(220 P.) struments Law, it was held that the taking has come through an intermediary to ocof a promissory note as collateral security cupy the status of a holder in due course. for a pre-existing debt without some inde-In Lowell v. Bickford, 201 Mass: 543, 88 N. pendent consideration was not a taking for E. 1, it is said: value. This view was accepted by some of the American courts, and is usually referred to as the New York rule. It is now generally held that, under the terms of the Negotiable Instruments Law, one who takes a negotiable note as collateral to secure a pro existing debt takes for value, even though no independent consideration is given; and this holding is not only based upon section 25 of the act (section 7817, Or. L.), but it is also strengthened and fortified by section 27 of the act (section 7819, Or. L.), which affirms that "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." See Voss v. Chamberlain, 139 Iowa, 569, 117 N. W. 269, 19 L. R. A. (N. S.) 106, 130 Am. St. Rep. 331; Felt v. Bush, 41 Utah, 462, 126 Pac. 688; Griswold v. Morrison, 53 Cal. App. 93, 200 Pac. 62; State Bank of Freeport v. Cape G. & C. R. Co., 172 Mo. App. 662, 672, 155 S. W. 1111; People's State Bank v. Penello (Cal. App.) 210 Pac. 432; City Nat. Bank v. Kelly, 51 Okl. 445, 151 Pac. 1172; Brown v. Rowan, 91 Misc. Rep. 220, 154 N. Y. Supp. 1098; 64 University of Pennsylvania Law Review, 318. See, also, Birket v. Elward, 68 Kan, 295, 74 Pac. 1100, 64 L. R. A. 568, 104 Am. St. Rep. 405, 1 Ann. Cas. 272, and note; Exchange National Bank v. Coe, 94 Ark. 387, 172 S. W. 452, 31 L. R. A. (N. S.) 287, 21 Ann. Cas. 934, and note, 31 L, R. A. (N. S.) 287, and note; 8 C. J. 488-495; 3 "Taking the demand note as collateral for the pre-existing debt made the bank a holder for value of the note as against Carrie S. Bickford, who was an accommodation maker. [Citing authorities.] The fact that the demand note was payable to the bank did not prevent its becoming a holder for value. [Citing authorities.] An accommodation party to a note cannot set up lack of a consideration against a holder for value." In Neal v. Wilson, 213 Mass. 336, 100 N. E. 544, it was held: "Where a defendant for the accommodation of a debtor and without consideration gives his note or check to a creditor of the debtor in payment of or as security for the debt due from the debtor to the creditor, he is liable to the creditor on the note or check." In Seager v. Drayton, 217 Mass. 571, 105 N. E. 461, the following language appears: "It is the contention of the plaintiff that (1) because of the forbearance of the plaintiffs there was a valid consideration for the note to sue Wright; (2) because the defendant's note was given in substitution for the note given by Wright and thereby constituted a novation; and (3) because the note of the defendant was given to the plaintiffs as creditors of the debtor Wright in payment of, or as security for, the debt due from Wright to the plaintiffs. If the plaintiffs' proof was sufficient to establish either of these contentions, they would be entitled to recover." See, also, Brannan, The Negotiable Instruments Law (3d Ed.) pp. 93–99, 107, 108. The rule followed in cases where a purely nominal consideration is given, or where the consideration paid for a note is grossly inadequate, does not control cases where a pre-existing debt constitutes the consideration, and consequently precedents like Hogg v. Thurman, 90 Ark. 93, 117 S. W. 1070, 17 Ann. Cas. 383, and In re Hill (D. C.) 187 Fed. 214, have no application to the instant case. [12] The respondents assert that the debt owing from Kerley to the bank was worthless, and that therefore, on the authority of Citizens' Trust Co. v. McDougald, 132 Tenn. 323, 178 S. W. 432, L. R. A. 1917C, 840, the antecedent debt did not constitute a valuable consideration. The answer to this contention of the respondents is found in the fact that, although the debt may not have been, and probably was not, worth its face value, the evidence indicates that it was worth something. Moreover, for a criticism of the precedent last cited see Brannan, The Negotiable Instruments Law (3d Ed.) 107. It is true that most of the adjudications dealing with notes given as collateral involve instruments which were payable to the debtor, and by him indorsed to his creditor. In such situations the note is a subsisting obligation at the time of its transfer to the indorsee; but in those same situations value for the indorsement is the sine qua non, and without it the indorsee is not a holder in due course. If under the statute a pre-existing debt is value for an indorsement, and enables the indorsee to be a holder in due [13] The printed briefs discuss the quescourse, then by the same token, the statute, tions of variance, matters of pleading, and a pre-exisitng debt is value for a note, and the burden of proof. It will be recalled that enables the payee to whom an instrument the answer avers that Kerley requested the respondents to sign as comakers as the bank "desired a little additional security in order to continue financing him," and that the bank alleges in its reply that it accepted the note "for valuable consideration, to wit, the credit upon other obligations of the defendant Kerley." It will also be recalled