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to the court to determine the rights of the parties,” was not in compliance with the statutory provisions to the effect that the affidavit must set out that the controversy is real and the proceedings in good faith to determine the rights of the parties. The stipulation of submission contains no averments which can possibly be deemed to take the place of the statutory affidavit, even if it be admitted that the requirement of the statute could be thus complied with. After a recital of facts stipulated, it continues: “That the questions of law herewith submitted to the court are as follows.” But nowhere in the stipulation is there a prayer for judgment. As was said in the case of Woodruff v. People, 193 N. Y. 560, 86 N. E. 562:

“‘Until the parties stipulate that a judgment may be directed herein, and also what the nature of the judgment shall be, in view of the contentions of the respective parties, we cannot exercise any jurisdiction in the matter.” Marshall v. Hayward, 67 App. Div. 137, 73 N. Y. Supp. 592.”

From the foregoing it follows that there was no valid judgment below; therefore there is nothing here for review. The judgment entered should be vacated and the appeal dismissed; and it is so ordered. Costs are awarded to respondent.

McCARTHY, DUNN, WILLIAM A. LEE, and WM. E. LEE, J.J., concur.

AMERICAN NAT. BANK v. KERLEY et al. (Supreme Court of Oregon. Nov. 7, 1923.)

1. Bills and notes 6-147—Note payable “to the order of the bearer” not one to “bearer.” A note payable “to the order of the bearer” is not one to “bearer,” alternatively defined by Or. L. § 7801, and under section 7822 negotiable by delivery merely, within sections 7793, 7976, declaring requisites of and defining a negotiable promissory note.

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Bearer.]

2. Bills and notes 6-147—Note payable “to the order of bearer” one to “order.” A note payable “to the order of the bearer” is a negotiable promissory note to “order” within Or. L. § 7800; the word “bearer” alone meeting the requirement that the payee, if not named, must be “indicated with reasonable certainty.” [Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Order.]

3. Bills and notes C=338—Payee may be a holder in due course; “negotiated.”

The payee of a note may be a “holder in due course,” defined by Or. L. § 7844, the word

“negotiated” therein, in view of section 7982, defining “holder,” and section 7851, declaring that “every holder is deemed prima facie to be a holder in due course,” not excluding the payee, notwithstanding section 7822, declaring when an instrument is negotiated.

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Negotiate.]

4. Bills and notes 3-58—Principal maker of note who delivered it not agent of payee so as to charge it with notice of infirmity against accommodation signers. The principal maker of a note, who delivered it, was not the agent of the payee, so as to charge it with his knowledge of any agreement between him and the others who signed for his accommodation, whereby the note was to be used only if he got still more signers.

5. Appeal and error (3-856(5)–Order granting new trial affirmed if there was ground therefor, though not that assigned by trial Court. Order granting new trial will be affirmed if there was any prejudicial error committed of which movant could complain, though not that assigned by the trial court for the order.

6. New trial 6-26—May be granted for matters not excepted to and overlooked. Granting of new trial is authorized by misapplication of principles of law to which no exception was taken or inadvertence to which attention was not called.

7. Bills and notes 6-334–Payee informed hefore acceptance of delivery of signing on unperformed condition not “holder in due course.” If tender of delivery of a note to the payee by the principal maker was not accepted at once, and before acceptance the payee was informed of the unperformed condition on which the accommodation makers signed, the payee was not a holder in due course.

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Holder in Due Course.]

8. Bills and notes 6-334–Payee not holder in due course where it had notice of infirmities after accepting note to be applied on a payment of others, but before giving credit. If a note was delivered by the principal maker, K., and accepted by the payee bank with the understanding that it should be applied as payment pro tanto of K.’s notes held by the bank, and thereafter, but before credit was given on the bank's books, it received notice of the unperformed condition on which the accommodation makers signed, Or. L. § 7S46, prevented it being a holder in due course.

9. Bills and notes 6-334–Statute as to notice to transferee before full payment inapplicable to note received as collateral. A note received as collateral is not controlled by Or. L. § 7S46, declaring that, where transferee receives notice of infirmity in note before he has paid full amount therefor, he is a holder in due course only to extent of amount paid.

Go For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(220 P.)

10. Bills and notes 6-359–Pre-existing debt Consideration relative to holder in due course of note taken in payment. Under Or. L. § 7817, defining value, one receives a note for value, relative to being a holder in due course, where it is received in payment of the pre-existing debt of the principal maker, the others being accommodation makers.

