Billingsley v. Mackay

• Decision Date: 04 August 1967
• Docket Number: No. 22996.,22996.
• Citation: 382 F.2d 290
• Parties: Henry E. BILLINGSLEY, Appellant, v. Richard L. MACKAY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

382 F.2d 290 (1967)

Henry E. BILLINGSLEY, Appellant, v. Richard L. MACKAY, Appellee.

No. 22996.

United States Court of Appeals Fifth Circuit.

July 5, 1967.

Rehearing Denied August 4, 1967.

Sol Goodell, Dallas, Tex., for appellant, Thompson, Knight, Simmons & Bullion, Dallas, Tex., of counsel.

Philip I. Palmer, Jr., Dallas, Tex., for appellee, Palmer, Green, Palmer & Gilmore, Dallas, Tex., of counsel.

Before JONES and COLEMAN, Circuit Judges, and HEEBE, District Judge.

PER CURIAM.

The appellant, Henry E. Billingsley, sued the appellee, Richard L. Mackay, upon a promissory note for $15,000 given by Mackay to B. D. Fitzgerald from whom Billingsley purchased the note for $12,000. Federal jurisdiction is based upon diversity of citizenship. On a trial without a jury the district court rendered judgment for Mackay. The judgment is affirmed. Fitzgerald procured the note from Mackay through fraud. At the time Mackay gave the note to Fitzgerald he placed upon the back of it a notation which he asserted, as one of his defenses, put Billingsley under a duty to make inquiry and inquiry would have disclosed that the giving of the note was a conditional delivery. Mackay also contended, and the district court found that Billingsley had actual notice from Mackay that "the validity of the note depended upon defendant's receiving" an assignment. This finding, in the light of the pleadings and the testimony, we regard as a finding that Billingsley had been informed that the delivery of the note was conditional. The evidence sustains the finding. Since the court found that there was actual notice, no necessity exists for considering the effect of the notation on the back of the note. Billingsley moved for a new trial for the purpose of bringing in another witness. The motion was denied. No error was committed by the denial of the motion.

The judgment of the district court is affirmed.

HEEBE, District Judge (dissenting):

I must respectfully dissent.

The maker of the note, defendant-appellee, never received the agreed-upon consideration for the note, and thus raised the defense of failure of consideration against plaintiff-appellant's claim as holder of the note. This defense is valid only if plaintiff is not a holder in due course under §§ 52 and 56-58 of the Negotiable Instruments Law, contained in Art. 5935, Tex.Rev.Civ.Stat. There was disputed testimony in the court below to the effect, and the court found, that when the plaintiff was considering purchasing the note, he was informed by the defendant-maker of certain limitations on the validity of the note arising from the accompanying transaction. It is my understanding of the law that even if the communications between plaintiff and defendant did take place, those communications were insufficient to prevent plaintiff from becoming a holder in due course.

First, it is clear that the note was negotiable — the notation on the back of the note was merely a statement of the transaction giving rise to the instrument, and under § 3 of the N.I.L. and Art. 5932, that statement does not make the promise to pay conditional. The N.I.L. makes incorrect the conclusion of the trial court that the notation "was sufficient to put plaintiff on notice that something was wrong with the instrument itself." Second, the plaintiff was entitled to rely on the unconditional nature of the promise to pay and to disregard any oral statements there may have been to the effect that the promise to pay was conditional — the terms and provisions of the written instrument cannot be varied by parole evidence. Third, at the time plaintiff purchased the note, he had no notice that the consideration had failed: since defendant's own testimony was that the consideration for the note was not yet due from the payee of the note at the time of the alleged communication between plaintiff and defendant, then, at most, plaintiff had knowledge that the executory agreement of the payee had not been performed at the time he purchased the note. The law of Texas as to the effect of such knowledge is well stated in 9...