This action was brought to determine the ownership of a promissory note for $1,200 and a mortgage on a certain quarter section of land in Grant county given to secure the payment of said note. The note and mortgage were'payable to and were owned by Gold1 Bros.' Security Company, a South Dakota corporation, hereinafter referred to as the plaintiff. Some four months after the execution of the note and mortgage, plaintiff received a telegram from- one Frank Wood, at Kansas City, Mo», to the effect that he had) a customer for about $6,000 in farm 'loans, and, if plaintiff could supply such customer, to make assignments in blank of such securities, and that he would remit for sam'e. Pursuant .to su’ch telegram-, plaintiff indorsed said note- in blank, and executed and acknowledged an assignment in blank of the said mortgage, and forwarded the note and mortgage, and the blank assignment thereof, and also- an abstract of the title to the land described in the mortgage, to said Wood. In the letter of transmittal accompanying said papers, plaintiff directed Wood to return said papers together wfith his remittance, advising plaintiff of the name of the purchaser of the note and mortgage, and that plaintiff would then fill out the assignment, have the same recorded,'-and return it to1 Wood. Wood failed to dispose of said note and mortgage as proposed in said telegram, and failed to -return the same to plaintiff as directed', and shortly thereafter, pretending and representing that he was the owner of said note *33and mortgage, pledged the same to defendant as security for a loan from defendant to .himself. He defaulted in the payment of the said! loan, whereupon defendant inserted its own name as indorsee of the note and assignee of the mlortgage, and. caused said assignment to be recorded in the office of the ' register of deeds of Grant county. Plaintiff then brought this action, in which it asks to have the said assignment canceled and set aside, and that, plaintiff be decreed to be the owner of said note and mortgage. Findings of fact and judgment were for defendants, and plaintiffs appeal.
It is contended by appellants that the question to be determined upon this appeal is whether defendant had such knowledge as would have put a prudent person upon inquiry as to the extent of Wood’s authority to dispose of the note and mortgage and that upon that question the evidence would! clearly preponderate in favor of appellants. We concede that the evidence would so preponderate were that the question before us. We concede that the law of this state was as is contended for by appellants prior to the adoption of the Negotiable Instruments Law, but the adoption of that law aligned this state with what is known as the majority rule. Now the right of a holder of a negotiable instrument for1 value before maturity cannot be defeated without proof of actual notice of the defect in the seller’s title or of, bad faith on the part of the purchaser. Rev. Code 1919, §§ 1610, 1760; Oschenreiter v. Block, 42 S. D. 154, 173 N. W. 736.
The findings' of the trial court, sustained by the evidence, negative any bad faith on the part of defendant and negative actual notice bn its part of the defect in Wood’s title to the note. ■Defendant was therefore a holder in due course of the note, and consequently of the mortgage security, and the judgment and order of the trial .court should be, and they are, affirmed.
ANDERSON, J., not sitting.