McKay v. Security-First National Bank

MOORE, P. J. — This is an appeal by defendant from a judgment in favor of plaintiff for the unpaid balance of a certain nonnegotiable promissory note in favor of the plaintiff by his deceased sister, Ida M. T. Miller. The note dated April 25, 1928, is for the sum of $39,688.93; is to bear no interest; to remain in effect during the life of plaintiff un[351]less sooner paid; to be paid out of one-third of the royalties from the oil well or wells producing on the parcel of land described in the note, and to terminate in the event of the cessation of said production. Following the signature of decedent is a postscript signed by the plaintiff: “I accept this gift under the within terms and conditions.” Decedent departed this life in January, 1938.

The trial court found that the note was in fact supported by an adequate consideration, having been executed in compromise of an action involving the unpaid balance of a former note of decedent for $100,000; that plaintiff is the lawful owner and holder of said note; that one-third of the royalties accrued as of the time of the trial was $1713.24; that no contest of the executor’s rejection of plaintiff’s claim had been made; that plaintiff during the course of the trial waived all recourse against the general assets of the estate of the said decedent other than his right to one-third of said royalties until the balance of said note should be paid in full; that decedent during her lifetime made valid and binding transfers to plaintiff of the said one-third of the moneys accrued, and to accrue, from said royalties until he shall have received the balance of $8,994.36; and that plaintiff’s claim thereto is valid.

Based upon such findings, the court decreed judgment in favor of the plaintiff for said last-mentioned sum, payable out of said one-third of the royalties accrued and to accrue, until said sum shall have been fully paid, and directed said Bank of America, the depositary of said royalties, to pay plaintiff one-third of all such royalties until payment in full of said balance, and further adjudged that neither the said husband of decedent nor the said appellant has any right, title, or interest in or to the one-third of said accruing or accrued royalties until plaintiff shall have received said sum.

The bases of its appeal are: (I) In the absence of clear and convincing evidence showing such intention, a promissory note payable out of a specific fund does not constitute a partial assignment of such fund; (II) a recital in a promissory note that it is accepted as a gift and the acceptance thereof by the payee as a gift estops the payee to assert that it was for a valuable consideration; (III) a promissory note made payable out of a specific fund cannot under any circumstances operate as a partial assignment of