Bluthenthal & Bickart v. City of Columbia

• Decision Date: 08 February 1912
• Citation: 57 So. 814,175 Ala. 398
• Court: Alabama Supreme Court
• Parties: BLUTHENTHAL & BICKART v. CITY OF COLUMBIA.

57 So. 814

175 Ala. 398

BLUTHENTHAL & BICKART v. CITY OF COLUMBIA.

Supreme Court of Alabama

February 8, 1912

Appeal from Circuit Court, Houston County; H. A. Pearce, Judge.

Action by Bluthenthal & Bickart against the City of Columbia. From a judgment for defendant, on overruling a demurrer to the rejoinder, plaintiff appeals. Affirmed.

Espy &amp Farmer, for appellant.

W. L Lee, for appellee.

MAYFIELD J.

Appellants a private corporation, sued appellee, a municipal corporation, on a bond or note executed by the municipality to the appellants, on July 29, 1907, due one year thereafter. To the complaint the defendant filed a plea alleging that at the time the note sued on was executed, appellant corporation was a partnership composed of Aaron Bluthenthal and Monroe Bickart; that defendant was a municipal corporation, carrying on a dispensary under a general law known as the Moody dispensary law; that the appellants as such partnership attempted to sell to the defendant a lot of spirituous vinous, and malt liquors, on credit, in express violation of the dispensary law; that the consideration of the note sued upon was the liquor thus sold to the municipal corporation in violation of the statute; that, the consideration of said note being illegal, the note itself was void; and that the plaintiff was not entitled to recover thereon in this action. To this plea the plaintiff corporation filed a replication, alleging that the note sued on was negotiable, and that the partnership sold and assigned it to the plaintiff corporation before maturity and for value. To this replication the defendant filed a rejoinder to the effect that said Bluthenthal and Bickart, who composed the partnership which sold and assigned the note to the corporation, were both stockholders, officers, and managers of the corporation to which the note was so sold and assigned, and that they, as partners and as officers and managers of the plaintiff corporation to which the note was sold and assigned, had full knowledge of all the facts set forth in the plea showing the note to be illegal and void, at the time it was so transferred and assigned to the plaintiff corporation. To this rejoinder the plaintiff demurred, and, its demurrer being overruled, it declined to plead further, and suffered judgment, from which judgment this appeal is prosecuted.

A contract very similar to the one forming the original consideration for this note was considered by this court in the case of Bluthenthal & Bickart v. Headland, 132 Ala. 252, 31 So. 87, 90 Am. St. Rep. 904. In that case it was ruled that the sale of liquors, upon credit instead of for cash, to a dispensary, for the town of Headland, was in violation of the statute providing for the establishment and maintenance of dispensaries, and such sale was therefore illegal and void, and that no cause of action could arise from such contract, nor would assumpsit lie upon an implied contract, though the city received and enjoyed the benefit of the goods sold. The correctness of that decision is not assailed on this appeal, but the case is attempted to be distinguished upon the theory that this is an action upon a negotiable note by a bona fide purchaser for value, without notice of the illegal consideration upon which it was founded. The rejoinder, however, alleged that the plaintiff corporation, through its officers and managers, had notice of the illegal consideration before, and at the time, it became the purchaser and transferee of said note, and that it was therefore chargeable with notice, and liable to all defenses available against the note in the hands of the original payee.

We are of the opinion that the ruling of the trial court in this case must be sustained, for several reasons, some of which we will now proceed to state.

It is true, as contended by appellant, that a purchaser of a negotiable paper in due course of business, before maturity and without notice of defenses that existed between the original parties, or that had subsequently arisen, is a bona fide holder for value, and as such takes the instrument free from defenses which were available between such original parties. Brown v. Bank, 103 Ala. 123, 126, 15 So. 435. In the hands of such a holder such an instrument is discharged of all legal and equitable defenses to which it may have been subjected before it came into such bona fide hands. This has been repeatedly held by this court to be true, even when the note was put into circulation by fraud, or was based upon an illegal consideration.

Mr Randolph, in his work of Commercial Paper, and Mr. Daniel, in his work on Negotiable Instruments, both say that such a paper is in some respects like the currency of the country, a circulating credit, and that before maturity the genuineness of the obligation and the solvency of the...