Dilworth v. Federal Reserve Bank Of St. Louis
| Decision Date | 30 October 1933 |
| Docket Number | 30731 |
| Citation | 150 So. 821,170 Miss. 373 |
| Court | Mississippi Supreme Court |
| Parties | Dilworth v. Federal Reserve Bank Of St. Louis. |
(Division B.)
Motion to transfer cause to another court must be made in trial court to give court opportunity to transfer (Const. 1890 section 147).
When motion to transfer cause is overruled, parties must then have formal pleadings setting up all their rights, and, if court retains jurisdiction and administers justice, though case may belong in another forum, judgment will be affirmed (Const. 1890, section 147).
Where creditor has claim on two funds, another having claim to one of them may compel creditor to first go against one to which complainant has no claim.
Marshaling of debtor's assets and fixing creditors' priorities can only be accomplished in chancery.
Constitution providing that no judgment or decree shall be reversed on ground of mistake as to whether case is for equity or common law does not intend that circuit court should retain equitable cases, or that chancery court should retain commonlaw cases (Const. 1890, section 147).
Where there are causes independent of jurisdiction as to whether case is for equity or common law, and party has been denied legal or equitable right, judgment will be reversed and case sent to court which is best fitted to administer justice (Const. 1890, section 147).
Maker of note who was sued by holder in circuit court held entitled to transfer to chancery court, where maker set up valid equitable defenses of right for discovery and right to marshal assets, of which defenses he could not avail himself in circuit court (Const. 1890, section 147).
ON SUGGESTION OF ERROR. [154 So. 535. No. 30731.]
1. APPEAL AND ERROR. Where demurrers have been sustained and pleadings stricken, allegations of pleadings are considered true. 2. BILLS AND NOTES. In suit on note, "non est factum" is not proper plea of general issue, since it merely denies signature and execution of note. 3. BILLS AND NOTES. In pledgee's suit on note, plea of general issue put in issue pledgee's right to bring suit and recover on note, and it was reversible error to strike out plea and notice of special matter thereunder. 4. APPEAL AND ERROR. Motion to transfer cause to another court must be made in trial court to give court opportunity to transfer it (Const. 1890, section 147). 5. APPEAL AND ERROR. Where court refuses to transfer cause and correctly decides lawsuit, reviewing court cannot reverse, but can reverse where errors as to nonjurisdictional matters are made and remand cause to proper court, when necessary (Const. 1890, section 147). 6. DISCOVERY. In pledgee's suit on note, where defendant alleged lack of precise knowledge of collateral securing principal debt to pledgee, and that pledgee was mishandling collateral, interrogatories concerning collateral held improperly stricken (Code 1930, section 1551). 7. TRIAL. In pledgee's suit on note, where defendant filed interrogatories, alleged mishandling of collateral securing principal debt to pledgee, and asked for marshaling of assets, chancery court could best determine cause. 8. MARSHALING ASSETS AND SECURITIES. In pledgee's suit on note, pledgee held required, under pleadings and doctrine of marshaling assets, to resort to collateral free from defenses as against pledger, before resorting to note involved, as against which defendant maker had right of set-off against payee-pledgor, even if pledgee was bona fide holder for value. 9. MARSHALING ASSETS AND SECURITIES. Generally, under doctrine of "marshaling assets and securities" creditor having claim upon two funds may be compelled to go against one to which he has exclusive right, where another has claim upon one of funds only. Dotcrine of "marshaling assets and securities" is that, where a creditor has a lien on two funds in the hands of the same debtor, and another creditor has a lien on one of them only, equity, on the application of the latter, will compel the former to make his debt out of that fund to which the latter cannot resort. The doctrine of marshaling is a benevolent doctrine of equity, and the right to marshal assets is governed by equitable principles; the doctrine applying only when it can be done with justice to the creditor and his debtor, and without prejudice to third persons.
HON. THOS. E. PEGRAM, Judge.
Suit by the Federal Reserve Bank of St. Louis against B. C. Dilworth, wherein defendant counterclaimed. Judgment for plaintiff, and defendant appeals. Reversed and remanded to chancery court.
On suggestion of error. Judgment of the circuit court reversed, and cause remanded to the chancery court for a new trial.
B. F. Worsham, of Corinth, for appellants.
It is a general rule of law, needing no authority to sustain it, that the allegations of the pleas are to be taken as true on the demurrers thereto.
U. S. F. & G. Co. v. First State Bank, 103 Miss. 91; State v. Nichols, 106 Miss. 419; Batesville, etc., R. Co. v. Mums, 111 Miss. 574; Polk v. Hattiesburg, 109 Miss. 872; Lumber Company v. Norton, 111 Miss. 720; Harrison County v. Marione, 110 Miss. 592.
