Bank of East Chattanooga v. Clayton

• Decision Date: 20 October 1921
• Docket Number: 7 Div. 123
• Citation: 90 So. 899,206 Ala. 518
• Parties: BANK OF EAST CHATTANOOGA v. CLAYTON.
• Court: Alabama Supreme Court

90 So. 899

206 Ala. 518

BANK OF EAST CHATTANOOGA v. CLAYTON.

7 Div. 123

Supreme Court of Alabama

October 20, 1921

Appeal from Circuit Court, De Kalb County; W.W. Harralson, Judge.

Action by the Bank of East Chattanooga against O.W. Clayton. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

Jones &amp McGhee, of Chattanooga, Tenn., and C.A. Wolfes, of Ft. Payne for appellant.

Isbell Scott & Downer, of Ft. Payne, for appellee.

SOMERVILLE J.

The consideration paid by plaintiff for the note in suit was a negotiable certificate of deposit, which was in fact negotiated by the payee, and afterwards paid in due course by plaintiff bank. As held on the former appeal in this case ( Clayton v. Bank of E. Chattanooga, 204 Ala. 64, 85 So. 271), this established the status of the bank as a purchaser of the note for value, and, if it purchased without notice of the defenses set up in the pleas, it was entitled to recover. This was the only contested issue in the case.

The evidence showed without dispute that the bank purchased the note without any knowledge of the defenses pleaded, and without knowledge of any extrinsic fact relating to the note except that it was given by defendant to the indorsee, the Southern Pharmaceutical Company, in payment for its corporate stock purchased by him.

Such knowledge could not carry any suggestion of fraud in the inception of the note, nor of any existing or impending failure of consideration. To require an indorsee of negotiable paper to investigate such matters of bad faith would be to repudiate a basic principle of the law merchant, and to render futile its primary purpose, viz. to facilitate the use of instruments of credit in the business of the country. Ex parte Goldberg, 191 Ala. 356, 67 So. 839, L.R.A.1915F, 1157.

The fact that the bank notified defendant a few days before the maturity of the note that it held it for collection is of no significance, and can have no effect upon the rights of the parties, since the undisputed evidence showed that the bank was the legal, as well as the beneficial, owner of the note. It was held for collection for the owner no matter who the owner was--the bank or any one else.

The evidence supported without conflict every allegation of plaintiff's replication to the pleas, and the affirmative charge for plaintiff should have been given, with hypothesis, as requested.

For the error of its refusal, the...