Webster v. Carter

• Decision Date: 19 June 1911
• Citation: 138 S.W. 1006,99 Ark. 458
• Parties: WEBSTER v. CARTER
• Court: Arkansas Supreme Court

138 S.W. 1006

99 Ark. 458

WEBSTER v. CARTER

Supreme Court of Arkansas

June 19, 1911

Appeal from Johnson Circuit Court; Hugh Basham, Judge; reversed.

Judgment reversed and cause remanded.

George O. Patterson and T. D. Crawford for appellant.

1. No defense was made out against the note. There was no offer to restore the horse and rescind the sale. A purchaser will not be permitted to retain the property and defend against the payment of the purchase money for want of consideration on the ground of fraud. 5 Ark. 395; 46 Ark. 33. The testimony shows that appellee was informed of the horse's age at the time he executed the note. There can be no rescission for a partial failure of consideration. 21 Ark. 342; Benjamin on Sales, 396, 397. Where the buyer receives what he really intended to buy, although the thing bought should turn out to be worthless, there is no failure of consideration. The doctrine of caveat emptor applies. Benjamin on Sales, 395; 2 Mechem, Sales, §§ 832, 1311; 10 Wall. 383.

2. It is not material whether appellant purchased the note with knowledge of appellee's defense or not, since the testimony is undisputed that J. B. Reynolds was a bona fide purchaser for full value. He acquired the rights of an innocent purchaser, and could transmit those rights to one with notice of the maker's defenses. 94 U.S. 278; 132 U.S. 117; Norton or Bills and Notes. 326 and cases cited.

Webb Covington and Charles Jacobson, for appellee.

Both J B. Reynolds and appellant took the note subject to any equities that existed between the maker and the original payee. The note sued on was made payable to the order of L C. Reynolds, not to bearer, and could be transferred so as to cut off the defense of the maker only by his, Reynolds's indorsement, 101 U.S. 68; 5 F. 403; 56 F. 854; 59 F. 896; 118 N.Y. 355; 92 Ind. 309; 34 Kan. 230. Webster could not properly institute this suit in his own name. The mere sale and delivery of a promissory note payable to order, without indorsement or other written assignment, does not give the holder a right of action in his own name. 1 Dall. 369. Where the statute requires suit to be brought in the name of the real party in interest, plaintiff must show himself to be such, and mere legal title is not sufficient. 8 Cyc. 68, 70, 71; 11 Ark. 105; 65 Ark. 209; 66 Ark. 312.

OPINION

MCCULLOCH, C. J.

The defendant, F. C. Carter, purchased a stallion from L. C. Reynolds, and executed to the latter a negotiable promissory note for $ 250 to cover part of the purchase price. Reynolds sold and delivered the note to his son, J. B. Reynolds, for a valuable consideration, and, as it is claimed, before maturity, and the latter sold and delivered the note, before maturity, to the plaintiff, H. R. Webster. There was no indorsement made on the note by either L. C. Reynolds or J. B. Reynolds, nor was there any transfer in writing. The transfer was only by delivery. Webster instituted this action against Carter on the note, and the latter defended on the alleged ground that Reynolds, the vendor, had falsely represented the age of the horse, and that he had promised to furnish registration papers showing that the horse had been registered but failed to do so. On a trial of the case below, there was a verdict and judgment in favor of the defendant, and the plaintiff appealed.

The first question urged by the defendant is that, the note being payable to the order of Reynolds and not being assigned in writing, the plaintiff has no right to maintain an action in his own name. This was undoubtedly the rule at common law, and prior to the adoption of the Code this court so decided. Biscoe v. Sneed, 11 Ark. 104; Sumpter v. Tucker, 14 Ark. 185. But this court, in Heartman v. Franks, 36 Ark. 501, held that the "real owner of a promissory note may sue on it in his own name without joining the payee, though he holds only by delivery and not by written assignment," basing the conclusion on the provision of our statute to the effect that "every action must be prosecuted in the name of the real party in interest." Kirby's Digest, § 5999.

The next question is, whether the plaintiff, being the owner of the note by sale and delivery without written indorsement, can be treated as an innocent purchaser for value under the law merchant. The authorities appear to be unanimous in holding that one who takes a negotiable note, payable to order, by delivery merely, and without written assignment, is not an innocent purchaser, and takes subject to all equities between the original parties. Trust Co. v. National Bank, 101 U.S. 68, 25 L.Ed. 876; 2 Randolph on Commercial Paper, §§ 787-789. Plaintiff therefore took the note sued on subject to any defense which the maker had against the original payee.

It is insisted, however, by learned counsel for the plaintiff that even though the plaintiff be treated not as an innocent purchaser, the evidence is insufficient to sustain the defense. The defendant testified that L. C. Reynolds, his vendor, represented to him, at the time of the sale, that the horse was only nine years old. He admitted, however, that before the sale was consummated he ascertained, from a statement made by Reynolds in his...