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(27 Or. 23)

a like transaction with one Margaret Metzger, BOWMAN V. METZGER et al.

whereby she was induced to execute her note (Supreme Court of Oregon. Feb. 11, 1895.)

to the said company for $1,000, with like NEGOTIABLE NOTE BONA FIDES OF INDORSEE

terms and conditions, except that she reKNOWLEDGE OF SUSPICIOUS CIRCUM

ceived only 10 shares of capital stock. On STANCES-Evidence.

August 21, 1890, these notes were renewed 1. The fact tnat the purchaser of a note for one year, at the instance of Durand, who had notice of facts which would have put a prudent man on inquiry as to defects therein,

had them made payable to himself, instead and failed to make inquiry, does not, as a mat

of the company.

The defendants. assuming ter of law, prevent him from holding the note the obligations of Margaret, then deceased, free from all equities.

executed all three of the new notes. On No2. Knowledge by a purchaser of a note of suspicious facts tending to show defects there

vember 4, 1890, the First National Bank of in is to be considered in determining whether he East Portland, of which plaintiff was the purchased in good faith.

cashier, became the owner of one of these 3. In an action by the purchaser of a note

notes. On August 18, 1891, at the instance procured by the payee by fraud, knowledge on the part of the purchaser of the manner in

of Durand, these three notes were again rewhich similar notes were procured by the payee newed by defendants for one year, with like is admissible to show his bad faith in the pur- conditions as before. On August 25, 1891, the chase.

bank purchased two of these notes of Durand, Appeal from circuit court, Multnomah coun- in consideration of which it returned to him ty; E. D. Shattuck, Judge.

the note previously purchased, and paid him Action by B. H. Bowman against J. H. in addition the sum of $700. And on SepMetzger and another. There was a judg- tember 16, 1891, the bank purchased the rement for plaintiff, and he appeals. Reversed. maining note, paying therefor $850. Plain.

This is an action to recover upon three tiff purchased all three of these notes of the promissory notes, for $1,000 each, all bearing bank in the month of July, 1892, for $3,000. date August 18, 1891. On July 29, 1989, one Evidence was offered at the trial which E. Durand, president of a certain corporation tended to show that on the 6th or 7th day of known as the Durand Organ & Piano Com- August, 1891, Metzger called at the bank, and pany of Portland, Ore., pretending to act in inquired of Bowman about the note then in behalf of said corporation, entered into an the bank, concerning which he had been notiarrangement with the defendant J. H. Metz- fied, and that he then informed him of the ger whereby he transferred and assigned to nature of the transaction between himself him 20 shares of the capital stock of said and Durand. “The agreement was between company, in consideration of the defendant's | Durand and us,” Metzger testified, "that these two promissory notes for $1,000 each, pay- , notes should not go out of his hands. He able to said company one year after date, gave us a contract to renew these notes for with interest from maturity at 10 per cent. five years.

He was to return them without per annum. At the same time, and as part costs. I also told Bowman that Durand told of the same transaction, Durand delivered to us he wanted these notes as assets, so he Metzger the following agreement, in writing, could swear and prove that he had so much to wit: “Portland, Oregon, July 29th, 1889. security in his possession to secure a comThis is to certify that we, the Durand Organ pany back east for pianos to stock his store, and Piano Company of Portland, Oregon, and as fast as he sold these organs and have this day received of John Metzger his pianos, and got the money for them, he would promissory note for the sum of two thousand pay for them.” S. E. Paddock, being called dollars, to run for twelve months without in. as a witness for plaintiff, testified: "I had terest, in full payment for twenty shares of some of those notes out; and about the 8th our capital stock, containing one hundred dol- day of July, 1891, in the evening, after the lars each. And we hereby agree annually to bank was closed, I went there to see him renew said note for the term of five years (Bowman) in regard to his having an interest from this date without interest each time of in the business, and asked him if he had any renewal And we further agree to surrender stock in this company. He said he had not. said note canceled to said John Metzger at I asked him if he ever had, and he said he the end of five years, for which we hereby never had. And he looked at me a moment agree to renew said note, upon the return and or so, and asked me if my name was Pad. delivery to us of all the twenty shares of cap- dock, and I said it was. "You live out near ital stock for wbich it was given. And we the slough?' And I says, “Yes.' And he further agree to pay a dividend of ten per called me to the window on the left, as you cent. per annum to the holder of said twenty go in there from Union avenue to the bank, shares of stock, herein described, either in and took out five notes, and handed them to capital stock, or apply the same in payment me. I looked at him, and told him then of the note given for said shares of stock, as what the understanding between Durand and the holder may desire. All taxes on capital myself was in regard to these notes; that stock to be paid by the company. Durand they were never to go out of his safe, never Organ & Piano Company, by E. Durand, to be transferred, no money should ever be President. [L. S.) Attest: D. J. Durand, paid on them. * I told him I underSecretary.” On August 21, 1889, Durand had stood Durand's object was these notes were



