Pollock & Bernheimer v. Simmons Brothers
| Decision Date | 06 June 1898 |
| Citation | 76 Miss. 198,23 So. 626 |
| Parties | POLLOCK & BERNHEIMER ET AL. v. SIMMONS BROTHERS ET AL |
| Court | Mississippi Supreme Court |
November 1898
FROM the chancery court of Prentiss county HON. BAXTER MCFARLAND Chancellor.
The appellants, Pollock & Bernheimer and others, were complainants in the court below. Simmons Brothers and others including S. M. Barnett, now appellees, were defendants in the chancery court. The decree of that court was in favor of the defendants, and the complainants appealed. The facts are sufficiently stated in the opinion of the court.
The anti-commercial statute referred to is as follows:
Decree affirmed.
Mc Willie & Thompson, for appellants.
Barnett was not an innocent purchaser, for several reasons:
1. He neither paid, nor did he agree to pay, full value for the goods. The sale to him, in part at least, was voluntary and a gift. It will be seen that the store fixtures, worth $ 175 were confessedly a gift. But the case is worse than that; he purchased, according to the undisputed estimony, something over $ 7, 200 worth of goods, and he did not pay, or assume to pay, counting both payment and assumptions, but $ 5, 204 therefor. The conveyance to him, therefore, was voluntary and a gift to the extent, speaking in round, but approximately correct numbers, of $ 2, 000. It will be noted that there is not one particle of evidence in the entire record to show that the goods were not worth fully their invoice price, $ 7, 200; this court cannot know judicially that a particular stock of goods has depreciated from its invoice price.
2. Barnett was not an innocent purchaser because he had not, when this suit was begun against him, paid for his purchase. He had given his notes for amounts largely in excess of the aggregate of complainants' demands, and these notes, too, were, and are, within our anti-commercial statute (§ 3503, code of 1892), and are to be considered and governed by the terms of that statute. The notes were made in Mississippi, payable in Mississippi, are payable to the order of the respective payees, and in every way fall within said anti-commercial statute. If payment is essential to constitute a purchaser an innocent one, then, surely, under our laws the giving of notes which the maker can successfully defend against, does not constitute a buyer such a purchaser. The giving of such notes is not the equivalent of payment. The rule seems to be that, in order to constitute an innocent purchaser, payment must have been actually made or the purchaser must at least have assumed an irrevocable obligation to pay. 2 Pomeroy's Equity Jurisprudence, sec. 751. The notes given by Barnett to Simmons Bros., were not, and are not, irrevocable obligations. They were and are within our statute, and the same defense can be made to them in the hands of subsequent holders which could have been made to them if they were sued upon by Simmons Bros. Could these notes be successfully defended against if complainants succeed in this cause? If they had never been transferred by Simmons Bros., could they, in case complainants succeed, recover on the notes? They could not, most assuredly. It would be a perfect defense to Barnett, when sued on the notes by Simmons Bros., to show that there was a failure of consideration, or a partial failure of consideration, in this, that the notes were given for goods sold by the payees to the maker, and that the payees at the time did not own the goods, or had sold them in fraud of creditors, and that the maker had to pay a stranger for the goods or return them to him. The notes given by Barnett in place, or in renewal, of the ones given by him to Simmons Bros., stand on the same plane. The only question in this case necessary to be decided is whether Barnett gave irrevocable obligations. We but confuse the case if we go into the matter of the good faith of Mrs. Dalton and of Allen, guardian, the assignees of the notes. Whether they were innocent purchasers of the notes within the meaning of the commercial law is aside from the case. The only question is, or can be, as to their rights as assignees under our statute. Their rights, as against Barnett, are governed and controlled by the statute, and, of course, the statute determines the character of Barnett's obligations as imposed by the notes. The following authorities bear us out in our position that the giving of notes under our anti-commercial statute does not, and cannot, constitute Barnett an innocent purchaser. Bear in mind, in reading these authorities, that the word "negotiable, " as applied to commercial paper, means negotiable in the sense of the law merchant. Barringer v. Nesbitt, 1 Smed. & M., 22; McMurran v. Soria, 4 How. (Miss.), 154; Parhan v. Randolph, 4 How. (Miss.), 435; Allen v. Commercial Bank, 3 Smed. & M., 448; Bank of Meridian v. Strauss, 66 Miss. 479; Tillman v. Hiller, 22 Am. St. R., 77.
If Mrs. Dalton and Allen are preferred creditors, they are preferred by an instrument which gives character to their rights--that is to say, they are preferred by the assignment of the notes to them. Under the law, their rights under this assignment cannot rise superior to the rights of Simmons Brothers, and the whole fabric predicated of the idea of the preference of one creditor over another must fall to the ground because of the very terms of our statute.
It is said by counsel that we have no right to make defense for Mr. Barnett on his note. We do not attempt to do anything of that kind. We do not care whether Barnett makes defense to the notes or pays them. The question here is his character as a bona fide or mala fide purchaser. We have a right to inquire into any matter that throws light upon this question of his character, and that is all that we ask in this case.
Blair & Anderson, on the same side.
A bona fide purchaser is (1) one who purchases without notice of the bad intent of the seller, and (2) he must be a purchaser for value, and (3) have paid the purchase money before notice of the fraudulent purpose of the seller. Wait on Fraudulent Conveyances, sec. 369, p. 484; 8 Am. & Eng. Enc. L. (1 ed.), 756, and notes.
We will notice the third element, viz., he must have paid the purchase money before notice of the fraudulent purpose of the seller. We concede that it is not required of him that he shall have paid the actual cash, to be protected. If he is a purchaser without notice for value and has irrevocably bound himself to pay the purchase money, he will be protected. Barnett had not paid the purchase money at the time the bill in this case was filed. He lacked the amount of the note transferred to Allen, in the place of which another had been executed, and of the note transferred to Mrs. Dalton. The question is, had he irrevocably bound himself to pay these two notes? To sustain the negative of this proposition, we refer to the following: 2 Pomeroy's Equity, secs. 750, 751, and notes; Tillman v. Hiller, 22 Am. St. Rep., 77; Bank v. Strauss, 66 Miss. 479. We refer to these authorities in connection with our anti-commercial statute, code of 1892, § 3503. They are decisive of this case. To hold that Barnett had irrevocably bound himself to pay these notes to Allen and Mrs. Dalton at the time the bill was filed in this case--that is, at time the fraud of the seller was brought to his notice--would overrule Bank v. Strauss, and other cases along the same line by our court, and nullify our anti-commercial statute. Tillman v. Hiller, supra, is a case almost on all-fours with the one in hand.
A bill is maintainable, under § 503, code of 1892, by creditors without judgment against a purchaser from a fraudulent debtor in a case where any one of the elements necessary to constitute a bona fide purchaser is absent. It is not necessary that all concur. In this case the third element is absent--that is, Barnett had not paid all the purchase money, and neither had he bound himself irrevocably to pay it. We are going on the idea now that the Allen and Dalton notes had been transferred to them in absolute payment and extinguishment of the guardianship debt, and the note of Simmons Bros. to Mrs. Dalton, which, however, we contend is not a fact, but, on the contrary, they were only held by them as collateral security.
Now under § 503 of the code, the creditors of Simmons Bros. got a lien on the goods bought by Barnett from them, from the filing of their bill, to the amount of the purchase money unpaid, or which Barnett had not irrevocably bound himself to pay. So the case stands this way: The...
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