Dollar Sav. & Trust Co. v. Crawford
| Decision Date | 04 April 1911 |
| Citation | 70 S.E. 1089,69 W.Va. 109 |
| Parties | DOLLAR SAVINGS & TRUST CO. v. CRAWFORD et al. |
| Court | West Virginia Supreme Court |
Submitted January 27, 1910.
Syllabus by the Court.
A recital of the consideration in a note, otherwise negotiable in form, does not render it nonnegotiable.
The rights of a bona fide assignee of such a note, in due course are not affected by the equities of the maker.
Knowledge by an assignee, in due course, of a negotiable note that it was given for the purchase price of a specified quantity of land at a specified price per acre is not notice to him of failure of title or shortage in quantity.
The use of the word "trustee" following the name of the payee in a negotiable note does not destroy its negotiability, if the trustee has the right to sell it and receive the proceeds; its only effect is to put the purchaser upon notice concerning the trustee's title and authority in respect to the note.
The fact that a note is assigned without recourse easts no suspicion upon the holder's title.
Whenever failure of consideration is a proper defense in an action of assumpsit upon a negotiable note, it need not be specially pleaded, but may be proven under the general issue.
The holder of a note has the right to apply a partial payment received thereon, first, to a discharge of the interest then due, and the balance, if any, to the payment of the principal pro tanto. A memorandum made by him on the note, at the time of receiving the partial payment, "Indorsement on principal," followed by the amount received, does not estop him from afterwards applying enough of the payment to discharge the interest then due.
Error to Circuit Court, Kanawha County.
Action by the Dollar Savings & Trust Company against E. T. Crawford and another. Judgment for plaintiff, and defendants bring error. Affirmed.
Linn & Byrne and Brown, Jackson & Knight, for plaintiffs in error.
Price Smith, Spilman & Clay, for defendant in error.
WILLIAMS P.
Plaintiff recovered a judgment against E. T. Crawford and W. L. Ashby in the circuit court of Kanawha county on the 20th day of March, 1909, for the sum of $15,411.08, in an action of assumpsit upon a promissory note executed by defendants to Howard Hazlett, trustee, and by him indorsed to plaintiff. To this judgment a writ of error and supersedeas was awarded. Defendants pleaded the general issue, partial payment, and also filed a special plea, setting up failure of consideration. The court sustained plaintiff's demurrer to the special plea; and on the issues joined on the remaining pleas, after hearing the evidence, directed a verdict for plaintiff.
The case has been very carefully briefed, and the points of law relied on are elaborately and ably argued by counsel on both sides. There is no dispute as to facts, and the questions of law are clear cut, and we have only to determine their applicability to the facts in the case.
The first assignment of error relates to the action of the court in sustaining the demurrer to the special plea. This plea alleged failure of consideration for the note. The note reads as follows: The following indorsements appear on the back of the note, viz.: "Balance due on principal $13,030.90." "Indorsement of principal, May 7, 1906, $26,000.00."
The special plea avers that the note was executed as part of the purchase price for an undivided one-half interest in 30,018 acres of land purchased of Howard Hazlett, trustee, in Logan and Boone counties, at the price of $7 per acre; that after defendants' purchase of the land they caused a survey of it to be made, and ascertained that it contained only 27,545.41 acres, thus making a shortage in quantity of 2,472.59 acres; that by virtue of this shortage they were entitled to set off against the note, as of May 20, 1904, the time said note began to bear interest, the sum of $8,654.06; that being a sum representing one-half the shortage at $7 an acre. The contract of sale by Hazlett, trustee, and D. F. Frazee, trustee, to Crawford and Ashby, dated February 20, 1904, and also the deed from Hazlett, trustee, dated April 16, 1904, which conveys to Crawford and Ashby the undivided half interest in said land, and which was made pursuant to the contract of sale, are made exhibits with the plea. The plea also contains the following additional averments: "And these defendants further show that the said note was afterwards assigned by said Hazlett, trustee, to the plaintiff without recourse, and with full notice to the plaintiff of the consideration and conditions of said note, and that the said plaintiff at the time of said assignment and transfer had notice that said note was given pursuant to said contract and deed for land at $7 per acre, and was subject thereto and contingent upon the acreage aforesaid, passed by said deed, being equal to 30,018 acres, and that these defendants had full right to set off against said note $3.50 per acre for each acre said tract was short of or less than 30,018 acres."
It is stubbornly urged by counsel for defendants that the recital in the note that it was "in part payment for land in Logan and Boone counties, and upon which a lien has been reserved to secure this note," was sufficient to put plaintiff upon inquiry which, if pursued, would have led to a discovery of defendants' equities. But the plea does not allege that plaintiff actually knew, when the note was assigned to it, that the consideration had in part failed, nor does it allege that any one knew at that time that there was a shortage. The demurrer admits the truth of the averments, but they are not sufficient to charge plaintiff with notice, or to put it upon inquiry respecting defendants' equities against Hazlett, trustee. Plaintiff knew that the note was given in part payment for land--the note so informed it; and grant that it knew all the facts which the plea alleges it knew, and also that it knew all the facts that would be disclosed by a reading of both the contract and the deed exhibited with the plea, still they are not sufficient to disclose that there was a shortage in the quantity of land. The contract is not for a supposed, or estimated, quantity of land, subject to be corrected or modified by future survey; but it was made for the sale of a definite quantity--a specified number of acres. Is it not reasonable, then, to presume that the contracting parties had satisfied themselves concerning the quantity of land, before making the contract and the deed? Does the recital in the contract and deed that the land contains 30,018 acres convey any notice that there is a shortage? Certainly not; it is rather an assurance that it does contain the quantity than that it does not. The plea does not aver that any one, not excepting defendants themselves, knew when the note was assigned to plaintiff that there was a shortage. Therefore, so far as it appears from the plea and its exhibits, there is nothing to indicate that plaintiff knew, or could have ascertained by any amount of diligent inquiry short of having an actual survey made of the land, that there was, or would be, a shortage.
Unless the note is rendered nonnegotiable, either by the recital of the consideration or by the fact that it is payable to, and assigned by, Hazlett in the capacity of trustee, and the defense of equities thereby let in, there is nothing in the plea or its exhibits which is sufficient to affect plaintiff with such notice as to let them in. The note is payable at the National Exchange Bank, and is negotiable in form. The recital of the consideration for which it was given does not render it nonnegotiable; neither does it put plaintiff upon notice of defendants' equities, there being nothing to indicate a failure of the consideration, either in whole or in part.
The equities between the makers and the payee are secret, or latent, and there is nothing to affect the assignee with notice of their existence. A negotiable note, reciting that it is for the purchase price of a horse, a house, or lands, does not render it uncertain, and is no notice whatever to the assignee that the payee's title to the property will fail. 1 Daniel on Neg. Inst., § 797; 7 Cyc. 947. In fact, we know of but one court which has taken a different view, and that is the Supreme Court of North Carolina, in the case of Howard v. Kimball, 65 N.C. 175, 6 Am.Rep. 739. But that decision has been criticised by text-writers, and seems to be generally regarded as unsound; it is not followed by other courts. Daniel, in his excellent work on Negotiable Instruments, vol. 1, § 797, says:
The true rule applicable...
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