Critcher v. Ballard

• Decision Date: 29 September 1920
• Docket Number: 62.
• Citation: 104 S.E. 134,180 N.C. 111
• Parties: CRITCHER ET AL. v. BALLARD.
• Court: North Carolina Supreme Court

104 S.E. 134

180 N.C. 111

CRITCHER ET AL. v. BALLARD.

No. 62.

Supreme Court of North Carolina

September 29, 1920

Appeal from Superior Court, Martin County; W. M. Bond, Judge.

Suit by B. A. Critcher, as trustee, and others, against P. A Ballard. Judgment for plaintiffs, and defendant appeals. New trial.

The action is by Gilliam and Dunstan, claiming to be holders for value in due course of a promissory note for $300, executed by defendant, P. A. Ballard, to one O. Ames. In the verified complaint of plaintiff, the note and the facts pertinent to the acquisition of same by Gilliam and Dunstan are set forth as follows:

"$300.00. Williamston, N. C., Nov. 17, 1915.

On or before the 1st day of November, 1916, I promise to pay to the order of O. Ames the sum of three hundred dollars, with interest from date till paid, at 6% per annum, payable annually. For value received. The payment whereof is secured by a deed of trust to B. A. Critcher, trustee, on real estate and personal property of even date herewith. This note is for the purchase of stallion, and said Ames warrants him to be free from incumbrances, and that he is solid, sound, and gentle, and work anywhere.

P. A Ballard. [ Seal.]"

Indorsements:

"Pay to J. B. Gilliam and F. M. Dunstan, without recourse to me.

Credits: ______ day of ______, 19--. $______."

(2) That the plaintiffs, J. B. Gilliam and F. M. Dunstan, are purchasers for value of said note, without notice of any equities or defense that may exist in favor of the maker, P. A. Ballard.

In the answer, the defendant admits the execution of the note sued on, denies the acquisition for value by Gilliam and Dunstan, and sets up a counterclaim, growing out of breach of warranty in the sale of horse referred to on the face of the paper.

The following issues were prepared for submission to the jury:

1. Was there a breach of the warranty made as to the stallion by O. Ames, as alleged?

2. If so, what damage, if any, did the defendant Ballard sustain thereby?

3. Did plaintiffs take said note in due course, for value, before maturity, and without notice of any equities existing in favor of defendant, Ballard, as alleged?

On the hearing, the execution of the note and possession thereof by Gilliam and Dunstan were admitted, and there were facts in evidence tending to show that the purchasers of the note had acquired the same for full value and before maturity. His honor, being of opinion that the warranty of the stallion, appearing on the face of the note, did not destroy or impair its negotiability, charged the jury that, if they believed the testimony and should find the facts to be as the evidence tended to prove, they would answer the third issue "Yes," and in that case they need not consider the first and second issues. The jury answered the third issue "Yes," and thereupon judgment was entered for plaintiffs Gilliam and Dunstan for the amount of the note, reduced by proceeds of certain personal property, sold pending litigation and applicable to its payment. Defendant excepted and appealed, assigning errors.

Dunning & Moore, of Williamston, for appellant.

HOKE J.

It is recognized in the better considered decisions on the subject that the mere statement of an executory contract on the part of the payee, growing out of the transaction in which a promissory note is given, will not, of itself, and without more, destroy or impair the negotiability of the note, when it otherwise complies with the requirements of that class of paper. The question was presented to this court in Bank v. Hatcher, 151 N.C. 359, 66 S.E. 308, 134 Am. St. Rep. 989, where defendant, the promisor, sought to set up a claim for damages for breach of contract in the sale of goods by sample, and it was shown that the bank, that held the notes by indorsement and for value before maturity, was aware of the stipulations of the executory contract out of which defendant's claim arose, but not of any breach of the same, and it was held that the counterclaim was not available as against the bank. After referring to several decided cases in support of the position, the court cites, as controlling on the subject in this jurisdiction, the section of the Negotiable Instruments Act more directly applicable, to the effect that a definite promise to pay is not rendered conditional, so as to impair negotiability, by a statement of the "transaction which gives rise to the instrument." As said in Mayers v. McRimmon, 140 N.C. 640-642, 53 S.E. 447, 448 (111 Am. St. Rep. 879):

"This statute, enacted in 1899 with a view of introducing some uniformity in this important feature of the law merchant, is in the main only a compendium of established custom concerning negotiable instruments, as construed and applied in the best-considered decisions of the courts."

And the clause in question here (section 2153), and the cases it embodies and interprets, is in full support of his honor's ruling that the negotiability of the note was not destroyed or sensibly impaired by reason of containing a statement of a warranty on the part of Ames, the original payee. Bank v. Hatcher, supra, and cases cited; McNight v. Parsons, 136 Iowa, 390, 113 N.W. 858, 22 L. R. A. (N S.) 718, 125 Am. St. Rep. 265, 15 Ann. Cas. 665; Hakes v. Thayer, 165 Mich. 476, 131 N.W. 174; Black v. Bank, 96 Md. 399, 54 A. 88; Buchanan v. Wren, 10 Tex.Civ.App. 560, 30 S.W. 1077; Jennings v. Todd, 118 Mo. 296, 24 S.W. 148, 40 Am. St. Rep. 373; Siegel...