Opinion
Hearing Granted by Supreme Court Fed. 23, 1928.
Appeal from Superior Court, Santa Clara County; P. F. Gosbey, Judge.
Action by the Westlake Mercantile Finance Corporation against Chas. A. Merritt and Chas. A. Parlier, individually and as copartners doing business under the firm name and style of Merritt & Parlier. Judgment for defendants, and plaintiff appeals. Reversed. COUNSEL
George H. Woodruff and Woodruff, Musick, Pinney & Hartke, all of Los Angeles, for appellant.
Elmer D. Jensen, of San Jose (H. A. Blanchard, of San Jose, of counsel), for respondents.
OPINION
CASHIN, J.
An appeal from a judgment entered for the defendants in an action on two bills of exchange, called trade acceptances each for the sum of $420.
The bills were dated April 30, 1925, and were drawn on the defendants and accepted by them on the day they bore date. The instruments were drawn by Aristocrat Distributing Company, the name of this concern being affixed thereto by J. B. Vallen, were made payable on June 30, 1925, and July 30, 1925, respectively, and each contained the following recital:
"The obligation of the acceptor hereof arises out of the purchase of goods from the drawer, maturity being in conformity with original terms of purchase."
And defendants denied that the bills were due or payable, and alleged as a defense to each cause of action that maturity "was and is dependent upon conformity with the original terms of purchase, and *** that the Aristocrat Distributing Company failed, refused, and neglected to perform the terms of purchase," and "that the Westlake Mercantile Finance Corporation, the plaintiff herein, and the assignee of said Aristocrat Distributing Company had notice that maturity of said bill of exchange was dependent upon conformity with the original terms of purchase."
The defendants conducted a mercantile business in San Jose, and the amounts for which the bills were drawn and accepted represented the price of certain washing machines which the drawer agreed to sell and deliver to the defendants. There was introduced in evidence over objection a written memorandum signed by the drawer and delivered to the defendants at the time the bills were accepted. This memorandum, by its terms which described the machines for the price of which the bills were accepted, granted to the defendants for the period of one year the sales right for Aristocrat washing machines, and contained the following provisions:
"Goods ordered below to be shipped at earliest convenience," and further "that if sufficient sales of above goods have not been made either in cash or time paper to cover amount of and before maturity of acceptances given herewith dated 90 and 120 days from date said dealer may return at end of agreement any of above goods remaining unsold on shipping instructions furnished at the time."
The defendants also testified that the drawer agreed to ship the machines within two weeks, to furnish salesmen and advertising matter, and conduct an advertising campaign to further the sale of the machines, all of which it failed to do. According to this testimony, the machines did not arrive in San Jose until about July 3, 1925, at which time defendants refused to accept delivery, and it was shown that the latter on June 29, 1925, by registered letter addressed to the drawer, which, owing to a change in the drawer’s address, was not delivered by the postal authorities, attempted to notify the drawer of their election to rescind the order on the ground of delay in delivery.
According to the witnesses for the plaintiff, whose testimony was taken by deposition, the bills were indorsed by the drawer to plaintiff on May 4, 1925, the consideration paid therefor being the sum of $789.60, and, according to the same testimony, the purchase was made without knowledge or notice of any infirmity in the instrument. The testimony of these witnesses was not contradicted, nor were the witnesses cross-examined by the defendant.
The court found that it was agreed between the drawer and the defendants that the maturity of the bills would depend upon performance by the drawer of the original terms of purchase, that the latter had not performed, and that the plaintiff had actual notice at the time of the transfer of the bills that the maturity of both was dependent upon such performance by the drawer, and as conclusions of law therefrom that the bills were not due or payable, and that the plaintiff took the same subject to defenses.
The appeal was taken under the alternative method, and it is contended that the findings that the plaintiff had notice that the acceptances were conditional are unsupported.
It was not alleged or shown that the drawer at the time the agreement was made did not intend to perform, nor does the record disclose testimony which supports the conclusion that the indorsee had knowledge of the terms of the sales agreement or notice thereof other than the statement of the transaction contained in the recitals mentioned. Moreover, as shown by the testimony of defendants, no breach of agreement had occurred at the time the bills were indorsed to the plaintiff. The defendants contend, however, that the recitals were sufficient to put the indorsee on notice as to the provisions of the sales agreement, making the acceptances conditional, and that as a consequence the bills were not negotiable.
Knowledge that an instrument negotiable in form was given in consideration of an executory agreement which has not been performed does not deprive an indorsee of the character of a bona fide holder in the absence of notice of a breach (Flood v. Petry, 1655 Cal. 309, 132 P. 256, 46 L. R. A. [N. S.] 861; Pratt v. Dittmer, 51 Cal.App. 512, 197 P. 365), which in the present case had not occurred at the time of the transfer; nor does the fact that an unqualified promise to pay is coupled with a statement of the transaction which gave rise to the instrument render the promise conditional (Civ. Code, § 3084; People’s Bank v. Porter, 58 Cal.App. 41, 208 P. 200).
