This is an action begun in the circuit court by notice of motion for judgment on a certificate of deposit, as follows:
“Peoples Bank of Keyser,
Keyser, W. Va., March 18, 1922.
“No. 338.
Adolph Segal has deposited in this Bank Five Thousand & No-100 Dollars, payable to the order of himself with interest at 3 per cent, per annum for Six Months on return of this certificate properly endorsed.
Not subject to cheek.
$5,000.00 T. D. Leps, Cashier.”
Endorsed as follows:
“Adolph Segal,
S. M. Smith,
Merchants Bank & Trust Company.”
The notice of said motion averred the purchase of said certificate by plaintiff before maturity, in due course, and for value received. And the usual statutory affidavit was attached thereto. The only plea by defendant was non as-sumpsit, on which issue was joined. A jury was waived, and the case submitted to the court in lieu of a jury.
After proving by the president of defendant bank that Leps at the date of the certificate of deposit sued on was cashier of his bank and that his signature thereto as such was genuine, plaintiff introduced as a witness Edwin W. Popkins, its treasurer, and over defendant’s objection was allowed to prove by him that plaintiff was owner of the certificate of deposit sued on, and that it had been purchased in due course, for value, at the price of $4,800.00; over like objection and exception the certificate of deposit was admitted in evidence; and this action of the court is the first point of error relied on for reversal.
In support of this point, it is urged by defendant’s counsel that the paper on its face bore such evidence of its infirmity as to call upon plaintiff for affirmative proof of its validity,
As already indicated, there was no plea of non est factum, or any other plea putting in issue the validity of the instrument, and as plaintiff proved before introducing it in evidence, that the signature thereto was that of the cashier of defendant, this was sufficient to admit it unless it carried on its face evidence of a material alteration after it was delivered. Do the “X’ed” out words show this? We do not think so. The alteration was evidently made by the same machine used in preparing the instrument, and this change of itself constituted no suspicious fact or circumstance putting the purchaser on notice of a' subsequent alteration or of any other infirmity in the instrument.
Adopting the view of some courts that any alteration in a deed or other written instrument constitutes prima facie evidence that it was altered after delivery, defendant’s counsel argue the inadmissibility of this paper until this presumption was overcome by evidence. Conceding their major premise, of course, their conclusion would follow; but we do not think the proposition is sustained, either by reason or the weight of authority. Three prior decisions of this court are cited and relied on to sustain the proposition, namely, Conner v. Fleshman, 4 W. Va. 693; Piercy’s Heirs v. Piercy, Ex’or, 5 W. Va. 199; and Carey Mfg. Co. v. Watson, 58 W. Va. 189. In the first case there was a plea of non est factum, which under the statute put the plaintiff on proof of the genuineness of the instrument. But even there the court held that the instrument in question was properly admitted in evidence, it being for the jury to say whether the alteration
There is nothing on the face of the certificate of deposit here involved evincing that it was altered after delivery. The law is that where the pleadings allege that the instrument sued on was made and delivered by defendant, and there is no pleading putting this fact in issue, the defendant is not permitted to show that it was altered after it was made and delivered. Archer v. Ward, 9 Gratt. 622. And where the instrument is declared on in its original condition the defense of alteration should be specially pleaded. 1 R. C. L. 1048, sec. 86.
The proposition supported by some decisions, that every alteration in an instrument is presumed to have been made after delivery seems to us opposed to sound reason, and certainly so when applied to an instrument otherwise regular on its face, except that some of the words on the printed form have been stricken out. Such a rule would almost prevent the use of printed forms so much in use in commerce, and require that every instrument which is in printed or written form should be absolutely perfect if the parties would escape the perils of the law; it would be harsh and necessarily burdensome. It is opposed to the salutory rule that the law never presumes a fraud. Unless an alteration is suspicious in character and such as to furnish intrinsic evidence of a subsequent alteration, it should be regarded as a legitimate
The next proposition of defense is that the instrument is not a negotiable instrument and is subject in the hands of the plaintiff bank to all intervening equities between the parties and their privies. It being conceded that the certificate of deposit was fraudulently executed and that defendant got no consideration therefor, this question becomes all important.
Three comparatively recent decisions of this court hold that certificates of deposit like the one involved here are negotiable instruments although the promise to pay be not in express words. Bank v. Bryan, 72 W. Va. 29; Benedum v. Bank, Id. 124; Pomeroy Nat. Bank v. Huntington Nat. Bank, Id. 534. But it is said these decisions were under section 7, chapter 99, Code, 1906, and did not involve the construction of the present negotiable instruments law of 1907, section 1, chapter 98-A, Code, 1923, which provides as follows:
“An instrument to be negotiable must conform to the following requirements: (1) It must be in writing and signed by the maker or drawer; (2) must contain an unconditional promise or order to pay a sum certain in money; (3) must be payable on demand or a' fixed or determinable future time; (4) must be payable to order of a specified person or to bearer.”
