Lienkauf Banking Co. v. Haney

• Decision Date: 15 June 1908
• Docket Number: 13,283
• Citation: 93 Miss. 613,46 So. 626
• Court: Mississippi Supreme Court
• Parties: LIENKAUF BANKING COMPANY v. JAY J. HANEY ET AL

46 So. 626

93 Miss. 613

LIENKAUF BANKING COMPANY v. JAY J. HANEY ET AL

No. 13,283

Supreme Court of Mississippi

June 15, 1908

FROM the chancery court of Lamar county, HON. THADDEUS A. WOOD Chancellor.

The banking company, appellant, was complainant in the court below: Haney and others, appellees, were defendants there. From a decree in defendant's favor the complainant appealed to the supreme court.

The suit was predicated of two certain promissory notes, set out in the opinion of the court, executed by Jay J. Haney and J R. Haney doing business under the firm name of J. J. Haney Company. Metzger Bros., the nonresident payees in and endorsers of the notes, are made defendants. The bill was afterwards amended so as to include as parties defendant the J. J. Haney Company, J. T. Arnold, J. H. Thompson, and Hawkins & Co., the amended bill charging that said Jay J. and J. R. Haney had transferred their interest to the J. J. Haney Company, who in turn transferred to Arnold, who sold to Thompson, who sold to Hawkins & Co.; and the bill avers that each of these defendants took the property subject to the lien of complainants, and that each, by use of the property and disregard of complainants' rights, had converted it to his own use and had so commingled it with other property of like kind as to render its identification difficult, if not impossible, and much of it had been destroyed by defendants, and thereby they had become liable to complainant for the amount of the notes. The bill prayed for a decree for the amount of the notes, interest, and attorney's fee and for a condemnation of certain rails, etc., sold to the Haneys by Metzger Bros., and for the purchase price of which said notes were given. The Haneys answered, setting up as a defense a delay in delivery which caused them a loss, and that the rails sold them did not come up to the representation made, but were of a poorer grade, and that they had advised Metzger Bros. that the notes would not be paid, and deny that complainant is the owner of the notes in good faith. The other defendants answered separately, each practically adopting Haney's answer. The court below held that the case was controlled by the law of Mississippi, and that the Lienkauf Banking Company, the purchaser of the notes, became the owner thereof subject to such equities as might be set up and proven by defendants, and dismissed complainant's bill. The facts are further stated in the opinion of the court.

Reversed and remanded.

Ford White & Ford and Green & Green, for appellant.

The court will observe that the notes or instruments of writing upon which this suit was brought, were both made payable at the Lienkauf Banking Company's office in Mobile, Alabama.

This being true, the right of the parties to this suit is necessarily governed by the laws of the state of Alabama. SIMRALL, J., in Harrison v. Pike, 48 Miss. 56, announced the rule on this subject as follows: "By the law merchant the indorser of a bill of exchange or promisory note, who had paid a consideration, takes the paper freed from the equities existing between the antecedent parties. But our statute, Code 1857, p. 255, Art. 2, allows as against the indorsee the benefit of all want of lawful consideration, failure of consideration, payments, discounts, set off made or had previous to notice of assignment. This radical innovation on commercial law has been uniformly held to apply to negotiable paper purely domestic; as where the note is made payable here, or where the bill of exchange is inland, or more properly domestic. If the bill is drawn upon a party in another state, or in a foreign country, or the note is made payable there, neither is, as a general rule affected by our statute, but is governed by the law of the place where performance is to be made." To the same effect see Miller v. Mansfield, 37 Miss. 688; Emanuel v. White, 34 Miss. 56; Bank of Kentucky v. Coffin, 41 Miss. 219; Fillons v. Harris, 12 Smed. & M. 462; Bank of Louisiana v. Williams, 46 Miss. 625; Dalton v. Murphy, 30 Miss. 75; Kendrick v. Kyle, 78 Miss. 278, 28 So. 951; Hart v. Foundry Co., 72 Miss. 809, 17 So. 769.

The fact that the obligation may have been written in Mississippi, or that it was secured by a lien, or mortgage upon property in this state does not at all alter the rule. Some of the cases above cited were based upon notes secured by mortgages upon lands in Mississippi.

The rule announced in Shannon v. Building & Loan Association, 78 Miss. 955, 30 So. 51, and other building and loan cases, in no way modify the general rule. The court in all the building and loan cases found that these companies, although masquerading under foreign charters, were in truth and in fact Mississippi corporations, in that they had localized themselves through the instrumentality of local boards of directors and through these local boards, actually collected, as had all the time been contemplated, between all parties, the notes, or obligations, due the building and loan company. There is nothing of this sort in the case at bar, and the case, we submit, is subject to the general rule.

Under the laws of Alabama, an indorsee of a promissory note, or bill of exchange, takes the paper freed from all equities between the parties. Johnson v. Hanover National Bank, 6 So. 909; Wildsmith v. Tracey, 80 Ala. 258; Brown v. First National Bank, 15 So. 435; Holmes v. Bank of Fort Gaines, 24 So. 959; Fairley v. Bank, 24 So. 428; Winter v. Pool, 16 So. 543; Scott v. Tane, 22 So. 447; Orr v. Spankman, 23 So. 829; King v. Peoples Bank, 28 So. 658.

The Lienkauf Banking Company were the owners of the notes sued upon and produced the originals and had them attached to a deposition. The bank purchased the two notes on November 24th, 1902, from Metzger Brothers, paying them therefor $ 2,113.95.

The chancellor held that the contract for the sale of the iron having been made in Mississippi, and the title retained as security for the debt, the Lienkauf Banking Company were charged with notice that it was a Mississippi contract and that the notes given in settlement were likewise Mississippi obligations. This court has more than once, as cited in Harrison v. Pike, supra, declared that the fact that notes are made payable in a foreign state to carry out a contract made in Mississippi, does not alter the rule.

Sullivan & Tally and Alexander & Alexander, for appellees.

The contract in this case is one and indivisible. It is not a simple promissory note for a sum certain payable in Mobile. The various stipulations in the contract cannot be performed in Mobile. The contract is not that the payee or his endorsee or assignee shall have the right to exact payment of the debt, but on the maturity of the first note they have the right and privilege therein designated.

The contract was made and concluded in Mississippi, the property, the subject matter of the contract, was in Mississippi; delivery thereof was to be in Mississippi and every part of the contract, except that calling for payment of the price, was to be performed in this state. The purchasers of this contract do not stand in the attitude of purchasers of ordinary commercial paper negotiable under the law merchant. On its face the contract gave notice that the money was to be paid as the purchase of certain iron rails and showed the several stipulations in regard to performance. The title to the rails was not stipulated to remain in Metzger Brothers or the holders of the notes, but in Metzger Brothers or their assigns. They had a perfect right to assign their interest or lien to any one they saw proper. The word assigns is hardly appropriate to indicate the successor under the law merchant to the title of commercial paper. We therefore submit that these contracts were not negotiable.

In the next place the ground of equity jurisdiction was to enforce the lien on the property, viz.: the iron rails and fastenings. It is not shown that any of these were in existence under the jurisdiction of the court when the decree was rendered.

Hawkins & Company,...