to show to manufacturers in the east, in case dent man would observe and inquire into, he wanted to buy goods on time, to show and which, if followed up, would lead to a his standing in the community, how he was, disclosure, and consequently to knowledge the manner his business stood there." J. P. of the real infirmities of the paper sought to Wilson testified to having discussed with be negotiated, is equivalent to such knowlBowman in July, 1891, the method employed | edge. The current of judicial authority by Durand for obtaining notes, and to having both in England and the United States has asked his advice touching the taking of stock narrowed the inquiry, and practically limtherein, and that Bowman advised him that ited it to the single question whether the he "probably better not.” The testimony of purchase had been made in good or bad both these witnesses was admitted over ob- faith, as one who purchases with knowljections. The court instructed the jury, edge of defects in the title is deemed guilty among other things, as follows: "Where of bad faith towards him who has a good something less than actual knowledge is defense against all the world except an innosought to be used as notice and as equiva- cent purchaser. If a person takes paper lent to knowledge, the transaction ought to with knowledge of its defects and infirmibe one where the party is put upon inquiry, ties, he takes mala tide. The one follows receives knowledge from some source that is the other as day follows nig! So “the rule reliable, some imperfection, some defect, may be said to resolve itself into a question some defense to these notes. No mere rumor, of honesty or dishonesty, for guilty knowl.

mere casual suggestion concerning it, edge and willful ignorance alike involve the would be sufficient. It must be something result of bad faith." Murray v. Lardner, that a prudent man would take notice of and supra. The doctrine is now well establishinquire about. If a man seeking some ad- ed, although it was otherwise maintained vantage of another should be put upon in- in England at an early period for a short quiry, and, with fair evidence of the truth of time, under the dicta of Gill v. Cubitt, 3 rumor that is abroad, he purposely

Barr. & C. 466, that the right of a bona fide avoid making inquiry, lest it should inter- purchaser of negotiable paper for value in fere with some scheme he had, and he re- the usual course of business cannot be defused to inquire, a man under such circum- feated on account of negligence in omitting stances would be held chargeable with the to make such inquiries as a prudent man truth of what was in the rumor as much as

would be prompted to make. It is the pol. if he had actual knowledge, provided the cir- icy of the law to eliminate from the considcumstances be such that, if he made the in- eration of the jury the question of common quiry, he would certainly ascertain the prudence as the measure of good faith, and truth.” The verdict and judgment were for with it the question of negligence, except in plaintiff in the sum of $1,145.29 and $300 at- so far as it may be taken as indicative of torney's fees, but, being dissatisfied with the bad faith. A person having under considamount awarded, he appeals.

eration the purchase of negotiable paper

may be less suspicious at one time than anW. W. Thayer and E. B. Williams, for ap- other, while the accompanying and attendant pellant. J. N. Davis, for respondents. circumstances may be similar, and yet or

dinarily he may be accounted a prudent WOLVERTON, J. (after stating the facts). man. One person may suspect where anothTwo questions arise upon this record. One er would not, and common prudence may relates to the instructions of the court to characterize each, and the standard by the jury, and the other to the admissibility which the jury may measure prudence may of the testimony of witnesses S. E. Pad- be higher or lower according as their busidock and J. P. Wilson. Of these in their ness training has molded their impressions order.