that the substance of all the evidence concerning the conversation at McCook's residence on the evening Under the terms of section 7851, Or. L."every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he, or some person under whom he claims, acquired the title as a rule does not apply in favor of a party who holder in due course; but the last-mentioned became bound on the instrument prior to the acquisition of such defective title." of October 14th was that the bank wanted additional security. The respondents insist The fact that the plaintiff is a holder. that there is no evidence to sustain the when that fact stands alone, suffices to averment in the reply that the note was taken as payment, and that evidence, if there prove that the plaintiff is a holder in due course until contradicted and overcome by be any, of acceptance of the note as collatother evidence. When evidence is offered eral is a variance from the averment in the showing that the note originated in fraud it reply. The plaintiff replies to the contenthen devolves upon the plaintiff to go fortion of the respondents by arguing that it ward by offering evidence to meet the conmakes no difference whether the plaintiff ac-tradictory evidence, and the burden is upon cepted the note as payment or as collateral, the plaintiff to show by a preponderance of for in either event the plaintiff says that the the evidence the ultimate fact that it took acceptance was for value, and that, since the note under circumstances making it a the respondents have alleged that the note holder in due course. Hansen v. Oregonwas executed to be used as collateral, the Wash. R. & N. Co., 97 Or. 190, 188 Pac. 963, respondents have thus alleged value, and 191 Pac. 655; Bank of Jordan Valley v. thus rendered it unnecesary for the plain- Duncan, 105 Or. 105, 112, 209 Pac. 149; tiff to prove value. It is true that, if the Everding & Farrell v. Toft, 82 Or. 1, 18, 150 note was given and accepted as payment or Pac. 757, 160 Pac. 1160; Gourley v. Pioneer as collateral, in either event it was for val- Loan Co., 51 Okl. 434, 151 Pac. 1072; Desue. Campbell v. Fourth Nat. Bank, 137 Ky. haze v. L. & E. Lamar, 17 Ala. App. 392, 85 555, 126 S. W. 114. It is also true that it is South. 586; First Nat. Bank v. Hall, 31 Idanot likely that the respondents were taken ho, 167, 169 Pac. 936; McClellan v. Morris, 71 by surprise. But it cannot be said as a Colo. 304, 206 Pac. 575; Campbell v. Fourth matter of law that the respondents have al- Nat. Bank, 137 Ky. 555, 126 S. W. 114. leged that the note was signed to be used as collateral. The language of the answer is broad. It is true that the answer speaks of "a little additional security," but the purpose of the security is explained thus: "In order to continue financing him." The answer is fairly susceptible to the construction that the note was to be used for obtaining subsequent advances or for new loans. The fact remains, however, that the plaintiff averred payment, and did not allege that the note was taken as collateral security. And this brings us to the question of the burden of proof. # [14] The instant case is not one where the sole issue is whether there is a want or failure of consideration; and so we are not required to construe sections 7816 and 7820, Or. L., although it is pertinent to direct attention to Bank of Gresham v. Walch, 76 Or. 272, 278, 279, 147 Pac. 534, where we held that ultimately it is incumbent upon the plaintiff to prove by a fair preponderance of the evidence upon the whole case that there was a consideration. See, also, 1 Daniels on Neg. Inst. (6th Ed.) 221; Ginn v. Dolan, 81 Ohio St. 121, 90 N. E. 141, 135 Am. St. Rep. 761, 18 Ann. Cas. 204; Bringman v. Von Glahn, 71 App. Div. 537, 75 N. Y. Supp. 845. See, also, Brannan, The Neg. Inst. Law (3d Ed.) 95 et seq. [15, 16] The plaintiff argues that there was no evidence that it had actual knowledge of any infirmity or defect, and that, since the respondents did not allege bad faith on the part of the plaintiff, the question of bad faith, on the authority of Bank of Jordan Valley v. Duncan, 105 Or. 105, 122, 209 Pac. 149, is not in the case. If we assume that the answer is defective as claimed, the plaintiff is nevertheless not in a position to urge it, because the plaintiff in its reply made the question of good faith an issue for decision by affirmatively alleging good faith; and this allegation in the reply operated to aid the answer. Catlin v. Jones, 48 Or. 158, 163, 85 Pac. 515; HodsonFeenaughty Co. v. Coast C. & F. Co., 91 Or. 630, 649, 178 Pac. 382, 179 Pac. 560; 31 Cyc. 714. The plaintiff must, under the pleadings, after evidence of fraud is offered, show by a preponderance of the evidence not only that it was without actual knowledge, but that it took in good faith, if there was a delivery of the note. Section 7848, Or. L. [17] The respondents were entitled to show the conversation between Molstrom and Kerley and the talk between Shannon and Kerley. The defense of the respondents is that they signed on condition that 18 additional signatures be secured. Whether they did so sign depends upon what was (220 P.) said; and it cannot be known what was said unless the conversations are related to the jury, who must in the end determine whether the respondents