The proposition advanced by counsel is that the certificate of deposit here in question does not comply with the second requirement of the present statute, in that it does not contain an unconditional promise or order to pay a sum certain
The next proposition relied on by defendant is that plaintiff is not a holder in due course and without notice of the fraud practiced upon the defendant. The record shows that the instrument sued on is one of a series, amounting in all to $105,000.00, payable to Segal, and delivered, not to Segal, but to one Robert A. McDougal, not at the banking house of defendant in West Virginia, but at the Queen City Hotel in Cumberland, Maryland; that the transaction was a private and secret one between Leps and Segal or McDougal, and
To be protected as a holder in due course the purchaser of the instrument must take it under the following conditions: “ (1) That the instrument is complete and regular on its face; (2) that he became the holder of it before it was overdue and without notice that it had been previously dishonored, if such was the fact; (3) that he took it in good faith and for value; (4) that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.” Section 52, chapter 98-A, Code, 1923. •
And section 56 of the same chapter says that: “To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” Mere knowledge of facts sufficient to create suspicion, without actual knowledge, will not deprive one of the rights of a purchaser in due course, but if the facts, circumstances and conditions attending the purchase are so cogent and obvious that to remain passive amounts to bad faith on his part and show bad faith on the part of the seller, the purchaser will be deprived of the status of a holder in due course. Marion National Bank v. Harden, 83 W. Va. 119; Arnd v. Heckert, 108 Md. 300. We have decided that there was nothing on the face of the certificate showing any irregularity in the issuance thereof; wherefore the plaintiff was entitled to the presumption that it was a holder in due course; for the mere
Another question of prime importance' is, did the plaintiff at the time of its alleged purchase of the certificate of deposit have notice of any facts or circumstances impeaching the validity of the instrument? The facts established by the competent evidence and on which defendant relies as showing notice to plaintiff of the invalidity of the instrument are as follows: First, that S. M. Smith, its immediate endorser, offered to sell the paper, bearing three per cent interest from date, and with only about five months to run, at a discount of $200.00 and the interest, when if valid and being in the form of a certificate of deposit of money, he could undoubtedly have secured better terms from the bank issuing it, and plaintiff could have been advised fully by telegram or telephone to the apparent maker in Keyser; Second, that Smith, the immediate endorser, was a comparative stranger, and that plaintiff, through its treasurer and witness Popkins, had at least some little knowledge of the bad reputation of Smith. Popkins did not personally conduct the transaction with Smith, but was present; Mr. Ezra Gould, its then vice-president, did. He is not now connected with the plaintiff and was not called as a witness. Popkins was asked: “Mr. Pop-kins, do you know anything about the reputation of S. M. Smith down there in Washington?” A. “I do now.” Q. “Did you then?” A. “Not so very much, no, sir.” His testimony thus evidences some knowledge of Smith’s reputation, which he tacitly admits is now bad. Counsel and witness must have understood that Smith’s reputation for honesty and fair dealing was the subject of the inquiry; Third, that contrary to what is alleged in the declaration and proved by Popkins, plaintiff in a suit brought by it in Washington, D. C., against said Smith and the Massachusetts Bonding Company, on a bond of indemnity against the insolvency or
The record shows that Leps issued and delivered the certificates of deposit to McDougal, Segal’s agent, in Maryland, and that Segal put them in the hands of West, of Philadelphia, and that Smith got them from West, one of which he disposed of, either to Van Senden or to plaintiff through Van Senden. When the fraud was discovered by defendant, West' was quite ready to surrender seven of them still in his hands, to Segal, and Segal to the defendant.
That all of the actors down to and including Smith had engaged in a scheme to defraud the defendant is most certain. Van Senden had probably discovered this, or at least had become suspicious;, and after the indemnity bond was received by him from Smith, he declined the deal and turned it over to Gould for the plaintiff. So that it appears that Gould was a most important witness for plaintiff to show the bona fides of the transaction with Smith, and plaintiff’s notice or want of notice of the fraud affecting defendant’s rights. Rules of evidence well established by our decisions and applicable to the facts here disclosed declare that, “When a, party to a controversy fails to examine a material witness
Wherefore, we are of opinion that the plaintiff has not shown by sufficient and competent evidence that it purchased the paper sued on in due course and for value without notice of the fraudulent origin and subsequent dealings with the paper; and that the judgment below on the issues joined ought to be reversed.