208 P. 113 | Cal. | 1922
The plaintiff and appellant, as guardian of the persons and estates of Alida Newell Popp and Mary Elizabeth Popp, her minor children, brought this action against the defendant bank for the possession of three bonds of the Adirondack Electric Power Corporation, *298 alleged to be the property of said minors, and wrongfully in the possession of defendant.
The defendant in its answer admitted that the bonds were in its possession, but denied they were owned by said minors or that such possession was wrongful, alleging upon information and belief that they were the property of the said Lenora S. Popp and J. Popp, her husband, who is not a party to the action, and were delivered to defendant by said Lenora S. Popp and J. Popp as collateral security for the payment of their joint and several note to the defendant for the sum of two thousand four hundred dollars, dated July 13, 1916. Upon these issues the case was tried without a jury, and the court found that said note was on July 13, 1916, for a valuable consideration, executed and delivered by the said Lenora S. Popp and J. Popp to defendant, and that no part of the principal sum of said note had been paid; that upon said July 13, 1916, the said Lenora S. Popp and J. Popp, as a part of the same transaction, including the execution and delivery of said promissory note and agreement which accompanied the same and embodied the terms upon which said bonds were deposited with defendant as collateral delivered to defendant at its banking house in the city of Santa Rosa, California, said three bonds, to be held by defendant "according to the terms and conditions of said collateral agreement," to wit, to secure the payment of said promissory note, "then and there representing to the officers and agents of said defendant, Exchange Bank, and inducing them to believe that said bonds belonged to and were the property of the said plaintiff, Lenora S. Popp, and her husband; that defendant accepted said bonds in good faith as security for the payment of said promissory note . . . , in the belief that said representation was true and without knowledge of or reason to suspect that it was not true." The court further found that said bonds had come into the hands of said Lenora S. Popp as a gift to said minors from an aunt, and were by said Lenora S. Popp placed in the custody of her husband and the father of said minors, and were not and never have been the property of said Lenora S. Popp or J. Popp. That said Alida Newell Popp was and is the owner of two of said bonds and said Mary Elizabeth Popp was and is the owner of one of said bonds. "That defendant *299 had no knowledge of the true ownership of said bonds or either of them, and had no reason to believe that said Lenora S. Popp and J. Popp were not the owners thereof and were without authority to pledge or sell the same. The defendant bank is the lawful holder of each of said bond as security and as a pledge for the payment of said promissory note, together with interest thereon. That said bonds and each of them were negotiable instruments, payable to bearer in money only, and without any condition not certain of fulfillment for value, and were pledged as security . . . to defendant before maturity, in due course and without fraud on the part of defendant." The conclusions of law were in accordance with the findings, and among other things ordered that plaintiff, as such guardian had the right to redeem the bonds upon payment to defendant of the amount remaining due on said promissory note Plaintiff in due time moved for a new trial, which motion was denied. Judgment was entered accordingly in favor of defendant, from which judgment plaintiff prosecutes this appeal.
[1] The first point which plaintiff makes for reversal is that the evidence is insufficient to sustain the findings, the specific attack being that there is no evidence in support of the finding "that Lenora S. Popp, for valuable consideration, executed the note and collateral agreement — that she executed it at the banking house of respondent bank, or that she made any representations to any of the officials of said bank." We have carefully reviewed the record and find ample evidence to support the finding. To be sure, there is present a conflict in the evidence, but where that is so this court will not disturb the finding of fact touching which the conflict exists. An extended and detailed recital of the evidence sustaining the findings specifically assailed would be of little profit. Suffice it to say, that during the period commencing in December, 1915, and extending to the date of the execution by the plaintiff and her husband of the note involved here, the account of the plaintiff and J. Popp with the defendant bank was in a continuous state of over-draft, and on the thirteenth day of July, 1916, the date of said note, this overdraft amounted to two thousand four hundred dollars, and it was to cover said amount that the note was executed and collateral deposited. The bank *300
officials were pressing Mr. Popp to take care of this obligation, and notified him, so he testifies, that it would not cash any more of his checks. The cashier of the defendant testifies that he told Mr. Popp that "something had to be done, we [defendant] couldn't let this thing run any longer." It was this attitude of the bank that brought about the execution of the note and the delivery as collateral of the bonds, and at which time plaintiff had not been appointed guardian of the persons or estates of her minor children, she having been appointed in the month of April, 1919. The account was in the names of the plaintiff, Lenora S. Popp and J. Popp, and was opened with money belonging to plaintiff, by the deposit of checks payable to her. [2] She thinks she never drew any checks against the account, and in any event, not more than one or two; nevertheless, the overdraft was in law as much her indebtedness as that of her husband, and it is the law of this state that a pre-existing debt is a valuable consideration. (Schluter v. Harvey,