did sign as claimed by them. It is not enough for Kerley to give his opinion or his conclusion as to what he told Molstrom and Shannon. Evidence of those two conversations is competent for the purpose of determining the condition or conditions upon which Molstrom and Shannon signed. The bank is of course not bound by the agreement between Kerley and the respondents unless the bank took the note with notice. Although this evidence is admissible, the purpose of it and the extent of its competency should be explained and limited by appropriate instructions. the jury that valves in pipes connecting the blow-off tank with the mud drum in which plaintiff was working were negligently left open when another boiler was blown off, thereby causing the steam to "kick back" and scald plaintiff, and that defendant failed to exercise due care to ascertain whether the valves were open before blowing off the boiler. 6. Negligence 136(15)-Negligence as to contractor's workman scalded by steam held for jury. In an action for injuries to a contractor's employee from steam ejected into a mud drum being installed by him under a boiler on defendant's premises, defendant's evidence that its employee closed the valves in pipes connecting the blow-off tank with the mud drum and did not open them before plaintiff's injury held insufficient to authorize a directed verdict for defendant, in view of evidence that the The order granting a new trial is affirmed. cision. HICKS v. PENINSULA LUMBER CO. (Supreme Court of Oregon. Nov. 13, 1923.) 1. Negligence 32(2) - Owner of premises owes contractor's employees duty of reasonable care. A company contracting for the doing of work on its premises by another owes the same duty to the latter's employees to keep the premises and place of work in a reasonably safe condition as if they were its own employees. 2. Steam 6-High degree of care required. Steam is such a dangerous agency as to require a high degree of care of those engaged in its production and use. 3. Negligence 32(1)-Owner of steam boilers required to exercise ordinary care to safeguard contractor's employee. into the pipes and that defendant failed to exercise due care to ascertain whether they were open before blowing off the boiler. 7. Master and servant 358-Filing claim for compensation not necessarily election precluding suit against third party. The mere filing of a claim for compensation by a contractor's employee, injured while doing work on another's premises under a contract let to his employer, followed by an award of the full statutory compensation, does not necessarily constitute an election to take under the act or affect an assignment of his right of under Or. L. § 6616, which merely requires that action against the third party to the state such election be in advance of any suit. 8. Master and servant 358-Election to take compensation instead of suing third person not presumed, where servant acts in ignorance of obligation to elect. An election, under Workmen's Compensation Act (Or. L. § 6616), by a workman injured while away from his employer's plant, to take under the act, instead of suing a negligent third person, will not be presumed, where he acts in misapprehension of his rights and in ignorance of his obligation to elect especially when no other person's rights are prejudicially affected. A corporation letting a contract for the installation of a mud drum under a steam boiler on its premises held required to take such reasonable precautions in proportion to the danger of steam being ejected into the drum through a blow-off pipe from another boiler, as an ordinarily prudent man, knowing that the contrac-9. tor's employee was ignorant of the danger, would have employed, under the circumstances, to safeguard him. 4. Negligence 136(6)-Question for jury. While the mere happening of an injury is insufficient to raise an inference of negligence, the case is for the jury, where proof of the accident is accompanied by proof of facts and circumstances from which an inference of negligence may or may not be drawn. 5. Negligence 134 (3)-Finding of negligence as to contractor's workman scalded by steam warranted. In an action for injuries to a contractor's employee while installing a mud drum under a steam boiler on defendant's premises, evidence held sufficient to authorize the inference by Master and servant 389-Payment of nurse hire by Accident Commission does not vest state with interest in workman's right of action against negligent third party. Payment of nurse hire by the Industrial Accident Commission as first aid to a workman injured while away from his employer's plant is no part of his compensation under Or. L. § 6628, and cannot be invoked to vest in the state, under section 6616, an interest in his right of action against a negligent third party. 