Dearman v. Trimmier
| Decision Date | 20 April 1887 |
| Citation | 2 S.E. 501,26 S.C. 506 |
| Parties | DEARMAN v. TRIMMIER. |
| Court | South Carolina Supreme Court |
Appeal from Spartanburg county.
J. S R. Thomson and D. E. Hydrick, for respondent.
The facts of this case, so far as they are necessary to be stated for the purpose of determining the questions raised by this appeal, are as follows: One Thomas M. Joplin, being engaged in the business of buying and selling horses, borrowed money for the purpose of enabling him to carry on his business from the defendant, F. M. Trimmier. On the twenty-fourth of April, 1876, he executed a note to the defendant for the sum of $1,027, securing the payment thereof by a mortgage on a lot of horses, among which were the two bay mares hereinafter referred to. One of the stipulations contained in this mortgage was that Joplin had agreed to sell the mortgaged animals, and apply the proceeds of such sale to the payment of the said note as soon as the money is paid. On the fourth of May, 1876, Joplin, sold the two bay mares above mentioned, as included in the said mortgage, to S.D. Dearman, the husband of the plaintiff, for the sum of $90 each, on a credit of 30 and 90 days. Joplin being unwilling to extend this credit to S.D. Dearman without security, two promissory notes were drawn up, one at 30 and the other at 90 days, signed by the plaintiff and the said S.D. Dearman, whereby they promised to pay to the order of Thomas M. Joplin the sums mentioned in each of said notes,--one at 30 and the other at 90 days from date, with interest at 1 1/2 per cent. per month; and, if not paid at maturity, interest thereafter to be at the rate of 5 per cent. per month. To secure the payment of these notes the plaintiff and her husband executed a mortgage to said Joplin of certain real estate, viz., two lots in or near the city of Spartanburg, one containing fifteen acres, more or less, which was the separate property of the plaintiff, and the other containing two acres, more or less. All the papers necessary to effect these transactions were drawn up by the defendant, Trimmier, who then was and still is clerk of the court for Spartanburg county; but the notes and mortgage of the plaintiff and her husband were not executed in his presence, having been taken to the house of the plaintiff for that purpose. After they were executed, Joplin delivered them to the defendant, who retained possession of them. When the first note fell due, S.D. Dearman went to Joplin to pay it, and was by him carried to the clerk's office, when the defendant produced the notes, and the amount of the first one was paid to Trimmier, or rather counted out on his table, when Joplin took $10 of it, and left the balance with Trimmier. Soon after this, and before the second note fell due, S.D. Dearman returned to Joplin one of the mares because she would not work as she was warranted to do. Joplin received her back, and asked Dearman to try another animal in her place. To this Dearman acceded, but soon returned that animal also as a failure, and Joplin received it. After this Joplin, on the demand of Dearman, refused to surrender the note given for the mare which had been returned. When the second note became payable, Trimmier demanded payment from S.D. Dearman, who refused upon the ground of failure of consideration, and that the contract had been rescinded. Several times this demand was repeated, Trimmier calling Dearman's attention to the extravagant rate of interest which the note was bearing, but Dearman persistently refused payment, denying his liability on the ground stated. It does not appear, however, that any demand was ever made upon the plaintiff, or that Trimmier ever had any interview or communication with her upon the subject. Matters were allowed to rest in this condition, without any further attempt to collect the note, until November, 1884, after any action on the note would have been barred by the statute of limitations, when the defendant, as assignee, by virtue of the power contained in the mortgage, advertised and sold the land, during the absence of the plaintiff and her husband in the state of Georgia, without any notice to them further than by the advertisement published in a newspaper in Spartanburg. At this sale, L. A. Mills became the purchaser at the sum of $550, the note, at that time, by the accumulation of interest, amounting to about $600. On the twenty-second of May, 1886, this action was commenced by the plaintiff for the purpose of requiring the defendant to cancel the note and mortgage and account to her for the proceeds of the sale of her property.
The case was heard by the circuit judge upon the testimony delivered in open court, who found the general history of the transaction to be substantially as above stated; that the plaintiff was a surety, and not the principal on the note, although she signed it first; that Trimmier was aware of the real nature of the transaction; that he took the notes of the Dearmans, together with the mortgage, as collateral security for the debt of Joplin to him, but that he had no notice of the failure of consideration, as to the last note, at the time the papers were transferred to him. Upon these facts he found, as matter of law, that while the transfer before maturity of a negotiable note such as this was, for a valuable consideration paid at the time, without notice of subsisting equities between the original parties, would carry with it the mortgage given to secure the payment of such note, and the holder would be entitled to both note and mortgage free and discharged from such equities, and that, while a negotiable note transferred before due, without notice of any equities between the original parties to it, "not for a valuable consideration given at the time, but in payment and extinguishment of an antecedent debt, *** if it be so taken in the usual course of business, it is free from the equities between the original parties;" yet for the doctrine that "a mortgage transferred in payment of a pre-existing debt to a purchaser of a note it secures, before maturity and without notice, stands discharged of equitable defenses between the original parties," the judge says he finds no authority. He, however, held that "a note and mortgage thus transferred only as collateral security for a debt *** is still affected with the equities between the original parties." This he bases upon the case of Haynsworth v. Bischoff, 6 S.C. 159. Inasmuch, therefore, as the note and mortgage were transferred to Trimmier only as collateral security for the debt of Joplin, the mortgage, in the hands of the defendant as assignee, was subject to the defense of failure of consideration which was fully made out. The circuit judge, therefore, held that the sale of the mortgaged premises was unauthorized, because there was no debt due under the mortgage, and consequently the defendant was accountable to the plaintiff for the full value of the premises, as evidenced by the price brought at the sale, which appeared to be fair. Judgment was accordingly rendered that the note and mortgage be canceled, and that the defendant pay to the plaintiff the sum of $550, with interest thereon from the third day of November, A. D. 1884, together with costs.
From this judgment defendant appeals upon the several grounds set out in the record. So far as these grounds impute error to the circuit judge in his findings of fact, it is only necessary to say that, under the well-settled rule, they cannot be sustained. The testimony as to several of the issues of fact was manifestly conflicting, and there can be no doubt that the conclusions reached by the circuit judge are based upon testimony quite sufficient to support them.
We proceed, then, to inquire into the legal principles applicable to the facts as found by the circuit judge. In the outset of this inquiry, it may be as well to say that the well-settled rule of law by which the holder of a negotiable note, who has acquired the same, before maturity, for a valuable consideration, without notice of any equity to which it might have been subject in the hands of the payee, cannot be affected by any such defense, is a different thing from the other equally well-settled rule by which a purchaser for valuable consideration without notice may protect himself against some antecedent equity. The former is a rule of commercial law, and applies only to a particular class of property,--negotiable instruments,--while the latter may be applied to any kind of property. One is a rule of commercial law, while the other is a rule of equity, and the incidents of the two rules are not always the same. For convenience, therefore, in the further discussion of this case, we will designate one as the commercial and the other as the equity rule. The commercial rule, as above stated, is universally conceded; but what shall constitute one a purchaser for valuable consideration of negotiable paper--whether he must actually pay the money, or part with something else of value, at the time of the transfer, or whether one who takes such paper in payment of an antecedent debt, or as collateral security for such debt, can be regarded as such a purchaser--has been the subject of some conflict of opinion. We think, however, that the decided weight of authority is in favor of the view expressed in Story on Promissory Notes, (section 195,) in the following language: "Every person is, in the sense of the rule, treated as a bona fide holder for value, not only when he has advanced money or other value for it, but when he has received it in payment of a precedent debt, or when he...
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