Miles v. Dodson

• Citation: 144 S.W. 908,102 Ark. 422
• Parties: MILES v. DODSON
• Decision Date: 26 February 1912
• Court: Supreme Court of Arkansas

144 S.W. 908

102 Ark. 422

MILES v. DODSON

Supreme Court of Arkansas

February 26, 1912

Appeal from Union Chancery Court; James M. Barker, Chancellor affirmed.

Decree affirmed.

R. G Harper, for appellant.

1. Dodson acquired the note after maturity. It was dishonored and put the purchaser on notice of all defenses. 38 Ark. 127; 30 Id. 590.

2. Appellee had no legal right, with his father, to negotiate the note to the Ouachita Valley Bank. 179 Ill. 599; 46 L. R A. 753.

W. E Patterson, for appellee.

1. Appellee is a bona fide holder, in due course of business, without notice, before maturity and for value. 41 Ark. 418; 42 Id. 22; 65 Id. 204; 94 Id. 387; 7 Cyc. 932, 928, 938; 65 Conn. 544; 1 Dan. Neg. Inst. p. 776, 801; 46 L. R. A. 784.

2. Payment to one not the legal holder of the note and without authority to collect avails nothing as a defense. 21 Ark. 393; 89 Id. 448; 55 Id. 347; 75 Id. 170; 1 Dan. Neg. Inst. 758; 46 L. R. A. 769; 86 Ark. 439.

OPINION

FRAUENTHAL, J.

This was an action upon a note originally instituted in the circuit court by C. W. Dodson against F. W. Miles and the other makers thereof. The note is a negotiable instrument for $ 575.25, dated August 20, 1903, and due January 1, 1905 payable to the order of E. H. Smith. The plaintiff claimed that he was an innocent purchaser of the note. The defendants alleged payment of the note, and that plaintiff had acquired it after its maturity and after notice that it had been paid. They also alleged that the note had been assigned by said E. H. Smith to Dodson & Sons, a partnership, of which the plaintiff was a member, as collateral to secure a principal note executed by said Smith to said partnership; that a great many other notes and shares of stock had at the same time been transferred to said partnership as collateral to secure said principal note, and that the partnership had collected on the other collateral a sufficient amount to pay the principal note. Without objection, the cause was transferred to the chancery court, and, by the consent of all parties, that court appointed a master to make and state an account of all payments which had been made and all sums which had been collected on all said collateral notes and shares of stock which had been transferred by said Smith to Dodson & Son, and also of all payments made by the defendants upon the note involved in this suit. Testimony of a number of witnesses was taken by the master relative to these matters, and he made a report in which he set out the various notes and shares of stock which had been transferred by said Smith to Dodson & Son to secure his principal note to them, and also the various sums which had been collected thereon. From this he found that there was still due and unpaid on said note executed by Smith to Dodson & Son the sum of $ 1,781.89. The master further found that in March, 1904, the defendant Miles had paid to said Smith the full amount of the note herein sued on. He thereupon reported that plaintiff was not entitled to recover on said note. The chancellor approved the findings of fact made by the master, but overruled the conclusion of law at which he arrived. He found that the plaintiff was an innocent purchaser of the note before its maturity, and thereupon rendered judgment in his favor for the amount thereof.

It appears that on or about September 1, 1903, said E. H. Smith became or was then, indebted to Dodson & Son in the sum of $ 7,000, and executed his note therefor to them. In order to secure the payment of that note, he transferred to Dodson & Son on the same day a number of notes of various parties which were payable to him and also some shares of stock in two or more corporations. Amongst the notes thus transferred as collateral to Dodson & Son was the note upon which this suit is instituted. At the time of making said transfers, Smith also executed a written power by which he authorized said Dodson & Son, or their assigns, to sell said collaterals, or any of them, upon default being made in the payment of said principal note executed by him to them. The testimony tended further to prove that shortly afterwards Dodson & Son placed these collateral notes in the hands of a firm of lawyers for collection. These attorneys testified that they used every reasonable effort to collect these notes and succeeded in collecting about $ 1,000 thereon by August, 1904. On September 1, 1904, Dodson & Son had a settlement with said Smith of the collections which had been made by them upon the various collateral notes, which, being credited upon said principal note, left a balance due thereon of $ 6,000. In renewal of the balance thus found due upon said note, Smith, on said day, executed to Dodson & Son his note for $ 6,000, due January 1, 1905. The note herein sued on, which had been transferred as collateral to secure the payment of the original note for $ 7,000, was still retained by Dodson & Son as collateral to secure the payment of the renewal note for $ 6,000. Some of the other collateral notes were also retained by them, and other notes were transferred to them as collateral for the payment of the renewal note. About that time Dodson & Son borrowed from, or became indebted to, the Ouachita Valley Bank in the sum of $ 4,346.62, and executed their note to it therefor, and in order to secure same transferred to the bank the said note for $ 6,000 executed to them by Smith, and also the collateral notes attached thereto, amongst which was the note herein sued on. Later, and in February, 1905, Dodson & Son having made default in the payment of their note to the bank, the collateral notes were sold by the bank under the power granted by Smith to Dodson & Son and their assigns. At this sale the plaintiff became the purchaser of the note herein sued on. The testimony upon the part of the defendant tends to prove that in March, 1904, F. W. Miles paid the amount of the note herein sued on to said Smith for the purpose of satisfying it. The note was not then in the possession of Smith, but was then held by Dodson & Son, who had no knowledge of this payment. In excuse for or explanation of paying the note to Smith without knowing that he was the holder thereof, or for failing to demand the note at the time of its payment, Mr. Miles testified that "it was a slack piece of business, I guess, being the only reason I know."

It is urged by counsel for defendants that the plaintiff purchased the note from the bank in February, 1905, which was after its maturity, and, on that account, was not an innocent purchaser thereof, but took it subject to all defenses that the makers had against the original payee, Smith; and they cite, to sustain this contention, Nisbett v. Brown 30 Ark. 585, and Sorrells v. McHenry, 38 Ark. 127. But under the facts of this case we do not think that the makers can resist the payment of this note by any defense which they might interpose to it in the hands of the original payee, even if it should be held that the plaintiff obtained the note from the bank after its maturity. The note had been transferred by the payee, Smith, to Dodson & Son in ...