Marlar v. Smith

• Decision Date: 31 October 1921
• Docket Number: 21997
• Citation: 126 Miss. 842,89 So. 667
• Court: Mississippi Supreme Court
• Parties: MARLAR v. SMITH et al

89 So. 667

126 Miss. 842

MARLAR v. SMITH et al

No. 21997

Supreme Court of Mississippi

October 31, 1921

October 1921

BILLS AND NOTES. Statute giving transferee right to transferor's indorsement not applicable to bearer proper.

The provisions of section 49 of the Negotiable Instruments Law (Laws 1916, chapter 244; section 2627, Hemingway's Code) are not applicable to a note payable to bearer. Such instrument needs no indorsement, but title passes by delivery, and the holder may sue in his own name.

HON. A J. McINTYRE, Chancellor.

APPEAL from chancery court of Tishomingo county, HON. A. J MCINTYRE, Chancellor.

Suit by Oscar Marlar against George W. Smith, and others. Decree for defendants, and plaintiff appeals. Affirmed.

Judgment affirmed.

W. C. Sweat, for appellant.

Our contention, in the first place, is that, when Smith delivered to Marlar, Bennett's note, payable to him or his order without endorsing it, whatever the agreement may have been between them about its endorsement, or whether there was any agreement at all or not, it was Smith's duty to endorse the note; and "equity will regard that as having been done which ought to have been done," and will treat the note as having been endorsed by Smith.

Section 49 of the Negotiable Instruments Act, section 2627, Hemingway's Code is as follows: "Where the holder of an instrument payable to his order, transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquired, in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made."

Now, when Smith delivered the note to Marlar without having endorsed it, it being payable to his order, Marlar had a right to go into a court of equity and compel him to endorse it. Marlar, however, brought suit in the chancery court for relief, setting up the facts, and asking that Smith be required to pay the note, or to pay the seven hundred dollars purchase price of the land, Smith having given him this worthless note, and asked that a lien be fixed on the land to pay the said purchase money. Under Marlar's prayer for general relief, he had a right to have the court by decree, require Smith to endorse the note, or to treat it under the circumstances as having been endorsed by Smith.

The proof shows conclusively that the note was worthless and that Bennett was hopelessly insolvent and did not have enough to pay the preferred claims against his estate. It further shows that Baugh, who gave the collateral notes, had nothing except that which was exempt by law and that his collateral notes, unsecured, were worthless and that the security had been cancelled by Bennett, the beneficiary, long before Marlar ever got the notes. Smith having failed to have the same transferred on the record, as provided by section 2295, Hemingway's Code, then all the papers which Smith delivered to Marlar for this seven hundred dollars are worthless.

The Uniform Negotiable Instruments Act, section 65, Hemingway's Code, section 2542, provides as follows: "Every person negotiating an instrument by delivery or by a qualified indorsement, warrants: (1) that the instrument is genuine and in all respects what it purports to be. (2) That he has a good title to it. (3) That all prior parties had capacity to contract. (4) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless."

It will thus be seen from this act that when Smith delivered the collateral notes, and the trust deed securing the same to Marlar, that he warranted that he had a good title to them. This, he did not have because the trust deed securing the notes had been cancelled of record long before this time, and legally cancelled too. There was no assignment on the record and Bennett had a perfect right to cancel the same, and did do so, and this cancellation was of record when the notes and trust deed were delivered to Marlar. The fourth clause of the section says that he warrants that he has no knowledge of any fact which would impair the validity of the instrument, or render it valueless. This is not a fact. Smith had constructive notice that the trust deed was cancelled, and this certainly did impair the value of the collateral notes. It will not do to say that Marlar had as much notice as Smith. When Smith traded this property to Marlar, it was his duty to know the condition of the property that he had traded.

When any man trades property to another whether it be notes, bonds, live stock or real estate, he impliedly warrants to the purchaser that his title is good. Smith traded this trust deed just the same as he did the note. He certainly had no title to the trust deed, and the notes which he traded were valueless without that security.

Under the law, generally, a man impliedly warrants that he has good title to whatever property he trades, but under the Negotiable Instruments Act, when he traded property, the law makes him expressly warrant that he has good title to it. Section 2295, of Hemingway's Code, made it incumbent upon Smith, when he took over this property from Bennett to see that the trust deed was transferred on the margin of the record. This he failed to do, as shown by the record itself copy of which is in this record. When Smith failed to require this transfer to be made, he left it in the condition...