II, Bills and notes 6-358–Pre-existing debt consideration to holder ln due course of note taken as collateral. Under Or. L. $ 7817, defining value, in connection with section 7819, as to holder having lien, one who takes a note as collateral to secure a pre-existing debt takes for value, relative to being a holder in due course.

12. Bills and notes 6-358–Pre-existing debt, though not of full value, valuable consideration for note taken as collateral. Pre-existing debt, though not of full value, constitutes valuable consideration for note taken as collateral, relative to being a holder in due course.

13. Pleading 6-403(3)-Answer held not to have averred note was taken as collateral so as to aid allegations of reply. Answer in action on note held not as matter of law to have averred that the note was taken as collateral, with the effect of aiding the reply, which alleged merely that it was taken in payment of pre-existing debt.

[4, Bills and notes (8-497(5)–0m evidence of note originating in fraud, plaintiff must show It was a holder in due course. Though under Or. L. § 7851, the fact that plaintiff, in action on a note, is a holder, standing alone, is sufficient prima facie proof of its being a holder in due course, on evidence being offered that the note originated in fraud, it has the burden of showing by a preponderance of the evidence that it took it under circumstances making it a holder in due course.

15. Pleading 6-403(3)-Defect In answer not alleging bad faith of plaintiff in taking note held alded by reply making good faith an IsSue. . As to any defect in answer in action on note in not alleging bad faith on plaintiff's part in taking the note, the answer is aided by the reply making the question of good faith an issue by affirmatively alleging it.

16. Bills and notes &=497 (5)—Under pleadings, on evidence of note originating in fraud, plaintiff held required to show both ab*ence of knowledge and taking in good faith. Under Or. L. $ 7848, as to what constitutes notice of infirmity in note or defect in title, good faith of plaintiff in taking the note being in issue under the pleadings, on evidence of the note having originated in fraud being offered, plaintiff has the burden not only of showing that it was without actual knowledge, but that took in good faith.

17. Evidence 6-444 (6)–Evidence of conversation between accommodation makers and principal maker competent to show condition on which they signed. Defense of accommodation makers of notes being that they signed on condition, not fulfilled, that additional signers should be obtained by the principal maker, evidence of the conversation between them and the principal maker is competent to show what the condition was; the principal maker's opinion or conclusion as to what he told them not being enough, though the payee was not bound by the agreement between the two classes of makers unless it took with notice.

In Bank. Appeal from Circuit Court, Umatilla County; Gilbert W. Phelps, Judge.

Action by the American National Bank against Joe Kerley and others. From an order granting the defendants other than the one named a new trial, plaintiff appeals. Affirmed.

The plaintiff, the American National Bank, a corporation, engaged in the banking business at Pendleton is attempting in this action to recover on an alleged promissory note signed by Joe Kerley, Abe Molstrom, and W. B. Shannon. Kerley, although named in the pleadings as a party defendant, was not served with process, and for that reason the action has thus far been prosecuted against only Molstrom and Shannon who signed as accommodation makers. A trial in the circuit court resulted in a verdict and judgment in favor of the plaintiff and against Molstrom and Shannon for the full amount of the note. The court, upon the motion of Molstrom and Shannon, set aside the verdict and judgment, and ordered a new trial, and the plaintiff appealed from that order.

The complaint follows the form usually adopted in an action on a promissory note, and, among other things, it alleges that—

“On the 15th day of October, 1920, for valuable consideration the defendants made, executed and delivered to the plaintiff herein their joint and several promissory note in words and figures substantially as follows to wit:

“Pendleton, Oregon, October 15, 1920.

“Twelve months after date without grace for value received I promise to pay to the order of the bearer at the American National Bank at Pendleton, in Pendleton, Oregon, five thousand dollars, with interest after date at the rate of 8 per cent. per annum until paid. Principal and interest payable in United States gold coin; and, in case suit or action is instituted to collect this note or any portion thereof, I promise to pay such additional amount as the court may adjudge reasonable as attorney's fees in said suit or action. Interest payable semiannually. ‘Joe Kerley,

“Abe Molstrom,
“W. H. Shannon.”

