ERROR
from the district court of Holt county. Tried below before
HOPEWELL, J.
AFFIRMED.
H. M
Uttley and E. W. Adams, for plaintiffs in error:
The
plaintiff nowhere alleges that she is or was at the time of
the alleged conversion the owner or entitled to the
possession of the note which she accuses the defendants of
having wrongfully and unlawfully converted to their own use.
The petition does not state a cause of action. (Cooley
Torts, secs. 442, 445; Smith v. Force, 16 N.W.
[Minn.], 704; Bond v. Mitchell, 3 Barb. [N. Y.]
304; Wright v. Field, 64 HOW Pr. [N. Y.], 117;
Johnson v. Oregon Steam Navigation Co., 8 Ore., 35;
Gage v. Allison, 1 Brevard [S. Car.], 387; Jones
v. Sinclair, 2 N. H., 319; Ames v. Palmer, 42
Me. 197; Wilson v. Wilson, 37 Md. 1; Wheeler v.
Train, 3 Pick. [Mass.], 257; Fairbank v.
Phelps, 22 Id., 538; Winship v. Neale, 10 Gray
[Mass.], 383; Clark v. Draper, 19 N. H., 419;
Forth v. Pursly, 82 Ill. 152; Caldwell v. Cowan,
9 Yerg. [Tenn.], 262; Byam v. Hampton, 10
N.Y.S. 372; Chandler v. West, 37 Mo. App., 631;
Gill v. Weston, 110 Pa. 305; Murphy v.
Hobbs, 11 P. [Colo.], 55; Gates v. Rifle Boom
Co., 38 N.W. [Mich. ], 245; Holmes v. Bailey,
16 Neb. 305; Bertholf v. Quinlan, 68 Ill. 297;
Barton v. Dunning, 6 Blackf. [Ind.], 209;
Kennington v. Williams, 30 Ala. 361; Hickok v.
Buck, 22 Vt. 149; Clark v. Draper, 19 N. H.,
419.) It was error to deny the defendants the right to open
and close. (Osborne v. Kline, 18 Neb. 351.) It was
error to require the jury by special findings to pass upon
the law as well as the facts. (Thompson, Trials, sec. 1017;
Coke Lit., 155, 156; Hickey v. Ryan, 15 Mo. 63;
Fugate v. Carter, 6 Id., 267; United States v.
Carlton, 1 Gall. [U.S. C. C.], 400; Wells, L. & F., sec.
2; Coquillard v. Hovey, 23 Neb. 627; Begg v.
Forbes, 30 Eng. L. & Eq., 508; Etting v. U.S.
Bank, 11 Wheat. [U.S.], 74; First Nat. Bank of
Springfield v. Dana, 79 N.Y. 108; Edleman v.
Yeakel, 27 Pa. 26: Runge v. Brown, 23 Neb. 826;
Herron v. Cole, 25 Id., 704.)
Paris
R. Hiatt and O. A. Williams, contra:
The
holder of commercial paper pledged as collateral security is
not authorized to sell it in the absence of special power. He
is bound to hold and collect such paper as it falls due and
apply the money to the payment of the debt. (Dan., Neg. Ins.,
sec. 833; Boone, Mort., sec. 315; Wheeler v.
Newbould, 16 N.Y. 398; Union Trust Co. v.
Bigdon, 93 Ill. 458; Fletcher v. Dickinson, 7 Allen
[Mass.], 23; Whittaker v. Charleston Gas Co.,
16 W.Va. 717; Zimpleman v. Veeder, 98 Ill. 613;
Joliet Iron Co. v. Scioto Fire Brick Co., 82 Id.,
548; Nelson v. Wellington, 5 Duer [N. Y.], 29;
Alexandria, L. & H. R. Co. v. Burke, 22 Gratt.
[Va.], 262.) The right of property does not pass to the
pledgee, but remains with the pledgor, subject to the lien of
the former. (Boone, Mort., sec. 309; Williams, Per. Pr., p.
26*; Franklin v. Neate, 13 M. & W. [Eng.], 481*;
Farwell v. Importers & Traders Nat. Bank, 90 N.Y.
488.) If the pledgee of a note held as collateral security
cannot collect it, he must return it to the pledgor: and if
he surrenders it to the maker without payment, or makes use
of it in any transaction of his own, he will be chargeable
with its full amount. (Boone, Mort., sec. 311; Wood v.
Matthews, 73 Mo. 477; Union Trust Co. v.
Rigdon, 93 Ill. 458.) The mere acceptance by a creditor
of a negotiable note of a third person makes it but
collateral security. Such acceptance does not operate as
payment, unless it be shown that such, at the time, was the
agreement of the parties. It will be deemed a conditional and
not an absolute payment of the original debt. This is the
rule where the note of a third person is given and accepted
for a pre-existing debt. (Boone, Mort., sec. 314; Wilhelm
v. Schmidt, 84 Ill. 183; Noel v. Murray, 13
N.Y. 167; Tobey v. Barber, 5 Johns. [N. Y.], 68;
Kephart v. Butcher, 17 Iowa 240; Guion v.
Doherty, 43 Miss. 538; Shipman v. Cook, 16
N.J.Eq. 251; Prettyman v. Barnard, 37 Ill. 105;
Whitbeck v. Van Ness, 11 Johns. [N. Y.], 409.) Gross
inadequacy of price is always a strong circumstance in favor
of the supposition that a sale of the property was not
intended. (Boone, Mort., sec. 39; Campbell v.
Dearborn, 109 Mass. 130; Reed v. Reed, 75 Me.