10. Master and servant 358-Acceptance of compensation held not election so as to work assignment to state of right of action against negligent third party. Receipt and acceptance of two weeks' compensation awarded an injured workman held not an election to take under the Compensation For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes Act so as to work an assignment to the state, | hospital, he returned to the Industrial Acciunder Or. L. § 6616, of his right of action dent Commission the amount of such first against a negligent third party, where the payment, and notified the Commission that sum paid was promptly returned to and ac- he elected to seek his remedy against the decepted by the Commission with the under-fendant, and at the request of the Commisstanding that the state's claim was discharged. sion, plaintiff executed a formal writing de11. Appeal and error 1033 (4)-Submission claring that election. of question whether injured workman elected to take under Compensation Act held not reversible error. Submission to the jury of the question whether one suing for injuries sustained while doing work on defendant's premises under the latter's contract with his employer elected to take under the Workmen's Compensation Act by filing a claim and accepting two weeks' compensation, which he subsequently refunded, held not error of which defendant could complain. Department 2. Appeal from Circuit Court, Multnomah County; G. W. Stapleton, Judge. Action by P. E. Hicks against the Peninsula Lumber Company. Judgment for plaintiff, and defendant appeals. Affirmed. C. A. Hart, of Portland (Carey & Kerr, of Portland, on the brief), for appellant. John W. Kaste, of Portland (Jay Bowerman, of Portland, on the brief), for respond ent. McCOURT, J. This is an action brought to recover damages for personal injuries received by plaintiff, which he alleges were caused by the negligence of the defendant. From a verdict and judgment in favor of plaintiff, defendant appeals. The injury for which plaintiff seeks damages occurred on May 3, 1921, at the lumber manufacturing plant of the defendant while plaintiff, an employee of the Willamette Iron & Steel Works, was engaged, with other workmen, in the installation of a mud drum under certain of the boilers in defendant's plant. Plaintiff was working in the mud drum, when defendant's foreman ejected steam from a live boiler into a blow-off pipe line that had been connected with the mud drum by defendant's employees a few hours previously, thereby scalding plaintiff. Two questions are presented by this appeal, both raised on the trial by a motion for nonsuit and a motion for a directed verdict: (1) Whether there was any evidence produced at the trial in support of any of the charges of negligence contained in the complaint; and (2) whether after the accident there was an election to take compensation under the Workmen's Compensation Law and a resulting assignment of the cause of action against the defendant, if any existed, to the state. The determination of these questions requires an examination of the evidence. Defendant is engaged in the manufacture of lumber. Its plant, which is located on the Willamette river at St. Johns in Portland, is furnished with steam by a battery of nine boilers, the easterly three of which were out of commission at the time of the accident. Underneath these three boilers there is located a cylindrical drum, 30 feet long and 30 inches in diameter, known as a "mud drum," running crossways of the boilbrick wall inclosing all the boilers above ers, the east end of which is flush with the mentioned. At the end of the mud drum and in this brick wall, there is a manhole, and below the manhole is a pipe leading along the floor and out through the wall of the building to what is known as the "blow-off" tank or "sump" tank located under the floor of the dock just outside the boiler room building. In this pipe which leads from the mud drum to the blow-off tank outside the building, there are two valves; one ordinarily used and the other an emergency valve. These valves are located just inside the wall of the boiler room building. The mud drum is designed to drain the boilers and to carry off sediment from the water in the boilers. When the boilers are drained or "blown-off," the water or steam passes inPlaintiff's employer, the Willamette Iron & to the mud drum, thence through the drainSteel Works, was operating under the Work-pipe (the valves being first opened), to the men's Compensation Law; but as the injury blow-off tank outside the building. happened away from the employer's plant, blow-off tank is similarly connected with all plaintiff had a right to take compensation, of the boilers. Its use is necessary in order or, at his election, seek his remedy against that steam and hot water from the boilers the defendant if the injury to plaintiff was (or their mud drums) shall not be discharged due to the negligence or wrong of defend- directly from the boilers. The blow-off tank has a vent for the escape of steam and a Immediately after he was injured, plaintiff drain emptying into the river. When condiapplied to the Industrial Accident Commis- tions require the blowing off of a boiler, the sion for compensation, and received a first fireman in charge opens the valve in the pipe payment for temporary disability. Shortly leading from the boiler (or its mud drum) to thereafter, and while plaintiff was in the the blow-off tank, so that when the steam is For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and indexes ant. The (220 P.) released from the boiler, it is discharged which were attempted to be cured by calkthrough the blow-off tank. If the valves in any of the pipes connecting the blow-off tank with other