& For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


The defendants Molstrom and Shannon joined in an answer in which they admit that they signed the instrument sued on, but deny any liability, for the reasons set forth in a further and separate answer, in which the respondents allege, in substance, as follows:

That on October 15, 1920, and for a long time prior thereto, Joe Kerley had been engaged in the insurance and brokerage business in Pendleton, and had what appeared and was reputed to be a large and lucrative business; that he did his banking with the plaintiff, and had theretofore borrowed considerable money of the bank on notes given by him to the bank; that from some time prior to October 15, 1920, Kerley had, unknown to the respondents, been losing large sums of money, and had been guilty of embezzling and appropriating large sums of money intrusted to his care, and coming into his possession in the course of his business; that the bank secured knowledge of his financial condition, and of his defalcations, prior to October 15, 1920, and found that he was indebted to the bank in a large amount, and that he had no property or means with which to pay in full his indebtedness to the bank, and that he was insolvent and bankrupt; that the bank upon ascertaining these facts, conferred with Kerley, and informed him of its knowledge of his financial condition and of his criminal defalcations, and instructed Kerley to prepare a promissory note with blanks for 20 or more signatures of financially responsible persons as comakers with him, to be held as additional security by the bank for the sums of money theretofore advanced and loaned to Kerley by the bank; that the bank instructed Kerley to keep from his friends and the public his financial condition and the fact of his Criminal defalcations, and further instructed him that, if he did not prepare the promissory note and secure signatures thereto as required by the bank, the bank would cause his immediate arrest, prosecution, conviction, and imprisonment for his defalcations; that the bank also instructed Kerley to secure signatures to the note by telling his friends that the bank desired a little additional security to continue financing him in his business and their signing would be conditioned upon 20 or more financially responsible parties signing as comakers, and until 20 or more so signed no liability whatever would attach ; that Kerley, being intimidated by the threats of the bank, and acting pursuant to its instructions, directions, and under duress, prepared a memorandum resembling the instrument sued on with 20 or more blanks for Signatures thereon, and, after signing the instrument as maker, took it to Molstrom and Shannon, and requested them to sign as comakers with him, stating to them that the bank desired a littile additional security in order to continue financing him, and that at its suggestion and behest he was securing the

signatures of 20 or more of his friends as comakers with him, and that no obligation would attach to them or either of them until 20 or more signatures of financially responsible friends had been secured to the memorandum, and that he would not deliver the instrument to the bank until 20 or more signatures of financially responsible parties had been secured and placed upon the document, so that the liability of any one signer would not exceed the sum of $250; that, acting upon the instructions, directions, and under the duress of the bank, and its threats of prosecution, Kerley did not advise either of the respondents of his financial condition or of the threatened criminal charges, or of any of the matters touching his true financial condition and his liability to prosecution; that, relying upon the representations of Kerley, the respondents signed the instrument conditionally, and for no purpose other than that relied upon, and without receiving any consideration whatever; that, in violation of the agreement, Kerley placed the instrument in possession of plaintiff without securing any additional signatures, and that the bank refused to allow Kerley to take the instrument from its possession for the purpose of securing additional signatures; that the bank knew at all times of the condition and agreement under which the respondents had signed the instrument, and knew that the condition precedent to the delivery of the instrument to the bank had never been complied with: that the bank paid or parted with no new consideration of any kind or character whatever, and that there is an entire want and failure of consideration for the instrument, and that the instrument is void and illegal because of the alleged duress and threats, and because of the concealment and misrepresentation of facts; and the respondents aver that the plaintiff is estopped by reason of its alleged acts and conduct from asserting or claiming any right or interest under the instrument as against the respondents. In its reply the bank denies any knowledge or information sufficient to form a belief as to whether or not Kerley had been losing large sums of money, as to whether or not such losses, if any there were, were unknown to the respondents, as to whether or not Kerley had been guilty of embezzling or misappropriating any sums of money, and as to whether or not the respondents had knowledge or information of such matters. The plaintiff also denies that prior to October 15, 1920, it secured knowledge of any defalcations on the part of Kerley, and denies that at that time the plaintiff found that Kerley had no property or means with which to pay his indebtedness to the bank or that he was insolvent or bankrupt. The plaintiff denies making the threats charged against it by the respondents, and denies that it took the note with knowledge that the respondents had signed on the condition or with the understanding that the instrument should be signed by any other persons, and denies that it took the paper in bad faith or with knowledge of any defect or infirmity. For a further reply the bank alleges, in substance, as follows: That on October 15, 1920, Kerley was indebted to the bank, and that he had been a customer of the bank and had been carrying a checking account therein; that during the fall of the year 1920 financial conditions were difficult, and Kerley had not liquidated his obligations to the bank as they fell due ; that it was not possible to carry the dishonored and overdue paper for a long period of time, and for that reason the bank “demanded that the defendant Joe Kerley should make a new note to the plaintiff in the sum of $5,000, and that he should get some responsible signers thereon;” that, pursuant to such demand, Kerley made out a note, and upon his own responsibility, without the knowledge of the plaintiff, he made the note so that there was r00m for 15 or 20 or more signatures; that he took the instrument to Molstrom and Shannon, who were his friends, and procured them to sign it, and he then brought the note to the bank, whereupon the plaintiff took and accepted the note, “and on account thereof gave the defendant Kerley credit for the sum of $5,000 upon notes then held by the plaintiff against said defendant”; that the bank took and accepted the note on the same date upon which it was made, or within one day thereafter, “and accepted same for valuable Consideration, to wit, the credit upon other obligations of the defendant Kerley,” and acCepted the same in due course of business Without knowledge of the transactions between the defendant Joe Kerley and the respondents, Molstrom and Shannon, and withOut knowledge of the representations, if any, that had been made by Kerley to Molstrom and Shannon, and without knowledge that any signatures upon said note had been obtained by fraud or misrepresentations; and that the note was complete and regular upon its face, and was accepted by the bank in good faith as an innocent holder in due course.

