Bernstein v. Pacific States Savings & Loan Co.

SHINN, J.,

pro tem.

It is shown by the findings, which are not questioned, that plaintiff, owner by assignment of a negotiable promissory note for $1,000, bearing an endorsement to her, endorsed the same generally after its maturity and delivered it to American Mortgage Company, as her agent, for the purpose of collection. The agent, in violation of its instructions, sold the note to McCabe-Fewell & Co., who sold it to State Guaranty Corporation, from whom defendant acquired it for a consideration of $275. Plaintiff had no knowledge of these transfers, and defendant had no knowledge of the limit of authority of plaintiff’s agent, American Mortgage Company.

Plaintiff prevailed in this action to quiet title to the note, and defendant appeals.

Appellant contends that as the note was negotiable and was purchased for value without knowledge of plaintiff’s rights as the real owner, title passed free from any defects in the title of appellant’s transferrer, notwithstanding the fact that each of the several transfers took place after the maturity of the note.

Both legal and equitable claims are involved in this proposition. Appellant did not establish a legal title to the note. Respondent’s agent had no authority to sell the note. Having purchased after maturity, appellant was not a holder in due course, and while a holder in due course takes title to a negotiable instrument free from defects of title of prior

[681]

parties under the negotiable instruments law, others do not. (Civ. Code, see. 3138;

Chase

v.

Whitmore,

68 Cal. 545 [9 Pac. 942] ;

Woodsum

v.

Cole,

69 Cal. 142 [10 Pac. 331];

McPherson

v.