and ideas. Accordingly, it is held that gross It is settled law that where a party takes negligence only is not a sufficient answer to a negotiable promissory note before matu- the bona fides of the purchaser, where he rity for a valuable consideration in good has given consideration for the paper. faith, and without knowledge of any defect Gross negligence may be evidence of mala of title, he acquires a title valid against all fides, but it is not the same thing. Where the world. Four things must concur to give negotiable paper has passed without any him a good and valid title: He must have proof of bad faith in the purchaser, there is acquired before due; he must have acted in no objection to his title. Goodman v. Hargood faith; must have purchased without vey, 4 Adol. & E. 870; Goodman v. Simonds, knowledge of any defect of title; and have supra; Murray v. Lardner, supra; Johnson paid valuable consideration therefor. v. Way, 27 Ohio St. 381; Rand. Com. Paper, Murray v. Lardner, 2 Wall. 121; Goodman $ 1001; Lane v. Evans, 49 Iowa, 156; Ed. V. Simonds, 20 How. 364; Hotchkiss v. wards v. Thomas, 66 Mo. 483; Craft's ApBank, 21 Wall. 354. But the question is peal, 42 Conn. 1-16; Kelly v. Whitney, 45 here presented whether anything less than Wis. 110; Bank v. Hoge, 35 N. Y. 65; Hotchknowledge is equivalent thereto; that is to kiss v. Bank, supra. The Ohio case (Johnsay, whether notice of facts or circumstan- son v. Way) is based upon an instruction so ces of a suspicious character which a pru- very similar to the one rendered in the case



at bar that we direct special attention to sun is shining. The jury are the judges it. In Murray v. Lardner, wherein Mr. Jus- whether a person has evaded information tice Swayne ably reviews the leading an- readily at his command for the purpose of thorities touching the question under consid- gaining an advantage under the law relaeration, the objectionable instruction was as tive to the transfer of negotiable instrufollows: "It will be for you, gentlemen of ments; and they have a right to consider the jury, to say whether the defendant has such a circumstance if it exists in determinmade out, as the burden lies upon the de- ing the mala fides of the holder. Schmuefendant, whether he has made out that he ckle v. Waters, 123 Ind. 269, 25 N. E. 281; received the paper in good faith, without any Bank v. Bennett (Ind. Apn) 36 N. E. 551. notice of the defect of the title,-in other These considerations make the evidence of words, of the theft from the plaintiff; or the witnesses Paddock and Wilson pertinent whether there were such circumstances of to the inquiry. It has a tendency to impute the character which I have described to you knowledge of the real transaction as it took as would warrant the inference that there place between Durand and defendant J. H. was ground of suspicion, and that he should Metzger to the plaintiff. Their testimony have made further inquiry as to the charac- is not directed to the particular transaction ter of the paper.” In Lane v. Evans the fol- out of which the notes in question origilowing instruction to the jury was held er- nated, but to similar transactions, in which roneous: "If the circumstances attending Durand was the chief actor, which were calthe purchase of the note were of such a culated to apprise plaintiff of Durand's busicharacter as necessarily to cast a shade up

methods. The knowledge of other on the transaction, or to put the plaintiff on transactions of a like peculiar and suspicious inquiry as to such fraud, then you will find nature is a circumstance which might propfor the defendant.” And Lake v. Reed, 29 erly be considered by the jury in passing upIowa, 239, was reversed upon an instruction on the good faith of plaintiff in the purchase rendered as follows: “Although the note of the notes in question. Goodrich v. MCmay have been procured by fraud, perpe- Donald (Mich.) 43 N. W. 1020, and Bank v. trated by the payee of the note, or his Bennett, supra. But, inasmuch as th ubagents, yet if plaintiff took the note before stantial rights of plaintiff were injuriously maturity in the ordinary course of business, affected by the instruction referred to, the and for a valuable consideration, such fraud judgment is reversed, and a new trial orwould not be available as against plaintiff | dered. as a defense, until it is shown that the plaintiff had notice of such fraud, or such

(26 Or. 587) facts and circumstances as would have put a reasonable man upon inquiry in relation

FOWLE v. HOUSE. to the same." So that, in the light of the (Supreme Court of Oregon. Feb. 11, 1895.) authorities, the instruction of the court be- APPEALABLE ORDER-DENIAL OF PRELIMINARY low was erroneous. Fraud is proven in such

