Eckert v. Searcy

• Decision Date: 23 April 1917
• Docket Number: 19132
• Court: Mississippi Supreme Court
• Parties: ECKERT v. SEARCY ET AL

74 So. 818

114 Miss. 150

ECKERT v. SEARCY ET AL

No. 19132

Supreme Court of Mississippi

April 23, 1917

Division A

APPEAL from the chancery court of Hinds county, HON. O. B. TAYLOR Chancellor.

Bill by Mrs. K. Eckert against R. J. Searcy and another. Bill dismissed and plaintiff appeals.

The facts are fully stated in the opinion of the court.

Decree reversed, and case remanded.

Percy Clifton, for appellant.

Searcy held three notes of Lewis' for one hundred dollars each one of which was then due in a few days, to secure the payment of ninety-eight dollars and seventy cents, the three notes being secured by retained title to one thousand dollars worth of hotel fixtures. Thereupon, without any authority to do so, and without notifying the pledgor to redeem, and without even notifying pledgor that he was going to sell or dispose of the notes surrendered them to the maker thereof for one hundred and twenty-five dollars, relying solely for authority therefor upon an alleged agreement, that in the event the debt of ninety-eight dollars and seventy cents was not paid by a stipulated date the notes were to be his. Such an agreement, if made, was void. 8 U.S. 332, 24 L.Ed. 775; 84 Hun. (N. Y.) 324; 3 Tex. 119, 49 Am. Dec. 723; 2 Cowan (N Y.) 324; 32 N. Y. State, 314; 4 Elliott on Contracts, sec. 3059.

The agreement, if made, being void, and no express agreement authorizing him to sell having been made, the law imposed upon him the duty to hold and collect the full face value. Boswell v. Thigpen, 75 Miss. 308.

Searcy's motive makes not a particle of difference. The tort was the affirmative act of compromising with the maker of the securities. Union Trust Co. v. Rigdon, 93 Ill. 469; Story on Bailments, sec. 321; Polock v. Jones, 12 Johns 145.

We do not regard the transaction as a sale, but rather as a compromise between the pledgee and the maker of the notes which were pledged. Searcy had the undoubted right to collect the notes of Lewis' to the extent of paying the debt due him, but he had no right to compromise, and take less than was due on the notes, to come out even on the deal or ahead on the deal. The law imposed upon him the duty to hold them and collect as they became due.

There may be cases, where the note was not well secured, that the pledgee might be justified in receiving a less amount than was due, and surrender the pledged paper; but where the claim held in pledge was well secured, as these were, the pledgee has no right to enter into a compromise, and give up the claim for less than is due thereon. McLemore v. Hawkins, 46 Miss. 715; Boswell v. Thigpen, 75 Miss. 308; Zimpleman v. Vender, 98 Ill. 613; Union Trust Co. v. Rigdon, 93 Ill. 458; Story on Bailments, sec. 321.

It is claimed for Lewis that he is a bona fide purchaser. All that is shown is, that he held the notes in his hands, marked paid, and that he acquired possession from Searcy for one hundred and twenty-five dollars.

We do not regard Lewis as a purchaser at all, but as a compromisee. An arrangement where the security is transferred for less than is due thereon to the party already bound by it, is called by Justice STORY, in his work on Bailments, sec. 321, a compromise; and he seems to distinguish such cases from the sale of a pledge, and such an arrangement is designated as a compromise in Aimpleman v. Veeder, 98 Ill. 613; Deeply v. Clark, 12 Ind. 428, 12 Johns 145; McLemore v. Hawkins, 46 Miss. 715; Boswell v. Thigpen, 75 Miss. 308.

A transfer such as this not being a sale, Lewis could not be a purchaser. Can a maker become a bona fide purchaser of his own paper. Some authorities hold that neither an acceptor or maker can be a bona fide purchaser. Others say that none of the immediate parties can. Norton on Bills and Notes, page 297, and cases cited; Zimpleman v. Veeder, 98 Ill. 617.

Searcy under whom Lewis claims, held the notes as security for a pre-existing debt, and was not a purchaser for value. Bank v. Bank, 106 Miss. 471; Bank v. Strauss, 66 Miss. 479; Hinds v. Pugh, 48 Miss. 268; Perkins v. Swank, 43 Miss. 349; McLeod v. Bank, 42 Miss. 99; Pope v. Pope, 40 Miss. 516; Brooks v. Whitson 15 Miss. 513; Howey v. Pack, 12 Miss. 229; Holmes v. Carmen, Freemans Ch. 408.