(220 P.)

Raley, Raley & Steiwer and H. J. Warner, all of Pendleton, for appellant.

Peterson, Bishop & Clark, of Pendleton, for respondents.

HARRIS, J. (after stating the facts as above). It will be difficult to discuss some of the questions presented for decision without first narrating many of the admitted tacts, and also much of the evidence relating to most of the controverted facts. Kerley had been engaged in the insurance and brokerage business in Pendleton, where he "aintained an office. Kerley represented, *mong other insurance companies, the St. Paul Fire & Marine Insurance Company, and oted Tebbin, who resided in Portland, had * supervision of the agents of that com

pany, including Kerley. A month or six weeks prior to October 15, 1920, Tebbin, as trustee, took possession of Kerley's business. There is evidence in the record from which the jury could have inferred that Kerley was insolvent, and unable to pay his debts, in October, 1920, and that the bank, through its vice president, knew that such was his financial condition; but there is no evidence tending to show that Kerley was guilty of any defalcation or embezzlement, or that the bank knew of his defalcations, if he was so guilty. On Friday, October 15, 1920, the date borne by the note in controversy, Tebbin sold Kerley's business, and on the next day, Saturday, Kerley's signs were removed and new ones Substituted. J. B. McCook, who resided in Pendleton, was the vice president and the local executive manager of the plaintiff. Although Kerley did some banking business with another bank, he apparently did most of his business with the American National Bank. At the time of the execution of the note in dispute Kerley owed the plaintiff about $16,000. We understand from the record that all this indebtedness was represented by notes given by Kerley, and that the bank had at all times aimed to keep Kerley's indebtedness fully protected by collateral securties. The last loan or advance made to Kerley by the plaintiff was made in June or July, 1920. Kerley, before moving to Pendleton, where he resided not more than three years, had lived in the town of Helix for several years. Abe Molstrom is a farmer, and he owned a ranch near Helix. He lived on the ranch in the summertime, and resided in Pendleton during the winter; and he had known Kerley between six and seven years. Helix is about 18 miles and Myrick is about 8 miles from Pendleton. W. H. Shannon is a farmer, and resides near Helix; and he had been acquainted with Kerley about 6 years. Neither Molstrom nor Shannon knew, when they signed the note, that Kerley owed the plaintiff $16,000, or that Tebbin was in possession of Kerley's business, or that Kerley was insolvent, if the fact is that he was insolvent. However, on the next day after signing the note Molstrom saw the changing of the signs at Kerley's place of business, and learned that the office had changed hands. There are six important conversations to be borne in mind: (1) The conversation at McCook's residence on Thursday, October 14th, at about 6 p.m., when McCook, in the presence of Tebbin, demanded that Kerley procure additional security; (2) the conversation between Kerley and Molstrom on Friday, October 15th, when Molstrom signed the note; (3) the talk on October 15th between Kerley and Shannon when the latter signed the instrument; (4) the conversation between Kerley and McCook at McCook's residence Friday evening, October 15th, when Kerley placed the note in McCook's hands; (5) the conversation which Kerley claims he had with McCook one or two days after Friday; (6) and the conversation at the bank on Tuesday, October 19th, when Molstrom, in the presence of Kerley, told McCook that the note was to have been signed by others before delivery. Tebbin happened to be in the bank at some time on October 14th, and at that time McCook requested Tebbin to ask Kerley to call at the bank. Tebbin promised to comply with the request, and accordingly, “about 3 o'clock in the afternoon of the same day,” he asked Kerley to see McCook. Subsequently McCook informed Tebbin that Kerley had not called at the bank; and so Tebbin then hunted up Kerley, and together they went to McCook's residence, Tebbin says, and there is no evidence to contradict him, that he did not know for what purpose McCook desired to see Kerley, but that, having promised McCook that he would ask Kerley to call on McCook, he, in order to make his promise good, and as a matter of courtesy to McCook, made Kerley “go to Mr. McCook's house with me that night.” Tebbin, in relating what occurred at McCook's house on the evening of October 14th, testified that McCook told Kerley that the security which Kerley had at the bank “was not sufficient to make the loan good, and that they required additional security,” and that McCook then asked Kerley “what he could do, upon which Mr. Kerley in substance replied and said he thought he could get a note signed by 20 men, friends of his, and Mr. McCook in substance replied, "all right; go and get it.’” The note which Kerley thought he could get was to be for $5,000. Tebbin says that McCook asked Kerley to report the next day, and that thereupon he (Tebbin) “made a statement I thought it would be hardly possible to secure any large number of signatures in one day, and I suggested that Mr. Kerley be given more than one day;” and McCook “consented to that as far as I understood it;” McCook said, “Go ahead and do the best you can, as far as time is concerned; that is the way I understand it.” Tebbin also testified that McCook did not by his demeanor or otherwise express or imply any threat against Kerley, and that, “so far as the number of signers was concerned,” Kerley was the one who “suggested he would be able to get 20 signers;” that McCook did not “put that [the number of signers] up to him as a demand as far as the bank was concerned ;” and that nothing was said at McCook's house about limiting the liability of each one of the signers to $250. Kerley says that “numbers of times” McCook asked him to get more collateral security for his indebtedness to the bank, and that McCook “was wanting to get payment as far as I could on them.” Kerley's testimony concerning the conversation at Mc