INJCXCTION. cases when it is shown that the purchaser

An order denying a preliminary injunc

tion to restrain the collection of a judgment had notice or knowledge of defects or in

until final hearing is not appealable. firmities in the title to the paper at the time of purchase. Knowledge may be imputed

Appeal from circuit court, Polk county; either by direct proof or by evidence of a

George H. Burnett, Judge. circumstantial nature, the same as any other fact. If a person is grossly negligent in

perance House for an injunction. From an the exercise of common prudence, this is a

order denying a preliminary injunction, fact competent to go to the jury as evidence

plaintiff appeals. Dismissed. of bad faith; but the jury must pass upon

F. A. Chenoweth, for appellant. tire question whether the purchaser has acted honestly or dishonestly, and not specu- PER CURIAM. This is an appeal from an late as to his probable diligence or negli- order denying a preliminary injunction. The gence. Bank v. Hoge, supra. The rule is plaintiff', in his complaint, alleges that he is thus established that the usefulness of com- the owner in fee of 320 acres of land in mercial paper may not be restricted, and yet Polk county, Or., and that the defendant had the party taking it is not relieved from the a dower estate therein, which was subject just obligations of the exercise of good faith. to a mortgage lien in his favor, given to se.

If a person purposely refrains from mak- cure the payment of $600, and interest at ing inquiry lest he should become possessed the rate of 10 per cent. per annum from of knowledge of infirmities in the title to October 1, 1887; that the defendant, withpaper which he is about to purchase, this is out ha ng paid any part of said mortgage a fact to go to the jury touching his good debt, commenced a suit against him, where. faith in the purchase. Good faith cannot be in she obtained a decree setting off her dower predicated upon want of knowledge result- and awarding her $88, the full amount of ing from the evasion of a plain duty. A the costs and expenses of the partition proman cannot shut his eyes to the light of day, ceedings, upon which decree she, on May and say he is without knowledge that the 31, 1893, caused an execution to be issued,

against Tem

and delivered to the sheriff of said county purchased with notice that their rights were for service; that many items of the cost bill

subordinate to those of defendants, and that de.

fendants had a right to operate the whole of were improper and illegal, and that the de

their ditch, one plaintiff's never disputed such cree therefor was irregular in ordering the right. Held, that defendants are not estopped whole amount thereof to be taxed against to use the whole of their ditch, and thereby de. him; that the defendant is insolvent, and, if

prive plaintiffs of water, by the fact that for

14 years they suffered water which escaped he were obliged to satisfy said execution,

from their ditch, and which would have been he would be powerless to compel her to re- used by them had they operated their whole turn the money which she might collect there- ditch, to be used by plaintiffs. on, or any part thereof, and prays that she Appeal from circuit court, Josephine counbe enjoined from enforcing the same. Upon ty; H. K. Hanna, Judge. the commencement of the suit the defendant Suit by Wimer Bros. & Co. against George was required to appear and show cause why Simmons and others for an injunction. Judga preliminary injunction should not be grant- ment for defendants, and plaintiffs appeal. ed therein, and, having appeared at the time Affirmed. appointed, she demurred to the complaint, This controversy grows out of conflicting whereupon the judge made an order deny- claims to water rights by the parties hereto. ing the injunction until the final hearing The plaintiffs are the owners of a ditch used of said cause, from which order the plaintiff to divert water from the east fork of the appeals.

Illinois river, in Josephine county, at a point The judge, in refusing to grant the prelimi- | opposite or immediately below the mouth of nary injunction, did not assume to pass upon Allen gulch. The point of diversion is upthe merits of the case, and hence the order on the east side of said fork, and is conductwas not final, and no appeal will lie there ed thence, in a southerly direction, to where from. Hill's Code, $ 533; Basche v. Pringle, it crosses the same stream by means of a 21 Or. 24, 26 Pac. 863. An appealable order flume constructed for that purpose, and is one which not only affects a substantial thence continues in a southerly and southright, but which, in effect, determines the easterly course to the plaintiffs' mine, locatsuit or action. The order complained of does ed in what is known as “Butcher's Gulch," not determine the suit, and the appeal must and finally runs into the west fork of said therefore be dismissed, and it is so ordered. river. The ditch was constructed by Daniel

