Miles City Bank v. Askin 119 Mont. 581, 179 P.

2d 750 (1947) Facts: In a black-jack or twenty-one game at Leon Par on the night of January 5, and the morning of January 6, 1945, George Askin paid his losses to J.W. Clark by 2 checks one for $150, the other for $1,000 each signed by Askin as drawer, payable to Clarks order and drawn on the bank of Baker, Montana. Askin signed his own name and inserted the numerals, all in lead pencil, and Clark filled in the remaining blanks including his own name. Askin stopped payment of the checks. Subsequently, Miles City Bank sued Askin on a check dated January 6, 1945 which bore the latters genuine signature as drawer with Clark as the payee. Such check was negotiated by Clark to Miles City Bank, and the former received value therefor. However, at the time of the negotiation, the amount on the check was $5,000, written with a different lead pencil. The court found that the amount on the check was changed, and written with a different lead pencil, and the figures $5,000 bear obvious signs of erasure of the words and figures. The court also found other evidence of alteration. The jury found for Askin, hence this appeal. Main Issue: W/N the plaintiff bank is a holder in due course Corollary Issues: 1. W/N the check is regular upon its face. 2. W/N the bank had no notice of infirmity in the instrument. 3. W/N the bank took the check in good faith. Ratio: The court did not answer the issues. It stated that the evidence was insufficient to sustain the verdict and judgment of the jury. The ancient rule of evidence was that alterations and erasures of written instruments were presumed to have been made at or prior to the time of their execution. However, when an alteration or erasure appears suspicious on its face, or in other similar circumstances, the law presumes nothing and the question as to the time when the person by whom, or the interest for which, the alteration was made are matters of fact to be found by the jury upon proof adduced by the party offering the instrument in evidence. An unauthorized material alteration in a note voids the instrument. In this case, the alteration is apparent on the face of the instrument because of the different ink used. The burden was on plaintiff to offer evidence tending to explain the alteration, and failing to offer any evidence on the subject, he

failed to make a prima facie case. The ultimate question of whether or not plaintiff is a holder in due course must be determined by the jury, such determination to be based upon its findings as to whether the check was materially altered after execution and delivery; and if so, was such alteration so manifest as to reasonably impart notice to plaintiff on an irregularity of and infirmity in the check. Dispositive Portion: The judgment is reversed, and the cause remanded for a new trial. BRONSON vs. STETSON FACTS Flint authorized Mears to negotiate an exchange of a land for a farm. Mears represented to Bronson that in order to effect such exchange, Bronson need to assume nearly $800 of mortgage over the Flint property wherein the money is to be deposited in Union Trust and Savings Bank. Mears had Bronson secure a note in order to cover the $800 and make a real estate mortgage over the Flint property to cover the note. The name of the payee and mortgagee were left blank. It was agreed that the blanks will be filled out by the bank. Mears had Mrs. Stetson sign on the note in the belief that it was necessary to complete the exchange and that Mears was a notary public. There had been no such mortgage on the property and Mears appropriated the money on his own. ISSUE Does the defendant hold the note in due course? HELD/RATIO NO. In order that any instrument when completed may be enforced against any person who became party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. Under the law and the facts, defendant payee cannot be held a holder in due course. The note and mortgage in her hands is open to plaintiffs equities must prevail. DISPOSITIVE PORTION REVERSED. Plaintiffs will have decree for relief prayed, with costs. BLISS ET. AL V. CALIFORNIA CO-OP PRODUCERS Facts:

ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN FERNANDO GARCIA GUEVARA MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN

California Co-operative Producers entered into several marketing contract with many producers. As part of the project, agricultural producers executed non-interest bearing negotiable notes, payable to the co-operative, in 10 installments. California agreed to furnish certain facilities, and also to provide insurance on the lives if the producers. Shidler, Winchester and Galbreath each executed one of the notes. Each of the 3 makers defaulted in the payment of the 1st installment. The cooperative negotiated each of the 3 notes to Bliss to secure the payment of the co-operatives note for $5,000, held by Bliss. The co-operative by reason of its insolvency and bankruptcy was unable to fulfill the contracts with the producers. The co-operative defaulted in the payment of $5000 note to Bliss. Bliss sued Shidler, Winchester and Galbreath Issue: Whether Bliss is a holder in due course? Held: The transferee of an installment note is not a holder in due course as to any part of the note when the transfer has been made after the maturity of one or more but less than all of the installments. Where the whole principal is overdue, that should warn the transferee that the note probably has been dishonored and there may be some reason for it which would constitute a defense. If, however, the installments due on the face of the instrument have not been paid and the transferee has notice of that fact, he is put on inquiry that there may be some defenses against it and he cannot be a holder in due course. The rule is that a transferee of an installment note is a holder in due course as to the installments to mature in the future when the transfer is made after one or more but not all of the installments are due on its face unless the past due installments have not in fact been paid and he had notice of that fact. In the state of evidence and the findings [the Court] believes the issue should be retried Le Due v. First National Bank of Kasson 33 Minn. 33, 16 NW 426 1883 Facts: The only question left, then, is whether this draft was overdue when Edison indorsed it to Jordan on Mar. 8, 1882, four months and 23 days after its date. In the case of a bill, note, or check payable on demand, no exact day of payment is fixed in the instrument. The general rule is that it must be presented for payment for payment within a reasonable time, having in view ordinary business usages, and the purposes which paper of that class is intended to subserve. The term overdue as applied to a demand bill of