Cook's house on the evening of October 14th is as follows:

“Mr. McCook told me after we went in there that I would have to get more collateral for the paper I had in the bank; that the collateral I had there was not sufficient for them to carry; and he asked me what I could do about getting more paper, and I told him I didn't have anything right at present which I could turn towards making it any better, but I might get out and get a note signed by some friends to cover part of it; and he asked me how much I could get, and how soon, and I told him I could get a note signed up for about $5,000, providing I could get possible 20 signers, say with the liability on the note would not be $250. I didn't think I could get any one or two men to go on a note for the full amount under the conditions of things; I would not want to ask them to; so he told me to go ahead and see what I could do, and I told him I would go out the next day and see how many I could get; so he said to go out and see how many I could get, and report to him the next evening.”

And, according to Kerley, “that is just about the extent of the conversation.” Kerley, when asked whether he had any conversation with McCook prior to the execution of the note “about force being brought to bear on you about getting security,” said, “I don't believe I did,” and “the only thing he said was regarding more collateral, I would have to get more collateral ; that was about all he ever Said about it.” McCook did not threaten Kerley with an indictment and prosecution for a crime if he did not procure a note. If any threats were made at all concerning the note in controversy they were made on the evening of October 14th at McCook's house; and, although McCook told Kerley “he had to get a bankable note,” and “he had to have that note the next day,” the record is devoid of any evidence tending to show that McCook made any of the threats charged in the answer,

McCook's version of the conversation of October 14th is as follows:

“I told Joe Kerley that his paper at the bank needed fixing; some of his collateral was going bad on our hands, and I wanted him to fix up about $5,000 more security for us, new paper. * * * I asked Joe Kerley what he could do, and Joe says: “I used to be postmaster at Helix, and lived there, and have lots of friends up there, and I think I can go up there among my friends and get a lot of signers on a note for you.’ I think he went on and said, ‘I think I can get as many as 20 signers.” “Well,” I says, “whatever you do, Joe, get it done to-morrow;’ and I think Joe brought up the point it would be hard to get a lot of signers in so short a time. ‘Well,' I says, ‘go ahead and get started; get whatever signers you can, or whatever you do get it tomorrow, and bring this note back to me tomorrow night;" and I think that is about the end of it. Joe says, “all right,’ and went away. * * * The matter of 20 signers was never mentioned by me. * * * Joe says, “I used to

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