Thompson v. Fourth Nat. Bank

• Decision Date: 21 January 1926
• Docket Number: 3 Div. 742
• Citation: 108 So. 69,214 Ala. 452
• Parties: THOMPSON v. FOURTH NAT. BANK OF MONTGOMERY.
• Court: Alabama Supreme Court

108 So. 69

214 Ala. 452

THOMPSON v. FOURTH NAT. BANK OF MONTGOMERY.

3 Div. 742

Supreme Court of Alabama

January 21, 1926

Rehearing Denied April 22, 1926

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Action by the Fourth National Bank of Montgomery against J.A Thompson. Judgment for plaintiff, and defendant appeals. Affirmed.

Rushton Crenshaw & Rushton, Hill, Hill, Whiting, Thomas & Rives, and Ludlow Elmore, all of Montgomery, for appellant.

Weil Stakely & Vardaman and Steiner, Crum & Weil, all of Montgomery, for appellee.

MILLER J.

This is a suit by the Fourth National Bank of Montgomery, a corporation, against J.A. Thompson on a promissory note for $45,000, made by him solely to this bank, payable on demand, with interest thereon, waiving exemptions as to personal property and agreeing to pay a reasonable attorney's fee if it was incurred in its collection, and this is claimed in the complaint. There is only one count in the complaint. A copy of the note sued on is attached to the complaint, referred to therein as an exhibit, and is made thereby a part thereof. The defendant filed 26 special pleas to the complaint. Demurrers of plaintiff, containing about 97 grounds, to each plea were sustained by the court. The defendant refused to file any further pleas. The jury returned a verdict for $50,820 in favor of the plaintiff, and from a judgment thereon by the court this appeal is prosecuted by the defendant.

This promissory note is in the ordinary form, with collateral agreements, among which appear the following:

"To secure the prompt payment of this note or any other liability or liabilities of the undersigned to said bank whether now existing or hereafter contracted, now due or hereafter to become due I hereby transfer and deliver to the said bank with full title thereto 450 bales of cotton the average grade of which is not below middling, and the average weight of which is not below 500 pounds per bale, stored in compresses or under B/L warehouse as per receipts therefor herewith delivered to said bank, and valued at $55,000.00."

This note also contains the following representation and covenant therein by the defendant:

"And we represent unto said bank and covenant that I have full power to dispose of said cotton as aforesaid, and that the same is not incumbered nor affected in any way whatever by which the right and title of said bank can be altered, defeated or impaired."

The note in this suit between the plaintiff, the original payee, and the defendant, the maker, is subject to the same defenses as if it were nonnegotiable. Section 9084, Code 1923. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value. Section 9052, Code 1923.

Pleas numbered 1 and lettered "d" and "j" set up that the note was signed by defendant, but was not to be delivered to the plaintiff until the Hall-Beale Company placed with the plaintiff securities representing 450 bales of cotton as collateral to secure the note; and this collateral security was never deposited with the plaintiff. It is true, under the statute (section 9044, Code 1923), every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. And as between the immediate parties, the delivery, in order to be effectual, must be made either by or under the authority of the party making it, and in such case the delivery may be shown to have been conditional. But these pleas fail to allege plaintiff had not performed its part of the contract by delivering to the defendant the $45,000, the consideration of the note. The defendant cannot avoid the contract by setting up a breach of a condition as to its delivery and retain the $45,000 received by him from the plaintiff by virtue of the contract. These pleas are defective and insufficient because the defendant fails in each to allege, either that he did not receive the consideration, $45,000, mentioned in the contract from the plaintiff, or that he has returned to the plaintiff this amount of money. If defendant received the consideration mentioned in the contract from plaintiff, he should restore or offer to restore it before attempting to avoid the contract, because it was delivered contrary to a condition. Norwood v. Stinnett, 80 So. 431, 202 Ala. 349; Parker v. Bond, 25 So. 898, 121 Ala. 529; 21 C.J. p. 1209, § 211.

There is no agreement between the parties alleged in either plea that upon nonpayment of the note the plaintiff was obligated to exhaust the collateral first before holding Thompson personally responsible on the note. As specially applicable, we find this text in 31 Cyc. 868, B-1:

"In the absence of a special agreement, the pledgee is under no obligation to surrender or enforce collaterals held by him before suing on the principal obligation."

These defects and probably others appear in these pleas, 1, "d" and "j": these defects named were pointed out by the demurrers, and the court properly sustained the demurrers to each of the pleas.

Pleas (2)(a), 3, 4, and C aver plaintiff converted to its own use or the use of another collateral securities representing 450 bales of cotton, to the damage of defendant, which defendant offers as a set-off or recoupment against the demand of plaintiff. In 31 Cyc. 869, b, we find the following general text:

"As a general rule the pledgor is entitled to set-off against the amount of the debt any profits or proceeds realized by the pledgee from the collateral and any loss resulting from the negligence, wrongful sale of, or other wrongful act of the pledgee in regard to the collateral," [108 So. 71] --which is supported in part by Tatum v. Commercial Bank & Trust Co., 69 So. 508, 193 Ala. 120, headnote 5, L.R.A.1916C, 767. But these pleas are each insufficient. Neither avers that the securities converted were the property of the defendant. There is no averment in either plea showing the cotton when converted by the plaintiff was the property of the defendant and was held by plaintiff as collateral security for this note when converted. The cotton under these pleas, when converted by plaintiff, may have been held by the plaintiff as collateral security for debts of others, and not for the debt evidenced by the note of the defendant. It appears that Hall-Beale Company was the pledgor and owned the collateral and not defendant. Nor do these pleas aver the loan was in fact made to the Hall-Beale Company, and not to the defendant. Hence the court did not err in sustaining the demurrers of plaintiff to each of these pleas. Form 26, § 9531, Code 1923; Tatum v. Commercial Bank & Trust Co., 69 So. 508, 193 Ala. 120, h.n. 5, L.R.A.1916C, 767, and authorities supra.

Pleas 5, 6, 7, and 8 are insufficient and defective because they fail to show any injury could result to defendant from the false representations or breach of the agreement by plaintiff. They fail to allege any facts showing a special agreement by plaintiff to enforce collection out of the collaterals before holding defendant liable on the principal obligation, and the facts alleged show no title or interest of defendant in the collaterals, and no damage under the agreement for breach of the contract by plaintiff could result to the defendant. "Fraud and damage must concur, and neither unaccompanied by the other, is a ground of defense." Rice v. Gilbreath, 24 So. 421, 119 Ala. 424, and authorities supra.

In pleas "a" and "h," defendant seeks damages for having been induced to enter into the contract evidenced by the note by false and fraudulent representations made by the president of the Hall-Beale Company and by the vice president of plaintiff. Each plea sufficiently names the officer of the plaintiff and of the Hall-Beale Company, who made the representations. It states the vice president of plaintiff, the officer who had charge of making said loan made the representation, and the president of the Hall-Beale Company made the representation. They are sufficiently identified by the plea. Pinkston v. Boykin, 30 So. 398, 130 Ala. 483; Montgomery v. Chemical Nat. Bank, 96 So. 898, 209 Ala. 585. This plea alleges the Hall-Beale Company prior to the execution of the note owed defendant about $45,000. It was secured by some paper collaterals. Defendant was pressing for its collection Hall-Beale Company could not borrow money direct from plaintiff, but could do so through defendant. Hall-Beale Company agreed with defendant to place to his account with plaintiff securities representing 450 bales of cotton to be held by the plaintiff for account of de...