Opinion
No. 24830. Department Two.
March 29, 1934.
BILLS AND NOTES (42, 44) — NEGOTIABILITY AND TRANSFER — INDORSEMENT IN BLANK — TRANSFER BY DELIVERY. Upon the payee's endorsement of a note in blank, it is payable to bearer and transferable to a holder in due course without further endorsement. [2] SAME (68) — RIGHTS AND LIABILITIES ON INDORSEMENT OR TRANSFER — BONA FIDE PURCHASERS — TAKING AS COLLATERAL SECURITY — RENEWAL OF PART OF DEBT SECURED — EFFECT. The status of a holder in due course of a note pledged as collateral is not altered by a partial payment of the debt and a renewal note for the balance of the original debt for which the note was pledged. [3] PLEDGES (6) — PLEDGEES AS BONA FIDE PURCHASERS. A pledgee's sale of collateral pursuant to the terms of the pledge to toll the rights of the pledgor, does not affect the pledgee's right to sue on the pledged note, as a holder in due course; since the sale was not a prerequisite to such suit.
Appeal from a judgment of the superior court for Lewis county, Studebaker, J., entered February 28, 1933, upon findings in favor of the plaintiff, in an action upon a promissory note, tried to the court. Affirmed.
Gus L. Thacker, for appellants.
Don G. Abel, for respondent.
This appeal is from a judgment in favor of the respondent upon a promissory note executed by appellants. The note bore date November 6, 1931, and was payable thirty days after date to the order of L.A. Savidge. The note was indorsed in blank by the payee, Savidge, and delivered to O.W. Ament, who, on November 12, 1931, delivered it to respondent bank, with other notes, as collateral for a loan of two thousand dollars, evidenced by his own note. When the Ament note became due in April, 1932, he paid respondent one thousand dollars, and gave his renewal note for the other one thousand dollars, payable thirty days after date. The bank retained the collateral, including appellants' note, to secure payment of Ament's renewal note. Ament defaulted in the payment of this note, and respondent sold the collateral held by it, including appellant's note, becoming itself the purchaser, for the amount due on Ament's note. Thereafter, this suit was brought.
Appellants filed an answer to respondent's amended complaint, alleging fraud by Savidge in procuring the execution of the note by them, and knowledge of the fact by respondent. No evidence was offered at the trial in support of these allegations, but it was stipulated by the parties in open court that, if respondent was found to be a holder in due course, it would be entitled to judgment, and if not a holder in due course, then appellants' defense of fraud should prevail.
[1] Appellants in their brief seek to sustain their contention that respondent was not a holder in due course upon three grounds. They first urge that the pledge of their note to the respondent was irregular, because the note was not indorsed by Ament. His indorsement was not necessary. The note was made payable to the order of L.A. Savidge. Savidge indorsed it in blank, thereby making it payable to bearer, and title could thereafter pass by delivery.
"An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery." Rem. Rev. Stat., § 3425. [2] The appellants next urge that, even though the respondent became a holder in due course when taking the note as collateral in the first instance, Ament's debt was, in effect, extinguished by the payment of one thousand dollars and the giving of the renewal note in April, 1932, and a new debt created; and that, in the meantime, respondent having become charged with notice of the fraud in the execution of the note, it was not a holder in due course in respect of the renewal note. This contention is without merit. The renewal note evidenced the part of the original debt not paid, and respondent's status as a holder in due course was not changed. The renewal note did not create a new debt. Brown v. Marion National Bank, 169 U.S. 416, 18 S.Ct. 390.
[3] It is finally urged by appellants that it will be presumed respondent purchased the note at a judicial sale, and they cite cases to the effect that a purchaser at a judicial sale is not a bona fide purchaser. The only evidence in the record in relation to the sale is the testimony of respondent's cashier to the effect that, when Ament defaulted in payment, respondent sold the collateral it held, including the note here in suit, pursuant to the terms of his note. The purpose of the sale of the collateral was to toll the rights of Ament. A sale was not necessary as a prerequisite to a suit upon the note by respondent. As pledgee, it had the right at any time after the due date of their note to sue appellants. 49 Corpus Juris 1020.
The trial court properly found respondent to be a holder in due course of the note sued upon, and the judgment will be affirmed.
BEALS, C.J., BLAKE, TOLMAN, and MITCHELL, JJ., concur.