Newell Contracting Company v. McConnell

• Decision Date: 22 January 1923
• Docket Number: 108
• Citation: 246 S.W. 854,156 Ark. 558
• Parties: NEWELL CONTRACTING COMPANY v. MCCONNELL
• Court: Arkansas Supreme Court

246 S.W. 854

156 Ark. 558

NEWELL CONTRACTING COMPANY v. MCCONNELL

No. 108

Supreme Court of Arkansas

January 22, 1923

Appeal from Cross Chanecry Court; A. L. Hutchins, Chancellor affirmed.

Decree affirmed.

L C. Going, for appellant.

The chancery court was without jurisdiction. 56 Ark. 476; 20 S.W 402. Where the remedy at law is complete, a party is not entitled to come into equity for relief. 7 Ark. 520; 13 Ark 630; 26 Ark. 649; 27 Ark. 77; 48 Ark. 331; 30 Ark. 579; 14 Ark. 50; 141 Ark. 649. The cause should have been transferred to the circuit court. 27 Ark. 585.

The proof is wholly insufficient to show that the bank was a holder of the note for value. In order to constitute one a bona fide holder, he must be a purchaser for value. 8 Cyc. 470, § 687; C. & M. Digest, § 7818; 131 Ark. 514.

Cary & Vorder Bruegge and Hughes & Hughes, for appellee.

The appellant having failed to move a transfer of this cause in the trial below, that question cannot be raised here for the first time. C. & M. Digest, § 1041; 57 Ark. 589; 122 Ark. 104; 141 Ark. 155.

One who takes negotiable paper before maturity as security for a debt, without notice of any defect, is a bona fide holder. 94 Ark. 387; 102 Ark. 45; 102 Ark. 422; 109 Ark. 107; 126 Ark. 420.

A preexisting debt constitutes value. C. & M. Digest, § 7791. The debt exists until the note is paid. 17 C. J.; 53 N.J.L. 200.

OPINION

SMITH, J.

On September 25, 1920, appellant company executed its negotiable promissory note of that date, due December 10th after date, for $ 2,500, to the order of H. A. Morrison; and this is a suit to collect it. The note was dated at Earle, Arkansas, and was payable at the Bank of Commerce in that city. The plaintiff is the receiver of the People's Bank & Trust Company, a defunct banking corporation of Memphis, Tennessee. The execution of the note by appellant is admitted, but a failure of consideration is alleged, and the answer further recites that the bank was not an innocent holder of the note.

Two preliminary questions are raised which will be disposed of before considering the case on its merits.

The first is, that the suit should have been brought at law. This objection is fully answered by saying that no motion was made to transfer the case. Secs. 1041, 1043, C. & M. Digest; Hayes v. Bishop, 141 Ark. 155, 216 S.W. 298.

The second proposition is that the receiver shows no right to maintain this suit. In answer it may be said that Portlock, the president of the bank, testified without objection that the bank failed and closed its doors, and appellee McConnell was appointed receiver and took charge of its affairs and is now administering its assets.

Upon the merit of the case it may be said the note was without consideration. No contention to the contrary is made by the receiver. But it is also insisted that the bank was not an innocent purchaser of the note. The insistence is that the bank received the note for collection for Morrison's account, and not as a purchaser.

The testimony of Portlock is unequivocal to the effect that the bank took the note as collateral to the note of Morrison, which it then held, without notice of any defense to it. Morrison had been indebted to the bank for some time, and on September 12, 1920, renewed his note for $ 2,750, the same being made payable four months after date. At that time the bank advanced no additional consideration.

It is urged that Portlock was an uncandid witness and that he should have explained the transaction in greater detail. He appears to have answered all the questions fully which were asked him, both on his direct and cross-examinations.

This court is fully committed to the doctrine that one who takes negotiable paper, before maturity, as security for a debt, without notice of any defect therein or defense thereto, receives it in due course of business and is a bona fide holder. The following cases have so held: Exchange Natl. Bk. v. Coe, 94 Ark. 387, 127 S.W. 453; Haldiman v. Taft, 102 Ark. 45, 143 S.W. 112; Miles v. Dodson, 102 Ark. 422, 144 S.W. 908; Exchange Nat. Bank v. Steele, 109 Ark. 107, 158 S.W. 969; Beard v. Bank of Osceola, 126 Ark. 420, 190 S.W. 849.

Appellant says the cases cited were all decided or arose before the enactment of the negotiable instruments law (secs. 7760 et seq., C. & M. Digest; act Feb. 21, 1913), and that sec. 52 of this act (which is sec. 7818, C. & M. Digest) has changed the rule as announced in the cases just cited. This sec. 7818 of the Digest defines a holder in due course, and the third paragraph of the section requires that he shall have taken the paper in good faith and for value. The argument is that, under the negotiable instruments law, value must be paid at the time the note is taken, and that the giving or security for a preexisting debt is not value within the meaning of the law. We do not so interpret the statute. Sec. 25 of this act (which is sec. 7791, C. & M. Digest) defines value as follows: "Sec. 7791. Value is any consideration sufficient to support a simple contract. An antecedent or preexisting debt constitutes value, and is deemed such, whether the instrument is payable on demand or at a future time."

This definition accords with our cases cited above.

In the case of Exchange Nat. Bank v. Coe supra, this court first had occasion to determine whether one who receives a negotiable note, before maturity, as collateral security for a preexisting debt, was a holder for value in due course of business. The authorities were examined and were found to be in hopeless conflict, as stated in the opinion. Without attempting to determine where the weight of authority was, it was said that the trend of modern decisions was in favor of the rule adopted in the Federal courts as tending to promote uniformity in the different jurisdictions. This was said to be important, in view of the increased dealings between the citizens of the different States, and because the courts of the National Government did not follow the decisions of the State courts on the question. Upon consideration of the facts stated, this court decided that the indorsee of negotiable paper, taken before maturity, as collateral security for an antecedent indebtedness, in good faith and without notice of defenses which might have...