boilers (or their mud drums) are left open at such a time, some of the steam coming into the blow-off tank may "kickback" up those pipes to the mud drum under the other boilers. ing. This proved unsuccessful, and the foreman of the Willamette Iron & Steel Works finally determined to cut out the leaky rivets and put in new ones. On Monday, May 2d, the faulty rivets were removed, and in the evening at 5 o'clock a new crew of the Willamette Iron & Steel Works, including the This is what happened when plaintiff was foreman above mentioned and plaintiff, behurt: He and another workman were in the gan the work of putting in new rivets. In mud drum under the easterly three boilers the meantime the pipe fitters of defendant when a boiler at the far end of the boiler connected the mud drum with the blow-off room was blown off. The steam was dis- tank, so that the mud drum no longer charged in the usual way into the blow-off drained on the floor of the dock outside the or sump tank, but because the valves in the building, but was connected up with the pipe which connected the blow-off tank with blow-off tank and the exhaust steam line the mud drum under the three easterly boil-connecting with all of defendant's boilers. ers were open, some of the steam traveled No notice that this connection had been from the blow-off tank up this pipe and into made was given to plaintiff, his foreman, or the mud drum and caused plaintiff's injury. any of the men working with him. The emAs above stated, plaintiff was an employee ployees of defendant in charge of the work, of the Willamette Iron & Steel Works. That who connected the mud drum with the blowcompany had contracted with defendant for off tank, testified that when the pipe fitters the construction and Installation of a new completed their work of installing this pipe mud drum under the three easterly boilers, and connecting it with the blow-off tank, one the installation to include the placing of the of them at once notified defendant's day firemud drum under the boilers, but not to in- man then in charge, and in the presence of clude the pipe work necessary to connect the the day fireman closed the valve nearest the boilers with the water supply to them or the mud drum. Later in the day the secondmud drum with the blow-off tank. Under shift fireman, who took charge at 2 o'clock the contract between defendant and the Wil- p. m., testified that he had occasion to oblamette Iron & Steel Works, before the lat- serve these valves, and noticed that the ter entered upon the work, defendant was revalve nearest the mud drum was properly closed. quired to, and did, disconnect the boilers, under which the mud drum was to be placed, from the blow-off tank, and in so doing, removed all the steam pipes connecting the mud drum with the blow-off tank. Defendant was also required to, and did, disconnect the pipes which supplied water to the boilers. On Saturday, April 30, 1921, the foreman in charge of the installation work reported to the chief engineer of defendant that the mud drum was in, and ready to be tested. The chief engineer of defendant thereupon directed his pipe fitters to make connection for the water supply necessary to make the tests. Defend ant's pipe fitters immediately made the connections, as directed, and also attached to the mud drum that portion of the drain pipe which was equipped with valves, as aforesaid, and which extends from the manhole in the mud drum to a point just outside the wall of the boiler room, so that water could be retained in the mud drum while the tests were being made and could be drained from the boilers and the mud drum upon the floor of the dock outside the building when the tests were completed. Tests were made of the mud drum on Saturday evening and Sunday, by filling the boilers with cold water, and after the tests the water was drained out through the pipe referred to, on the floor of the dock outside the building, The tests developed defects, The reriveting work which began Monday evening required one of the men to get inside of the mud drum, going in through the manhole at the end. Later a second man was sent in by the foreman of the Willamette Iron & Steel Works, so that there were two, plaintiff and another, in the mud drum when steam was turned into the same, as hereinafter stated. At about 2 o'clock in the morning of Tuesday, May 3d, defendant's night fireman blew off one of the boilers then in use; it being customary to do this once or twice during the night. The valves in the pipe leading from the blow-off tank to the mud drum, in which plaintiff and his fellow workman were at work, were then open, and the steam which came into the blow-off tank from the boiler then blown off by the fireman traveled up through this connecting pipe, passed the open valves and into the mud drum where the men were working, and severely burned and scalded them. The plaintiff and his fellow workmen, including his foreman, all testified that they did not know that the mud drum had been connected with the blow-off tank, and that they had not opened the valves in the pipe which made the connection, and had not touched the same. It does not appear from the evidence that any persons not in the employ of defendant, other than the Willamette Iron & Steel Works |