264; Langton v. Horton, 5 Beav. [Eng.], 9.) There was a
pre-existing debt. The relation of debtor and creditor
existed between the grantor and grantee. In such cases the
court will treat the conveyance as security. (Saxon v.
Hitchcock, 47 Barb. [N. Y.], 222; Hoopes v.
Bailey, 28 Miss. 328; Henley v. Hotaling, 41
Cal. 22.) It is competent to show by parol evidence that
negotiable paper transferred by endorsement and delivery was
intended to be held simply as collateral security, and not
absolutely. (Boone, Mort., sec. 310.) The question whether a
note or bond is given and accepted in satisfaction of the
original debt is for the jury; and it is error for the court
to decide it as a matter of law. (1 Thompson, Trials, sec.
1254: Johnson v. Weed, 9 Johns. [N. Y.], 310;
Stone v. Miller, 16 Pa. 450; Sellers v.
Jones, 22 Id., 423.) In case of a conflict of evidence
as to whether a note was received as a payment, or merely as
collateral, the question is for the jury. (Boone, Mort., sec.
314; Atlantic Fire & Marine Ins. Co. v. Boies, 6 Duer [N.
Y.], 583.) A sale of collateral security and an
appropriation of the entire proceeds amounts to a conversion.
(Cortelyou v. Lansing, 2 Caine's Cas. [N. Y.],
200; Clark v. Gilbert, 2 Bing. N. C. [Eng.], 565; 1
Smith Lead. Case, [7th ed.], 385; Williams, Per. Pr. [3d Am.
ed.], 27*; Norton v. Kidder, 54 Me. 189; Farrand
v. Hurlburt, 7 Minn. 477; Latimer v. Wheeler,
30 Barb. [N. Y.], 485; Robbins v. Packard, 31 Vt.
570; Graves v. Smith, 14 Wis. 5; Johnson v. Cumming,
15 C. B., n. s. [Eng.], 330).
M. F.
Harrington, also, for defendant in error.
OPINION
MAXWELL, CH. J.
This
action was brought by the defendant in error to recover for
the conversion of a note, and on the trial of the cause the
jury returned a verdict in her favor, upon which judgment was
rendered. The first objection of the plaintiffs in error is
that the petition fails to state a cause of action. The
petition is as follows:
"1st.
On or about the 2d day of September, 1885, Paris R. Hiatt
executed and delivered to this plaintiff his promissory note
dated September 1, 1885, whereby he promised to pay the
plaintiff on the 1st day of September, 1888, the sum of $
3,800, with interest thereon at the rate of 10 per cent per
annum, payable annually on the 1st day of September of each
year. Said note was payable at the Bank of Neligh in the town
of Neligh, Nebraska. Plaintiff cannot now give a more
accurate description of said note for the reason that the
same is not now in her possession, but is in the possession
of one Hill, hereinafter named, through the wrongful acts of
the defendants as hereinafter set forth.
"2d.
To secure the payment of said note said Paris R. Hiatt, on
the 2d day of September, 1885, executed and delivered to this
plaintiff a mortgage deed, and thereby conveyed to plaintiff
the following described premises, situated in the county of
Wheeler and state of Nebraska, to-wit: The southwest quarter
and the north half of the southeast quarter and the southwest
quarter of the southeast quarter of section 2, and the
northwest quarter of the northeast quarter of section 11, all
in township 24, range 10, west 6 P. M., which premises were
on said day owned in fee-simple by Paris R. Hiatt aforesaid.
"3d.
Said mortgage deed was duly recorded in the office of the
county clerk of Wheeler county, Nebraska, on the 3d day of
September, 1885.
"4th. The only incumbrance upon said premises
prior, senior, and superior to plaintiff's said mortgage
was a certain mortgage for the sum of $ 600, hereinafter
referred to, and upon which there was only $ 570 due February
28, 1887.
"5th.
That said $ 600 mortgage on said premises was given about May
16, 1884, by the plaintiff and the said Paris R. Hiatt to
these defendants for the purpose of securing a certain note
for $ 600, dated May 16, 1884, and given by this plaintiff to
the defendants. A more exact description of said note
plaintiff cannot give for the reason that the said note is in
the possession of the defendants.
"6th.
On the 28th day of February, 1887, plaintiff was indebted to
defendants in said sum of $ 570, and the said Paris R. Hiatt
was indebted to the defendants in the sum of $ 48, and the
said Paris R. Hiatt and this plaintiff were jointly indebted
to the defendants in the sum of $ 145.
"7th.
On the 28th day of February, 1887, plaintiff, being the owner
of and in possession of said $ 3,800 note and mortgage
securing the same, indorsed the said $ 3,800 note in these
words: 'Pay to the order of Cortelyou, Ege & Vanzandt.
Sarah F. Hiatt.' And plaintiff also assigned said
mortgage to the defendants, and after indorsing and signing
over said note to the defendants, delivered said $ 3,800 note
and the mortgage securing the same to the defendants as
security for the payment of the said indebtedness owing by
the said Paris R. Hiatt to the defendants, and also for the
securing the said indebtedness owing by said Paris R. Hiatt
and plaintiff jointly to the defendants, and to secure also
the payment of the said $ 600 note and obtain a release of
said $ 600 mortgage, thus making the said $ 3,800 mortgage a
first lien upon said premises, and to secure the payment of
the further sum of $ 300 borrowed by plaintiff from
defendants on the 28th day of February, 1887, but plaintiff
never received but $ 231.50 of said $ 300.
"8th.
No part of said $ 3,800 note has ever been paid
by said Paris R. Hiatt, nor any portion of the...
