Alropa Corp. v. King's Estate

• Decision Date: 22 April 1937
• Docket Number: No. 90.,90.
• Citation: 272 N.W. 728,279 Mich. 418
• Parties: ALROPA CORPORATION v. KING'S ESTATE.
• Court: Michigan Supreme Court

279 Mich. 418

272 N.W. 728

ALROPA CORPORATION

v.KING'S ESTATE.

No. 90.

Supreme Court of Michigan.

April 22, 1937.

Action by the Alropa Corporation against the Estate of Merrill B. King, deceased. From a judgment in favor of the defendant, the plaintiff appeals.

Judgment set aside, and lower court directed to enter judgment for plaintiff.

Appeal from Circuit Court, Kalamazoo County; George V. Weimer, Judge.

Argued before the Entire Bench, except POTTER, J.

Mason, Sharpe & Stratton, of Kalamazoo, for appellant.

Howard, Howard & Howard, of Kalamazoo, for appellee.

SHARPE, Justice.

On March 6, 1926, the deceased, Merrill B. King, and wife contracted to purchase certain real estate located in the state of Florida, the purchase price of which was $6,500, payable 25 per cent. down and the balance in six promissory notes for $812.50 each, payable one every six months. Note 1 and the first installment of interest on all notes became due September 6, 1926. The notes are negotiable instruments and contain no reference to the purchase of land from the Shoreland Company or the land contract that required certain development work to be done by the Shoreland Company, which work has never been completed.

Some time prior June 19, 1926, the notes in question, Nos. 2 and 3, were negotiated by the Shoreland Company to the Miami Bank & Trust Company as a part of certain collateral security given for a loan made by that bank to the Shoreland Company. On June 19, 1926, the Miami Bank & Trust Company merged with the City National Bank & Trust Company, and the Shoreland Company note, together with the collateral, including the notes in question, became the property of the City National Bank & Trust Company.

On October 28, 1926, the Shoreland Company note, then held by the City National Bank was renewed for a reduced amount. This note was later acquired by the Tarrier Company. In September, 1932, the King notes were purchased from the Tarrier Company by the Burns Mortgage Company, and in May, 1933, this latter company sold the notes to plaintiff herein.

The record also shows that the Shoreland Company never developed the property in accordance with their agreement, although some development work was going on at the time of the loan made by the Miami Bank & Trust Company and the deposit of the King notes as collateral. The Shoreland Company went into bankruptcy October 26, 1928. Plaintiff filed a claim against the estate of Merrill B. King and upon appeal to the circuit court the cause was tried before a jury, which found in favor of the defendant estate. Plaintiff made a motion for a directed verdict at the close of defendant's testimony, and the same was denied by the trial court.

Plaintiff appeals and contends that it is bona fide owner and holder in due course through a previous owner and holder in due course, while defendant estate claims that plaintiff is not a holder and owner in due course as said notes are open to the defense of want of consideration.

At the outset we have in mind that the land contract and notes were signed in Florida and were to be performed in Florida. Consequently, they are Florida contracts, and, as such, are controlled by the laws of that state. The state of Florida has adopted the uniform negotiable instruments law. Comp.Gen.Laws Fla.1927, § 6817, which provides: ‘In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.’

In the opinion written by Mr. Justice Davis in Robertson v. Northern Motor Securities Co., 105 Fla. 644, 142 So. 226, he cites Jockmus v. Claussen & Knight, Inc. (D.C.) 47 F.(2d) 766, in which that court says, ‘It is a well-established rule that knowledge by the purchaser of a note that the consideration therefor was an executory contract does not prevent him from becoming a bona fide holder for value before maturity, unless there has been a breach of the contract to the knowledge of such purchaser,’ and quotes from Bigelow on Bills, Notes and Checks (3d Ed.) § 482: “It is an established principle in the law of negotiable instruments that the recital of the consideration for the instrument, even though this may indicate an executory undertaking on the part of the payee, not only does not affect the negotiability of the instrument, but does not put upon the purchaser the duty to inquire whether the...