Houston v. Keith

• Decision Date: 23 October 1911
• Docket Number: 15040
• Court: Mississippi Supreme Court
• Parties: OTHO S. HOUSTON v. THOMAS KEITH

56 So. 336

100 Miss. 83

OTHO S. HOUSTON v. THOMAS KEITH

No. 15040

Supreme Court of Mississippi

October 23, 1911

APPEAL from the circuit court of Newton county, HON. C. L. DOBBS Judge.

Suit by Otho Houston against Thomas Keith et al. From a judgment for defendant, plaintiff appeals.

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

Reversed and new trial awarded.

J. B Stirling and F. M. West, for appellant.

Over the objection of the plaintiff an offer to compromise namely, to accept less than the face of the note, made to the defendants by one F. M. West, before litigation began, was admitted in evidence. This was error. 2 Phillips on Evidence, p. 218 et seq., note 196; 75 Miss. 659.

Over the objection of the plaintiff, statement alleged to have been made by Mr. West that Houston bought the note for fifty per cent of face was admitted in evidence. This was clearly erroneous for the reason that it matters not whether face value was paid for the note by Houston, or not. If he paid a valuable consideration without notice, he became the purchaser entitled to payment of the note unless notice of failure of consideration can be brought home to him before the purchase of the note. No effort has been made to show that Houston had notice of failure of consideration before his purchase and the fact that he purchased at less than face value, admitting for the sake of argument that such statement was made, would be but a circumstance to go to the jury affecting the question as to whether or not he was a bona fide purchaser.

One who took this note as collateral security for even half its value, if he was a bona fide purchaser without notice, is entitled to recover and no effort has been made to show that Houston had notice of the failure of consideration before his purchase. In fact, it could not be so shown for the warehouse company might have built the warehouse under the terms of the note after the transfer.

But the statement of Mr. West was inadmissible for the further reason that the alleged statement was of an agent after the occurrence and was therefor inadmissible. 64 Miss. 713.

The note sued on being made payable in Texas is solvable under the laws of Texas. Lienkauf Banking Co. v. Haney et al., 46 So. 626, citing numerous Mississippi cases beginning with the case of Fellows v. Harris, 12 Smedes & Marshalls' 462, and ending with the cases of Hart v. Foundry Company, 72 Miss. 809, and Harrison v. McPike, 48 Miss. 46.

The holder of a negotiable note duly endorsed is presumed to be the holder for value and that the note was duly acquired befo maturity. The burden of proof is on the maker to show the contrary. Harrison v. McPike, 48 Miss. 46; Bank v. Haney, 46 So. 626.

This being a negotiable instrument in Texas, Houston took the note as a bona fide purchaser before maturity and the burden of proof was on the defendants to show that he had notice of the non-performance of the contract or it being executory that it would not be performed. Bona fide purchasers are protected against equities by statute in Texas. Texas Revised Statutes 265.

A bona fide purchaser is not bound to inquire whether the consideration has been performed by the payee or wholly or partially failed even though the note contains a clause stating the purpose for which it is given. The consideration therefor being executory. Buckhanan v. Wren, 30 S.W. 1077, 40 S.W. 1025, 29 S.W. 392.

He is not required to inquire whether the payee is able to perform the contract. 1 Cyclopedia of Law & Procedure, 941-48.

A stipulation, in a note that it is for a consideration thereafter to be realized, does not affect its negotiability if otherwise negotiable. 19 L. R. A. 717; 66 Miss. 48; 19 Am. St. Rep. 61.

Under the well-established decisions of this state the holder of a negotiable instrument is presumed to be the bona fide endorsee and need only introduce the instrument in evidence in suit and the burden is shifted to the defendants to show notice of want of consideration or other valid defense.

The purchaser of this note is not shown to have had any notice of a failure of consideration or fraud in the procurement of such note before he purchased the same and he is not affected by the transactions between the makers and the building association.

Even if all the testimony of the defendants had been admissible the question as to whether Houston was a bona fide holder of said note would have been one for the jury and should have been left to them and not settled by the court.

As stated, even if Houston had taken this note as collateral security for half its value, he would have been entitled to recover, for the taking of paper as collateral does not destroy the bona fides, and when taken as collateral the purchaser is entitled to all the rights of a bona fide purchaser of commercial, negotiable paper, unless notice or want of consideration before purchase can be brought home to him.

We respectfully ask that this case be reversed and remanded.

OPINION

MCLEAN, J.

This is a suit brought by appellant against the appellees on a promissory note, dated Decatur, Mississippi, September 7 1907, for twelve hundred and fifty dollars, payable on or before November 1, 1907, to the Farmers' & Bankers' Warehouse Building Association, of Houston, Texas, or order, payable at Houston, Texas. The note recites that it "is given in payment for the construction of certain improvements upon that certain lot or parcel of land situated in Decatur, Newton county, Mississippi, this day contracted to be erected by the Farmers' & Bankers' Warehouse Building Association, for Farmers' E. & C. Union W. H. S. Company, and to secure the payment therefor an express contract and mechanic's lien is given by said contract upon said land and improvements." The defendants pleaded, first, the general issue; second, that said stipulation in the note was part of an executory contract, entered into between the Farmers' & Bankers' Warehouse Building Association, and that the plaintiff was put on notice by the stipulations contained in said note; and,...