[4] The appellant's next contention is that the defendant bank is not a bona fide holder in good faith or for value of the pledged bonds. Much of what precedes is applicable to this phase of the case. The claim is made that the desperate financial condition of Popp, which had existed for months prior to the date of the note, the repeated unsuccessful attempts of the defendant to adjust the account, and the sudden appearance of the bonds tendered and accepted as collateral, coupled with Mr. Popp's declaration that they belonged to his wife, and the additional circumstance that on the margin on the outside of two of said bonds is written in ink "Alida Newell Popp," and on the margin on the outside of one of said bonds is written in ink "Mary Elizabeth Popp," should have prompted the defendant, indeed cast upon it the duty, to make "some investigation *302 as to the true condition of the ownership of the bonds." The record discloses that the defendant did make "some" investigation, but, aside from that, we find no reason for holding that under the conditions and facts as they then existed, the defendant or its officers were obligated to canvass the title to these bonds with greater detail than they did. They had no reason whatever to distrust Popp or to disbelieve or doubt his statements. Further questioning of him would have elicited nothing in contradiction of his declaration that his wife owned them and that she got them back east from an aunt. This was a reasonable explanation of the ownership and their possession by him. It might also be regarded as a satisfactory apology for his failing to earlier offer them as security. The fact that the bonds were in Popp's possession, and were received by the bank from him, when taken with the recital in the collateral agreement, signed by Mrs. Popp, that they were deposited with defendant "as collateral security" for the payment of said note, justified the bank in believing, as the record discloses it did, that the bonds were so deposited with the knowledge and consent of Mrs. Popp. Not a word was said by Popp in reference to his minor children owning the bonds, and naught was said or done indicating that Popp was wrongfully hypothecating them. None of the officials of defendant knew or had reason to suspect that Popp had fraudulently removed them from the safe deposit box where the Popps claimed they were kept, and which was unknown to defendant. Moreover, Mr. Le Baron, an official of defendant, testified, which was manifestly accepted as true by the trial court, that Mrs. and Mr. Popp "came in with the bonds and executed this note for the purpose of taking up that overdraft which we were trying to wipe out." He was asked "did they hand you the bonds — these three One thousand dollar Adirondack bonds? A. Surely. Q. At that time and place did John Popp and Lenora S. Popp execute that note and collateral agreement? A. They did." So far as notice, actual or constructive, "arising from the relationship of the parties or circumstances attending the transaction," is concerned, the facts are decidedly with the bank. As has been said, the makers and pledgers were husband and wife; the account was in their joint names, and the indebtedness that of both of them; the initial deposit *303 consisted of money belonging to the wife, against which she permitted her husband to check ad libitum, without, so far as appears, at any time requiring him to account, or ever inquiring of the bank the status of such account. Under these circumstances, it cannot be said the officials of defendant were not justified in accepting as true, and relying upon, the representations of J. Popp.
[5] It remains to inquire if the names of the minor children, written on the margin of the bonds, constituted notice, actual or constructive, to the bank that the children owned them, or notice sufficient to cast upon it the duty of making further investigation touching such ownership. The attention of no one connected with the bank was called to said names thereon at the time the bonds were pledged, and the representative of defendant, who received them, testified that he had no recollection of having seen the names at the time the bonds were deposited, although he could not "swear" they were not there. But, even though the officials of the bank had seen these names on the bonds, in view of the fact, as we shall presently point out, that they passed by delivery without indorsement, and of Mr. Popp's unequivocal statement that his wife owned them, upon which they were justified in relying, we hold that failure to make further inquiry touching their ownership would not have established a lack of good faith, or prevented defendant from being a holder for value in due course. [6] "The well settled rule at present, except as already noted (not necessary to repeat here), is that mere knowledge of facts sufficient to put a prudent man on inquiry, without actual knowledge, or mere suspicion of an infirmity or defect of title, does not preclude the transferee from occupying the position of a holder in due course, unless the circumstances or suspicions are so cogent and obvious that to remain passive would amount to bad faith." (8 Corpus Juris, p. 501.) But plaintiff states, referring to the same volume of Corpus Juris, page 711, that this rule is subject to the qualification that "where the circumstances are such as to justify the conclusion that the failure to make inquiry arose from a suspicion that inquiry would disclose a vice or defect in the instrument or transaction, such indorsee is charged with knowledge." The answer to this is that there is no finding in the present case bringing it within this exception, *304 and if there was such a finding it would be pure conjecture, for we discover nothing in the evidence indicating that the bank officials were intentionally omitting to pursue information through fear they might unearth something touching the ownership of the bonds in question which would compel them to reject them as security, or, if accepted, would, in the event of its being disclosed, defeat the pledge.
[7] The next contention of the plaintiff is that the bonds in question are not negotiable. We think this proposition must be sustained. The bonds were issued apparently in the state of New York on "January 1, 1912. They are payable to the bearer, or to the registered holder in case the bonds be registered, and on their face they show that they are secured by a mortgage or trust deed upon real property, and they become due on January 1, 1962. The record does not show that they were ever registered. They are precisely similar in all respects to the bonds under consideration in Kohn v. Sacramento etc. Co.,
[9] The respondent concedes that the bonds were not negotiable, under the aforesaid decisions, at the time they were issued, and he relies on the fact that the legislature by an act which took effect August 7, 1915, amended our code in relation to negotiable instruments so as to make bonds such as these negotiable. If that act could have had the effect to change the character of the bonds in that particular, undoubtedly the point would be well taken and the bonds would have been clothed, at the time they were transferred to the defendant, in 1916, with all the characteristics of negotiable instruments. But it is well established that the legislature cannot by an act subsequent to the execution of a contract change its legal effect in any material particular. In section 871, volume 1 of Daniel on Negotiable Instruments, that author says: "The law in force at the time the contract is made must apply to it with respect to its interpretation and effect,otherwise the legislature would itself make a contract for theparties." (Italics ours.) This proposition is established by the decisions in Cook v. Mutual Insurance Co.,
The judgment is reversed.
Wilbur, J., Shaw, C. J., Sloane, J., and Lawlor, J., concurred.