Searcy's title being defective, Lewis was bound to show that he was a bona fide purchaser, in good faith, for value. In determining whether a holder of negotiable paper purchased before due is a bone fide holder is to be determined by the simple test of honesty and good faith on his part in making the purchase. In determining whether the purchaser acted in good faith or not, the amount of the consideration may become a material inquiry. 41 Am. Reports, 462; 34 N.Y. 247; 35 N.Y. 65.

In DeWitt v. Perkins, 22 Wis. 474, it was held that purchasing a note for three hundred dollars for five dollars against a solvent maker was very strong, if not conclusive evidence of bad faith. And a like decision was rendered in Hunt v. Standford, 12 Tenn. (6 Yerg.) 387, where a note for three hundred thirty-three dollars and thirty-three cents was purchased for one hundred and twenty-five dollars. In some of the cases it is said that the consideration must be full and fair as well as valuable. Goldsworth v. Lewis, 12 Barb. 410; Hall v. Wilson, 16 Ld. 548; Ward v. Trust Co., 192 N.Y. 61.

One who purchases negotiable paper without inquiry, when the circumstances are such as would excite the suspicion of a prudent man, does not stand in the position of a bona fide holder. 29 L. R. A. 351.

In Jones v. Gordon, 2 App. Cas. 614, 4 Erc. 416, Lord BLACKBURN, after pointing out that mere neglect is not sufficient to prevent the holder from being deemed a holder in good faith. "I think that is dishonesty."

Lewis knew his own secret mind that something was wrong, and admitted that: "He didn't care so long as he got the notes in his possession, marked paid."

In DeWitt v. Perkins, 22 Wis. 474, the court says: "Our own court has held successively whatever is sufficient to excite attention or put a party on inquiry, is notice of everything to which such attention, or inquiry might reasonably lead." Freemans, ch. 323; 5 How, M. 552; 43 Miss. 260; McLeod v. Bank, 42 Miss. 99.

In the case at bar, suppose the notes had been stolen and transferred to defendant, would not the fact that they were offered to him at a discount of fifty-eight per cent. have been sufficient to put him upon inquiry as to the title acquired.?

Howie & Howie, for appellee.

The fact in this case are not that the notes were placed up as collateral. Not at all, Searcy testified that the notes were placed with Thompson with the understanding that he was to hold them until a certain date and that if the debt was not paid by that time in cash, then the notes were to be accepted in full settlement and discharge of the debt.

The notes were not placed up for collateral. They were deposited to be held for future delivery. Searcy had no right at all against them until the time limit had expired, not even as security for what was due him. But when the time arrived, under the agreement, he was entitled to receive them in full settlement and discharge of his debt. This is what was done.

So we say that accepting all the law cited by counsel, we are still bound to arrive at the same conclusion and affirm the case. Yes but they say this is only the statement of Searcy. Correct. But we answer that the chancellor decided this question of fact in favor of the appellees and so this court will not go behind it.

As to Lewis, they say that he could not be a purchaser for value of his own paper but that he could compromise the matter and take his paper up before it was due. If the wording pleases them better than to call it purchasing for value then we will let it go at that. They cite law showing that it was proper for him to "Compromise with the parties to the security, for a less sum than the sum due on the security," see page two of last brief. Then if this can be done the only other question that could possibly arise, as far as Lewis is concerned, is, was he free from fraud in the matter and did he give anything of value for the notes.

The answer to the fraud proposition, is answered on the decision of the chancellor. In fact there was nothing offered that tended to prove fraud on his part. Nor is there any dispute of the fact that he actually paid the money for the notes. Quite a deal is made of the argument that Lewis did not pay enough for the notes. He got them for as little as he could. He found the holder wanting money badly. Naturally he made the best trade that he could. This was natural. Then too, it must be remembered that it was shown that he did not have even this amount of money to take them up with. He had to borrow this. When a man has to borrow money to take up his paper before it is due, it is but natural to expect that he would require considerable discount.

We contend that he certainly was doing nothing more than discounting his own paper, or compromising it and settling it before due, which was perfectly legitimate.

We submit therefore that the decree of the chancellor should be affirmed.

OPINION

HOLDEN, J.

From a decree of the chancery court of the First district of Hinds county, dismissing the bill of complaint filed by the appellant against the appellee, the appellant, Mrs. Eckert, appeals here.

The case is, briefly, this: On May 4, 1914, the appellant, Mrs K. Eckert sold to J. M. Lewis, one of the appellees herein, a certain lot of household goods and furniture. The consideration of the sale was three hundred dollars in cash and the execution of eight promissory notes by the said J. M. Lewis to the said Mrs. K. Eckert for one hundred dollars each, the first of which was due and payable thirty days...