Merchants & Farmers Bank v. Bank of Winona
Decision Date | 26 January 1914 |
Docket Number | 16278 |
Citation | 64 So. 210,106 Miss. 471 |
Court | Mississippi Supreme Court |
Parties | MERCHANTS AND FARMERS BANK v. BANK OF WINONA |
APPEAL from the circuit court of Carroll county, HON. E. V HUGHSTON, Special Judge.
Suit by the Bank of Winona against the Merchants and Farmers Bank. From a judgment for plaintiff defendant appeals.
The facts are fully stated in the opinion of the court.
Reversed and remanded.
Noel Boothe & Pepper, for appellant.
The court erred in overruling the motion to strike out the replication to appellant's second plea, which plea alleged appellee's claim to the notes sued on was merely that of a holder of said notes, as collateral for pre-existing indebtedness, with no other consideration. The replication did not traverse the allegation of mere security for the pre-existing indebtedness, which defense was thus denied and overruled, erroneously. First National Bank v Strauss, 66 Miss. 779; Robertshaw v. Britton, 74 Miss. 873; Thigpen v. M. C. R. R. Co., 3 Geo 351-2; Smith v. Elder, 14 S. & M. 104.
The court erred in excluding the testimony of appellant and in granting a peremptory instruction for appellee. First National Bank v. Strauss, 66 Miss. 779; Dodge v. Cutrer, 58 So. 208; Netterville & Boyd v. Stevens & Pillett, 2 How. 645; Smith v. Prestidge et al. , 6 S. & M. 484.
Monroe McClurg, for appellant.
Ogden's Negotiable Instruments, sec. 126, page 113, says that a bona fide holder for value without notice is: "A holder in due course is a holder who has taken the instrument under the following conditions: First, that it is complete and regular upon its face; second, that he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; third, that he took it in good faith and for value; and fourth, that at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."
"Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he, or some person under whom he claims, acquired the title as holder in due course."
The Negotiable Instrument Law provides: "The title of a person who negotiates an instrument is defective within the meaning of this act when he obtains the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud."
"To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith."
Bolles on the Modern Law of Banking (1907) at page 241, says: 31 Cyc. Law & Pro., p. 850, par. 2.
Mr. Colby in his excellent work on Replevin (1890) in chapter IX, states the rule of law to be that, one dealing with a bailee is the same as if dealing with an agent and must inform himself as to the authority of the bailee to contract. He is at his peril to know the extent the original bailor has given the bailee to deal with the property. He says: "A purchaser from an agent without authority, even though the purchaser pay full value and acts in good faith, carries no title, and the owner may sustain replevin." And in section 209, the author says: "Where an agent sold the goods to his own creditor, thus paying his own debt, the title of the owner is not thereby divested, and he may bring replevin against even a subsequent purchaser without notice."
Stearns on the Law of Suretyship (1903), treating of blank endorsement, as by Blackston of the Boatmen notes, or by Blackston of these notes pledged, announces the law to be: 66 Penn. 481.
Bolles' Modern Law of Banking, volume 1, chapter XI, pages 392 and 395, cites decisions from the supreme courts of Alabama, Kentucky, Federal Reports, United States, New Jersey, Massachusetts, Vermont, Louisiana, Maine, and Washington, to sustain the proposition that: "When two banks had mutual dealings for two years, knowledge of which the directors could have obtained by examining the books, they must be presumed to have had knowledge of the transaction."
Ogden on Negotiable Instruments (1909), Sec. 55. We have shown that defendant had actual knowledge, or could have had by ordinary law-imposed inquiry and is chargeable with it independently of the significant notation on the back of one of the notes. In Sec. 236 (1907), the same author says: And in the next section he lays down the rule to be, "So, where assignees occupy the same position as the payee would, had he sued, the rule permitting a defense of failure of consideration, as between the original parties, would apply." At the end of the same section the author states that "the want of consideration, or the failure of consideration for negotiable paper between the parties to it, constitutes no defense against it in the hands of a bona fide endorsee or holder without notice or knowledge of any facts tending to invalidate the note." Transpose this reading without changing the meaning and we have, the endorsee or holder with notice or knowledge of any facts tending to invalidate the note, is mala fide and cannot stand.
For a circumstance showing the necessity for inquiry, in a South Dakota case, reported in 29 L. R. A. (N. S.) (1908) 351, a note on page 356, says that, "The offer for sale by a stranger residing outside of the state, to an individual, of a note, endorsed to him without recourse, which had been procured from the maker by fraud, at a place other than that of the maker's residence, is a circumstance calculated to arouse suspicion in the mind of a prudent person, so that his purchase without inquiry may destroy his bona fides and prevent his enforcing the note against the maker." See, also, McKnight v. Parsons, 22 L. R. A. (N. S.), 718, 721; 63 Am. Dec. 633; Iowa, Arkansas, New York, Delaware, Georgia, Alabama, Vermont, Tennessee, Connecticut, Massachusetts, South Dakota, Minnesota; 11 Wall. (U.S.); 104 U.S.; 2 Ency. Evid., 524, note 48; Am. & Eng. Ann. Cases, 660; 128 U.S. 590; 153 and 200 Ind; Beach v. Nevins, 162 F. 129, 18 L. R. A. (N. S.) 288.
Knowledge of the officers of a bank is imputed to the bank. That of the president always. 133 U.S. 566; 110 U.S. 7-15; 130 U.S. 267; 3 Cyc. 122, citing 101 U.S. 320; 1 Pet. 299; 15 Wall. 165; 10 Wall. 604; 186 U.S. 342, reaffirmed in 205 U.S. 527; 145 U.S. 435-443; 150 U.S. 1063; 147 U.S. 59; 94 U.S. 429; 150 U.S. 231; How. U.S. 343; 141 U.S. 50-71; Harkness v. Russell, 118 U.S. 663.
The specification of a particular consideration in a promissory note plain or sealed, may be varied by good evidence and the real consideration shown. Palen v. James, 45 Miss. 129, Meyer v. Casey, 57 Miss. 615, Cook v. Blackbourn, 57 Miss. 689.
After all, aside from set-offs and defenses before notice our laws differ very little from the Law Merchant. The statute in force at the time of the negotiations now in question reads as follows:
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