Ilunt in the year 1800, and is known as the (27 Or. 1)

Hunt or Wimer ditch. On September 2,

1876, George Simmons, one of the defendants, WIMER et al. v. SIMMONS et al.

and Walter Simmons, his brother, became its (Supreme Court of Oregon. Feb. 11, 1895.) owners, and sold and conveyed the same to WATER RIGHTS ---CONFLICTING CLAIMS OF APPRO- Jacob, George W., and W. J. Wimer by two PRIATORS-ABANDONMENT OF DITCI - ADVERSE POSSESSION-ESTOPPEL.

conveyances of date July 6, 1878, and Feb1. Where water is appropriated for placer

ruary 7, 1883, respectively. On May 23, mining and irrigation, and is actually used for

1888, Jacob Wimer conveyed his interest to those purposes for several years, the place of his two sons, George W. and W. J. Wimer, its use may be changed by the appropriator, although by making such change a subsequent ap

plaintiffs herein, and on July 18, 1888, they propria tor is totally deprived of the use of the

sold the property to Anna F. Smith, but on water as he has been accustomed to use it aft. November 31, 1892, again became the owner it had left the prior appropriator's ditch. ers thereof through a sheriff's deed upon a

2. A ditch by which water was appropriated for mining was filled up at a certain point,

sale under foreclosure proceedings against by permission of the appropriators, with debris Anna F. Smith and W. I. Wadleigh. The defrom a mine, but under an agreement that the fendants' ditch was constructed in the year mine owners should reopen the ditch upon re

1836, and takes its water from the west quest. The ditch was not used beyond that point for 14 years, but the water was actual- bank of the same stream as the Hunt ditch, ly employed during that time in the rest of the but at a point some 2442 or 3 miles above. ditch. The appropriators rejected several prop- When first constructed, it was about 7 miles ositions to reopen the ditch and furnish water to persons beyond the point of obstruction, be

in length. A portion of the water diverted cause it would not pay them. They frequently by this ditch was carried beyond the gulches spoke of the unused part of the ditch as theirs, known as Scotch, Allen, Sailor, Shelly, and protected it from destruction, and refused to

Butcher's, and into Fry, Waldo, and Caro sell it. Hd, that there was no intention to abandon the ditch beyond said point of ob

gulches. The balance was used at Scotch structior.

gulch, and through it discharged, into the 3. Where plaintiffs and defendants were said east fork above the head of plaintiff's' appropriators of water for mining purposes, and the water from defendants' ditch was dischar

ditch. This ditch, throughout its full length, ged into the sticam. just above the head of with its branches, is known as the “Scotch plaintiffs' ditch, the fact that plaintiffs used the Gulch" or "Desselles & Connell Ditch." In water so escaping from defendants' ditch for a period of fourteen years without interference by

the year 1877, while William Bybee was operdefendants does not create a right to use the ating some mining ground at the head of Alsame by prescription or by adverse possession. len gulch, he allowed the tailings and debris 4. Plaintiffs and defendants were appro

from his mine to be carried down to and priators of water for mining purposes, and at the time plaintiffs acquired their ditch defend

across this ditch, and by this means it was unts used only a part of theirs, but plaintiffs filled up and obliterated for the space of


some two or three hundred feet. From this sonable time is allowable within which to time the ditch below the obstruction fell in- make the application to such pu, poses, and to disuse until the year 1891, when the de- the surroundings and circumstances of each fendants purchased the same from Desselles particular case are elements for consideration & Connell, together with their mining grounds in determining what is a reasonable time withat Scotch gulch, and reconstructed and open- in which to complete and fix the extent of the ed it out again throughout its full length, in- appropriation. Hindman v. Rizor, 21 Or. 112, cluding its branches, restoring it to about its 27 Pac. 13; Simmons v. Winters, 21 Or. 35, original capacity. This ditch was purchased 27 Pac. 7; Low v. Rizor, 25 Or. 556, 37 Pac. by Desselles & Connell, together with a pla-82; Cole v. Logan, 24 Or. 304, 33 Pac. 568; cer mine of about 20 acres, located in Scotch Sieber v. Frink, 7 Colo. 154, 2 Pac. 901. A gulch, in 1866, who worked their said mine prior appropriator, having the exclusive right every year from 1866 down to 1891, with the to the use of part or all the water of a possible exception of a year or two immed- stream, may lose the same by abandonment. iately preceding the year last named. As to When abandoned, the water becomes publici this the proof is not clear. However, George juris, and subsequent appropriators are entiSimmons, one of the defendants, operated

