SMITH v. LAGERSTROM

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District Court of Appeal, Second District, Division 2, California.

SMITH v. LAGERSTROM et al.

Civ. 16658.

Decided: July 18, 1949

J. Vincent Wood, Santa Barbara, and Gordon M. Snyder, Los Angeles, for appellants. T. H. Canfield and John A. Westwick, Santa Barbara, for respondent.

From a judgment in favor of plaintiff predicated upon the granting of his motion for a directed verdict after trial before a jury in an action to recover on a promissory note, defendants appeal.

Undisputed Facts: The complaint as amended alleged a cause of action for failure to pay the amount due on a promissory note. Among other allegations of the complaint was the following: ‘That on the 3rd day of January, 1947, the Defendants and each of them, made, executed and delivered to Plaintiff their certain Promissory Note, in words and figures as follows:

$6,000.00

January 3, 1947

_____ after date we promise to pay to the order of Allen Dale Smith Six Thousand no/100 Dollars at _____. Value received with interest at the rate of _____ per annum.

/s/ Russ Lagerstrom

/s/ Marjorie Lagerstrom'

In addition to a general denial of the foregoing allegation of the complaint defendant alleged among others the affirmative defense that plaintiff was not authorized to fill in the blank spaces in the promissory note to make it an ‘on demand’ note, but that plaintiff's authority was limited to making the note payable only from the profits of a certain business located in Santa Barbara known as the ‘Seven Seas Restaurant.’

At the trial plaintiff testified that when he received the note it contained the blanks which appear in the note as alleged in the complaint as amended, and that he filled in the words ‘On demand; Santa Barbara, California’, and ‘seven percent.’ After plaintiff had rested, his counsel objected to the introduction by defendants of any evidence in support of the affirmative defenses heretofore mentioned. This objection was sustained by the trial judge.

Question: Was it prejudicial error for the trial judge to sustain an objection to the introduction of evidence by defendants in support of their affirmative defense that plaintiff's authority to fill in the blank as to the time of payment of the note was limited to making the note payable from profits realized from the operation of a business in Santa Barbara known as the ‘Seven Seas Restaurant’?

This question must be answered in the affirmative. Section 3095 of the Civil Code, Section 14 of the Uniform Negotiable Instruments Law, reads in part as follows: ‘Section 3095. Blanks; when may be filled. Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. * * *’ (Italics added.)

Pursuant to the provisions of the foregoing section of the Civil Code, the law is settled that when an instrument is delivered which contains a blank, the person in possession thereof has prima facie authority to complete it by filling in the blank. White v. White, 39 Cal.App.2d 57, 60, 102 P.2d 432; In re Estate of Gillett, 73 Cal.App.2d 588, 596, 166 P.2d 870.

However, such authority is merely prima facie and gives rise to a rebuttable presumption that may be overcome by the adverse party's introducing the proper quantum of competent evidence. In re Estate of Gillett, supra, 73 Cal.App.2d at page 597, 166 P.2d 870; Cassetta v. Baima, 106 Cal.App. 196, 200, 188 P. 830; Pacific Automobile Exchange v. Stansfield, 62 Cal.App. 577, 580, 217 P. 566.

Therefore, applying the above rule to the facts of the present case, plaintiff had prima facie authority to fill in the blancks in the note, which authority was based on a rebuttable presumption and placed on defendants the burden of overcoming the authority to fill in the blanks. Since the burden was on defendants to overcome the prima facie case made by plaintiff, defendants were entitled to introduce, in support of their affirmative defense, evidence tending to prove that plaintiff was without authority to fill in one of the blanks in the note to make it an ‘on demand’ note, and that his authority was limited to making the note payable only out of the net proceeds of a business in Santa Barbara known as the ‘Seven Seas Restaurant.’ The court by sustaining plaintiff's objection to the introduction of evidence in support of such defense precluded defendants from introducing evidence tending to sustain a substantial defense to the action, and the ruling was thus prejudicially erroneous.

There is no merit in plaintiff's contention that the evidence which defendants were proffering violated the parol evidence rule. The authorities relied on by plaintiff are inapplicable since the evidence was not offered for the purpose of adding to, varying or contradicting the terms of a written instrument, but on the contrary, was offered for the purpose of establishing the very terms of the written instrument. Akopoff v. Mesropian, 96 Cal.App. 128, 129, 273 P. 604; P. A. Smith Co. v. Muller, 201 Cal. 219, 222, 256 P. 441; Verzan v. McGregor, 23 Cal. 339, 343.

In view of our conclusion it is unnecessary to consider other alleged errors urged by defendants.

The judgment is reversed.

I concur. However, in view of the reversal of the judgment and the possibility of a new trial of the action, other alleged errors complained of by appellant should be determined for the guidance of the trial court and counsel to the end that the same errors may not be made the subject of another appeal. See Canon 19, Canons of Judicial Ethics, 49 Rep.Am.Bar Assn. (1924) 760, 767. Since the majority have deemed it unnecessary to consider such errors it would serve no purpose for me to discuss them. This concurrence is not to be construed as an expression of an opinion concerning the validity of the other matters discussed in appellants' brief, nor should the failure of the majority to decide all questions raised by the appeal be taken by the trial court to mean that any of them are regarded as unsound.

McCOMB, Justice.

MOORE, P. J., concurs.