It is clear that the recital that "the obligation of the acceptor arises out of the purchase of good from the drawer" was but a statement of a transaction which gave rise to the instrument, but defendants contend that the concluding portion, "maturity being in conformity with original term of purchase," meant that maturity should depend upon performance by the drawer of the terms of the sales agreement, and that this agreement by reference was made a part of the acceptances.
The word "being," the present participle of the verb "be," is equivalent to "which is" (Porter v. Ritchie, 32 Utah. 381, 91 P. 24, 27), and has been held to be sufficient as an averment of an existing fact (State v. Boncher, 59 Wis. 477, 18 N.W. 335; In re Nickodemus, 18 Fed. Cas. 222, No. 10,254), and the word "conformity" means "correspondence in form and manner, resemblance, agreement harmony" (Webster’s International Dictionary).
The language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist, which is presumed to be the promisor (Civ. Code, § 1654), and in accordance with this rule it has been held that if a drawee intends to qualify or attach a condition to his acceptance he must do so distinctly and unmistakenly, or his acceptance will be taken to be absolute (8 Cor. Jur., Bills and Notes, § 496, p. 323). In the present case the bills having provided definite dates of payment, viz., June 30, 1925, and July 30, 1925, the recitals when read with these provisions in accordance with the rule that contracts are to be construed as entireties (Civ. Code, § 1641), the words used being understood in their ordinary and popular sense (Civ. Code, § 1644), created no uncertainty as to when the bills should mature, but clearly referred to the due dates of the instruments as being the dates of maturity which conformed with the original terms of purchase.
It is urged by defendants that plaintiff has failed to print in its briefs, or in a supplement appended thereto, as required by section 953c, Code of Civil Procedure, the portions of the record upon which it relies in support of its contention that the finding of notice of the condition is unsupported, and, further, that it appears from the testimony that Aristocrat Distributing Company is a fictitious name under which J. D. Vallen was conducting his business, and it not being shown that the provisions of section 2466 of the Civil Code were complied with, the action cannot be maintained.
In the following cases the rule requiring the evidence relied upon on appeal to be printed was construed as one for the convenience of the court (Oliver v. Robnett, 190 Cal. 51, 210 P. 408; Gibbons v. Yosemite Lumber Co., 190 Cal. 168, 211 P. 4; People v. Woods, 190 Cal. 513, 519, 213 P. 951; O’Connor v. West Sacramento Co., 189 Cal. 7, 207 P. 527), and in the present case plaintiff having printed in its opening brief the material portions of the testimony of its witnesses respecting the circumstances attending the purchase of the bills, there is a sufficient compliance with the rule.
The question of the capacity of the drawer to sue, or of the right of plaintiff as indorsee of the bills to maintain an action thereon, was not raised by the answer or by objection at the trial, and cannot be urged for the first time on appeal. Sweeney v. Stanford, 67 Cal. 635, 8 P. 444; Phillips v. Goldtree, 74 Cal. 151, 13 P. 313, 15 P. 451; Cook v. Fowler, 101 Cal. 89, 35 P. 431; Quan Wye v. Chin Lin Hee, 123 Cal. 185, 55 P. 783; Paff v. Ottinger, 32 Cal.App. 439, 163 P. 230; Helms v. Pacific Mill Co., 57 Cal.App. 442, 205 P. 708.
Defendants also contend that regardless of whether a condition was expressed in the acceptances the court was not bound to believe that the bills were purchased without notice of the condition contained in the sales agreement, and that the evidence justified a finding to the contrary. While the credibility of the witnesses is a question for the jury or the trial court sitting as a jury, they are nevertheless bound by the presumption that witnesses speak the truth, and in the absence of contradictory evidence or other facts tending to impeach their credibility their testimony cannot be disregarded. It is the declared law of the state that to constitute notice of an infirmity in an instrument negotiable in form or a defect in the title of the person negotiating the same, the person to whom it is negotiated must have actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith (Civ. Code, § 3137), and mere knowledge of facts sufficient to put a prudent man on inquiry without actual knowledge or mere suspicion of infirmity or defect in the 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 (Popp v. Exchange Bank, 189 Cal. 296, 208 P. 113; Goodale v. Thorne, 199 Cal. 307, 249 P. 11).
In the present case the bills were purchased for the plaintiff by its president, whose employment, however, had ceased before his deposition was taken. This witness testified to the circumstances under which the purchase was made and the price paid, and no finding contrary to his testimony as to the amount was made. Moreover, nothing appears from his situation or the character of his testimony which would reasonably support a finding that his testimony was influenced by improper motives, nor was his account of the transaction inherently improbable. The same applies to the testimony of all the witnesses for the plaintiff, none of whom were cross-examined or contradicted, nor was the court for the reason above stated in a position to find against their credibility from the manner in which they testified.
The above testimony-and the record contains no other evidence respecting the transaction between the drawer and the plaintiff-was insufficient to support a finding that the latter had notice in fact or knowledge of the condition contained in the sales agreement, and it is manifest that the finding of notice was based upon the view of the trial court that the recitals in the bills were constructive notice of the condition.
It being our conclusion that the bills with the acceptances were in terms unconditional, and that the finding of notice was unsupported, the judgment is reversed.
We concur: TYLER, P. J.; KNIGHT, J.