tled to it according to their respective priorithe mine for about nine months during the

ties. The abandonment may be express and years 1887 and 1898 under a contract of pur- immediate, as by the intentional act of the chase from Desselles & Connell, and at the owner and possessor of the right, or it may be time of the purchase by defendants it was implied from his neglect, failure of application practically worked out. Some work was be- to the purpose designed within a reasonable ing done there when the evidence was taken time, nonuser, and the like. Kin. Irr. & 233; in this case, but it is of little moment. In Black's Pom. Water Rights, $ 96. The right 1888 some Chinamen mined in Allen gulch, of a prior appropriator may also be lost by and by purchase from Desselles & Connell the adverse possession of another. Nonuser utilized from 50 to 75 inches of water from by the owner of the right and adverse user of said ditch. It appears that during the latter it by another for a time equal to the period part of spring and during the summer and fixed as the limitation of actions for the reearly fall, and at times during the winter covery of real property is necessary in this months, there is insufficient water in the said state to work a forfeiture through this metheast fork to supply both these ditches; hence

od. Id. $ 98; Dodge v. Marden, 7 Or. 458; this suit to restrain defendants from carry- Water Co. v. Crary, 25 Cal. 508. These gening the water of said stream beyond Scotch eral propositions of law are well established, gulch and below the head of plaintiffs' ditch.

and it is unnecessary to support them further The decree below being favorable to defend by citation of authorities. Keeping them in ants, the plaintiffs appeal. Other facts sufli- mind, let us consider the relative rights of cient for elucidation are alluded to in the the parties in the light of the facts as disopinion.

closed by the testimony.

For some years prior to 1877 the Desselles R. G. Smith, E. C. Bronaugh, L. L. Mc

& Connell ditch carried from 600 or 700 to Arthur, and W. D. Fenton, for appellants.

1,000 inches of water to Scotch gulch. Beyond Lionel R. Webster, for respondents.

that, Desselles says, “it would carry about

400 inches." In answer to the question, WOLVERTON, J. (after stating the facts). “How many inches flowed down the ditch beThe plaintiffs contend that they are entitled yond Scotch gulch?” he replies, “350 inches, to the quantity of water that has been car- used by Joseph Smith in Scotch gulch, Spellried through their flume at the crossing of the man & Bro. in Allen gulch, some Chinamen in east fork of the Illinois river during the peri- Sailor gulch, and Shelly & Co. below the od intervening from 1877 to 1891. They base town of Waldo, for mining and irrigating their claim of right upon the following propo- purposes.” George Simmons, one of the desitions: (1) The owners of the defendants' or fendants, says, in answer to the question, Scotch gulch ditch abandoned all that part of “How does the size of the ditch, since you it below Scotch gulch in 1877; (2) the owners cleaned it out, compare with the size of it as of said ditch abandoned all the water thereof it was when the Wimer ditch was dug?" that was turned or allowed to flow back into "Oh, it is about the same size.” W. J. Wisaid stream through Scotch gulch in 1877; and mer, one of the plaintiffs, testifying in Au(3) plaintiffs have acquired a prior and perfect gust, 1893, says that defendants at that time right to the waters of said stream as against were carrying in their ditch, beyond Scotch defendants by adverse possession and use gulch, 300 or 400 inches. He thought 300 during the time intervening from 1877 to inches at any rate, while plaintiffs were at 1891. It is the policy of the law that water the same time carrying from 150 to 200 inchof a stream shall be appropriated to the ex- Considering that defendants' ditch intertent only that it is put to or designed for cepts the stream above that of plaintiffs', it is some useful or beneficial purpose. This is the probable that water was flowing therein bemeasure of the appropriation. The entire ap- yond Scotch gulch to the extent of its averpropriation may not be utilized at once for age capacity. The mines at Scotch gulch, the purposes designed. In such case a rea- which the defendants purchased with the


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