The title of a person who negotiates an instrument is defective within the meaning of this chapter when he negotiates it in breach of faith or under such circumstances as amount to fraud.
Section 2711, Code of 1930; Sections 2708, 2712, 2713 and 2715, Code of 1930; Elmore County Bank v. Bank, 66 So. 509.
While the primary purpose of the law merchant may be to facilitate the use of instruments of credit, and while an endorsee of a note need not investigate matters of bad faith, such as fraud, failure of consideration as between the original parties to the instrument, yet the court seems to hold that where the endorsee is a direct party to the fraud, then the duty to make the inquiry into the full facts is placed on the endorsee.
Bank v. Clayton, 90 So. 899; Welmer v. First Acceptance Co., 212 N.W. 638.
Formal notice is not necessary, but any knowledge of the holder of defenses is equivalent to notice.
8 Cyc. 497, note (a), and 498, note 84, and 502, note 19, and 506; McNamara v. Jose, 28 Wash. 461; State Bank v. Lawrence, 42 L. R. A. (N. S.) 329; Goodman v. Simonds, 15 L. R. A. 934; Ward v. City Trust Co., 192 N.Y. 61; Cassedy v. Wells et al., 162 Miss. 102.
Under the law in Mississippi there is a difference between owning a note outright, and holding the note as pledgee for security. The appellee, in the case at bar, was the pledgee of the notes of appellants; this is not and cannot be denied, and is directly set out in the pleas. The notes of appellant were not rediscounted to appellee but were pledged to the appellee by the First National Bank.
Love v. Rogers, 150 So. 815; Van Winkle Gin & Machinery Co. v. Citizens Bank, 89 Texas 147, 33 S.W. 862; Live Stock State Bank, et al. v. Locke, 277 S.W. 405. Lester G. Fant, Sr. & Jr., of Holly Springs, for appellee.
Overruling the motion to transfer the cause to the chancery court was not reversible error.
Constitution of State of Mississippi, Section 147; Federal Compress Co. v. Coleman, 143 Miss. 620, 109 So. 20.
Overruling the motion to require response to the interrogatories was no error.
McLean v. Letchford, 60 Miss. 169.
There was no plea of the general issue filed. The plea so styled merely denied "promising" and "owing" the notes. It did not deny the execution and delivery for valuable consideration. It therefore was not a plea of the general issue, or any other plea, since it merely attempts to argue a conclusion of law, i. e. whether the maker owed the notes duly executed and delivered. It was therefore a nullity. Moreover, though the action is founded on promissory notes, it was not verified. This plea, therefore, interposed no defense.
First National Bank of Gulfport v. Adams, 123 Miss. 279; Sec. 1587, Code of 1930.
No defense was pleaded to the action.
The doctrine of set-off and counterclaim as applied to negotiable paper is not available against a bona fide holder in due course. This is true, it is held, even though the transferee purchased with notice of the claim.
8 C. J., 487, par. 702, and 804, par. 1063; Sanders v. McAlister Bros., 101 Miss. 227, 57 So. 801; Sections 2681 and 2847, Code of 1930; Bank of Iowa City v. Jno. McGrath, 111 Miss. 873, 72 So. 701; Harrison et al. v. Pike Bros. et al., 48 Miss. 46; Stevens v. Stanley, 153 Miss. 801, 121 So. 814; Commercial Credit Co. v. Summers, 154 Miss. 501, 122 So. 541.
All the allegations attempting to charge the appellee with fraud are simple conclusions of the pleader, containing no facts properly pleaded which include any form of fraud or bad faith to the appellant, or for that matter to the payee; and it is well settled that the demurrer admits only those facts which are well pleaded, and does not admit the conclusions of the pleader or matters which are improperly and illegally pleaded.
First National Bank v. Adams, 123 Miss. 279, 85 So. 308; Barnes v. Jones, 139 Miss. 675, 103 So. 773; Pitts v. Baskin, 140 Miss. 443, 106 So. 10.
Nothing is more well settled in law than that a charge of fraud requires a specific statement of fraudulent acts; that fraud cannot be charged generally by using the word "fraudulent" or as a conclusion of the pleader, as was attempted to be done in this case.
Bush v. Vail, 2 Miss. Dec. 519; Jones v. Rodgers, 85 Miss. 802, 38 So. 742; Parker v. Tapscott, 142 Miss. 768, 107 So. 561; 8 C. J. 495, par. 705.
Appellant's entire theory seems...
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