbe title of Coad, or knowledge of such facts that bis action in taking them amounted to bad faith, and tbe statute that an antecedent or pre-existing debt constitutes value, there can be no question but that Babbitt became, before tbe writ of garnishment against appellant, a bona fide bolder for value, without notice, of tbe notes, except- as to tbe $125 of past due notes of*167 which he became the owner subject to the lien of the writ of garnishment against Frazier.”
In all other respects, the petition for rehearing is denied.