exchange, is used in diff. connections, sometimes it is used in reference to a right of action against drawer or indorser. Again, the term is applied to a bill which has come into the hands of an indorser so long after its issue as to charge him notice of its dishonor, and thus subject it in his hands to the defenses which the drawer had against it in the hands of the assignor. Issues: 1. WON the draft was overdue Ratio: 1. It is in the last connection that the overdue is considered in the present case. That in this case a bill may be said to be overdue, although it has never been in fact presented to the drawee for payment, is recognized everywhere throughout the books, and will be apparent , we think on a moments reflection. 2. The cases are almost innumerable in which it has been held that paper payable on demand had been outstanding so long, when transferred, as to be deemed overdue and dishonored, so as to subject it, in the hands of the purchaser to any defenses which the maker or drawer had against it in the hands of the payee; and none of these cases is the question whether or not the paper had been, before the transfer, presented for payment to the maker or drawee, referred to as at all material. 3. The fact, that the draft was, without any explanation of the reason found outstanding nearly five months after its date, fully justified that trial court in holding that it was overdue and dishonored when Jordan took it, so as to charge it in his hands, or the hands of those who hold under him, with any defense or set-off which the drawer had against it in the hands of Edison.

Dispositive Portion: Order denying new trial affirmed.

Idaho State Bank v. Hooper Sugar Co. Facts: Plaintiff brought suit as holder of a six months note for $30,000 made by the Hooper Sugar Co. under date of Sept. 5, 1919, payable to the defendant Parley Wright and indorsed by him in blank on September 2, 1920. It seems

ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN FERNANDO GARCIA GUEVARA MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN

that, on this day, Wright had renewed a personal note, also for $30k, held by National City bank of Salt Lake, and had forwarded the note in suit for a different purpose, to have it deposited with trustee under a plan for the reorganization of the Hooper Sugar Co. On the next day however, the cashier altered the renewal note by 1) erasing the name of his bank as payee and inserting that of a bank in Pocatello, Idaho, 2) by changing the interest rate from 6 to 7 % per annum, and 3) by adding a recital that the note in suit was deposited with a collateral security for it. He then transferred both notes to the Pocatello bank sold the two notes of plaintiff, the note in suit being taken as collateral. Issue: W/N the plaintiff is a holder in due course? Held/Ratio: Yes. The material, intentional and fraudulent alteration of a bill or note by the payee or holder will not only be a defense to an action on the instrument as altered, but also an action on the original indebtedness. There is however, no finding by the trial court that Wrights renewal note was altered by any fraudulent intention. Therefore, Wright remains liable on his original obligation, independent of the altered note. The note sued upon is: o 1) complete and regular on its face, o 2) no claim was made that the note sued upon was ever dishonored, o 3) It was not overdue since, when Wright indorsed the note and delivered it to the Natl. City Bank after its maturity date, such note as to Wright becomes a demand note. He gave it a second maturity date as to him, namely, a reasonable time, after the transfer. Plaintiff became such holder within the reasonable time and as regard to Wright, plaintiff received the note free from any equities of Wright founded upon the mere fact the note appeared to be overdue:

Facts: J. and T. Dunn drew a bill of exchange on Ricketts, Thorne George and Co. dated June 19, 1813 and due June 19, 1913 for 1000 payable to the order of J. Sinclair and issued the same to the payee for value. A day after issuance, the payee presented the bill to the drawee but was dishonored for non-acceptance. The drawer was not given notice of the dishonor. Subsequently, the payee negotiated the bill to Mary OKeefee who had no knowledge that the bill was previously dishonored. OKeefee presented the bill for acceptance and was again dishonored by the drawee. OKeefee immediately gave notice to the drawer that the bill was dishonored and subsequently sued the drawer. The lower courts ruled in favor of OKeefee, thus making the drawer liable. Issue: Whether or not the drawer is liable even if he was not informed the first time the bill was dishonored Held: Yes. It has been argued that the drawer would simply be conditionally liable if the bill is dishonored by non-acceptance of non-payment if he was not given notice. However, the court held that: The drawer who issued his bill without procuring its acceptance, is not without some degree of blame. He issues it in an imperfect state and cannot justly complain of the neglect of any indorsee who takes the bill in his state. No authority has pronounced that a bill of exchange shall be void security in the hands of an innocent indorsee, who has no knowledge that the bill has already been dishonored because the former holder did not give notice to the drawer. Also, if the drawer were merely conditionally liable, it would destroy the very policy of the instrument such that no person would willingly trust it.

Dispositive Portion: For what has been said, it follows that the judgment rendered in this action should be, and the same is hereby reversed.

Dunn v. OKeefe

ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN FERNANDO GARCIA GUEVARA MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN