Texas Banking & Insurance v. Turnley

Stayton, Associate Justice.— It is not questioned that the bond in controversy was the separate property of Mrs. Turnley, and such it will be considered. This being true, if it was deposited by her husband with the bank for the purpose, and under the agreement claimed by it, which, under the verdict, will be assumed to be true, then the act of the husband was wrongful as to the wife and without legal authority. It is urged that no title to the bond passed to the bank, and that it had no right to hold it, even in pledge, as a security for any sum which the bank may, under the contract which it asserts was made with Turnley, have advanced to him on the faith of the pledge of the bond, and this for the reason that the statutes of this — 368 — state, it is urged, in terms provide the sole mode by which any character of separate property of a married woman may be conveyed, which not having been complied with, no right or title vested in the bank through the unauthorized act of the husband. It is claimed that the husband had no power to transfer the bond in sale nor to place it in pledge and thus bind the wife; that the wife joined by her husband could do this, only in the mode prescribed by the statute for the conveyance of the separate property of a married woman. Whether this be true or not in reference to negotiable instruments which pass by delivery, we need not in this cause consider. There are many reasons why the statutes, applicable to the transfer of other separate property of married women, should have no application to the transfer of such negotiable instruments passing by delivery as they may own, and authorities are to be found holding that as to such instruments statutes similar to those of this state, in reference to the conveyance of the separate property of married women, have no application. Work v. Glaskins, 33 Miss., 539; Cobb v. Duke, 36 Miss., 62; Robertson v. Wilcox, 36 Conn., 429. The great mass of the business of the commercial world is now transacted through negotiable securities, which embrace many classes of paper other than promissory notes and bills of exchange, among which are coupon bonds when negotiable in form. Daniel on Neg. Inst., 1500, and authorities cited. Such was the character of the bond in controversy, which carried on its face the promise of its maker to pay at a given time to its bearer the sum named in it. This being true, the power of the husband of Mrs. Turnley rightfully to transfer the bond or place it in pledge becomes of but little, if any, importance, if the bank in legal effect was an innocent purchaser. The fact that the pledge may have been made by the husband cannot surely make it less effective than if made by a stranger. The ordinary rule is, that no person can transfer to another greater right in personal property than such person has; but there is a well recognized exception to this rule, a disregard of which would work incalculable injury to the commercial world. Kegotiable, securities furnish this exception, and, in reference to them, rules are wisely adopted which are applicable to no other personal property; and however wrongful may be the act of the person by whom such instruments are passed to an innocent purchaser, he is protected under well settled rules, notwithstanding the transferer may have had no legal right to transfer. — 369 — In such cases legal right and real power to convey become unimportant ; and he who takes, under given and well recognized conditions, from one who has apparent power is as fully protected in his right to such paper as though he held under the real owner. The principles applicable to the right of a bona fide purchaser of negotiable paper, as found in the adjudications of the courts, are thus stated by an elementary writer: “ That the purchaser or holder of a negotiable instrument, who has taken it, (1) bona fide; (2) for a valuable consideration; (3) in the ordinary course of business; (4) when it was not overdue; (5) without notice of its dishonor; and (6) without notice of facts which impeach its validity as between antecedent partios, has a title unaffected by those facts, and may recover on the instrument, although it may be without any legal validity as between the antecedent parties; as, for example, though it was without consideration originally, or was subsequently released or paid, and even though it was originally obtained by fraud, theft or robbery.” “ That the possession of a negotiable instrument payable to bearer, indorsed in blank, or specially indorsed to holder, carries title with it to the holder. The possession and title are one and inseparable.” Daniel on Negotiable Instruments, 769a; Murray v. Lardner, 2 Wall., 110; Goodman v. Simonds, 20 How., 365; Texas v. White, 7 Wall., 735; Hotchkiss v. Bank, 21 Wall., 359; Greenwell v. Haydon, 78 Ky., 332; Coddington v. Bay, 20 Johns., 644. One who takes such securities under like circumstances, as a collateral security for present or future advances, is entitled to the same protection. Goodman v. Simonds, 20 How., 365; Texas v. White, 7 Wall., 735; Bank v. Hoge, 35 N. Y., 68; Stoddard v. Kimball, 6 Cush., 469; Bank v. Chapin, 8 Metc., 42; Bank v. Fowler, 36 Ohio St., 525; Buchanan v. Bank, 78 Ill., 501; Ringling v. Kohn, 4 Mo. App., 61; Fisher v. Fisher, 98 Mass., 303; Colebrobke on Collateral Securities, secs. 8, 17, 43, 65, 70, 194, and authorities cited under the several sections; Daniel on Neg. Inst., 824-833, and authorities cited in notes. The bond in question was payable to bearer, and title thereto would pass by its delivery; if taken under such a contract as is alleged by the bank, the. taking was bona fide; it was in the ordinary course of business, and, so far as the record shows, without notice of any fact which would even throw suspicion on the title of Turnley; and if-, taken for a valuable consideration paid by the bank, before the maturity of the instrument, or to secure a liability incurred before that time, its right to the paper as a pledge must be held invulnerable, to — 370 — the extent necessary to protect the bank for all advances made to Turnley prior to the maturity of the paper. It is alleged, and there is evidence tending to show, that the bank received the bond with others about the 22d' of December, 1873, under an agreement with Turnley that the bank should hold them as collateral security for such sums as Turnley might then or thereafter owe the bank, with which he contemplated a future course of ■dealing. We .consider the case, under the verdict, as if there was an express finding that such an agreement was made at the time the bond was deposited. If on the faith of such pledge the bank became the creditor of Turnley during any time prior to the maturity of the bond, then the bank would have the right to hold the bond or its proceeds to secure the payment of such sum; but it is not believed that a contract .made by Turnley before the maturity of the bond would be a continuing contract, which would give the bank the right so to hold the bond or its proceeds to secure a debt contracted with Turnley after the maturity of the bond, nothing in relation thereto having been done, or liability incurred by the bank, prior to that time. Such a contract, in legal effect, would be a new contract, founded in consideration on the advance made at the time; and Turnley not being the owner of the bond, the right of the bank must be determined by the state of facts existing at the time the debt due to the bank was created. While it is well settled that one who* in good faith, takes, before its maturity, a negotiable instrument in pledge as collateral security for present or future advances which" he may make, will be protected, notwithstanding the pledgor may have had no real title whatever to the instrument, he, however, having an apparent title which may have been acquired by breach of faith as the agent of the true owner, or by theft, robbery or other wrong, yet it is equally well settled that one who takes such an instrument after its maturity from one having no title or right to transfer, and advances money on the faith of it, takes it subject to every right of the true owner, and acquires only such right as had the person from whom he obtained it. Goodman v. Simonds, 20 Howard, 365; Foley v. Smith, 6 Wall., 493; Texas v. White, 7 Wall., 735; Vermilye & Co. v. Adams Express Co., 21 Wall., 139; Greenwell v. Haydon, 78 Ky., 345; Bird v. Cockrem, 28 La. Ann., 70; Henderson v. Case, 31 La. Ann., 216; Arnets v. Commonwealth, 18 Gratt., 750; Thomas v. Kinsey, 8 Ga., 429; Colebrooke on Collateral Securities, sections 46, 69, 70, and cases cited in notes to the several sections; Daniel on Neg. — 371 — Inst., 782; Schouler on Bailments, 174; Weathered v. Smith, 9 Tex., 623; Greneaux v. Wheeler, 6 Tex., 515; Pasch. Dig., art. 221. It appears that Turnley did his banking with the appellant after the deposit of the bonds; but the record does not show the state of the account between them at the date of the maturity of the bond or at any time prior thereto. It therefore does not appear that the bank ever advanced to Turnley any sum whatever prior to the maturity of the bond and on the faith of that as a security. So far as the record shows, the cash deposits of Turnley may have been sufficient to meet all his drafts drawn prior to the maturity of the bond. If so, no right in the bank to hold the bond as against the true owner ever existed. Ho indebtedness of Turnley to the bank is shown except that which arose on the 6th day of July, 1874, when the draft on Heller, with the accompanying bill of lading, to secure the acceptance and payment of the draft, were indorsed by Turnley and delivered to the bank as collateral security for the advance then made. This was after the maturity of the bond in controversy. This being true, the implied contract which then arose between Turnley and the bank, even if based on the original agreement or understanding, must stand as to its validity and effect on the right of Mrs. Turnley, as though the transaction did in fact, as it did in law, transpire on that day solely. The sole consideration on which the transaction must stand or fall passed from the bank to Turnley on that day; there was none preceding it to sustain it. There was no such preceding contract or promise between the bank and Turnley as can constitute a consideration for the implied contract of July 6, 1874, and thus sustain the right of the bank, without resort to the consideration which moved from it to Turnley when it cashed his draft on Heller. ■ The bank might have declined to cash that draft without breach of any contract shown to have been made with Turnley, and he, prior to receiving the money on it, might have demanded the bond in question without violating any contract he had made, and would have been entitled to receive it. Turnley could have withdrawn the bond at any time, even prior to its maturity, if not then indebted to the bank, for there is no contract shown which made it obligatory on either party to continue business on the basis of such an agreement as the bank alleges was made. — 372 — At any time between the 1st July, 1874, which was the date of the maturity of the bond, and the time on the 6th of the same month when the bank cashed for Turnley the draft on Ileller, if Turnley was not otherwise indebted to the bank, the right of his wife to demand and receive the bond, of which she was the owner, was clear; such being true, any right which it may assert longer to hold the bond or its proceeds necessarily grows out of, and is dependent on, a transaction and contract between Turnley and the bank after the maturity of the bond. By such a transaction and contract neither the bond nor its owner can be bound. The rule of commercial law invoked by the appellant has its existence only for the protection of those who deal in negotiable paper while it is necessary to maintain its integrity as the makers of it contract it shall be, and as the commercial world understand it to be, by giving to apparent title in favor of Inna fide purchasers and holders the effect of full and complete title. No such necessity exists after the maturity of such paper. Negotiable paper may circulate after maturity and retains many of its commercial attributes, but he to whom it is transferred after maturity acquires nothing but the actual right and title of the transferer; to such person apparent title is not enough, and want of notice of the right of the true owner, further than in law it is deemed to be given by the fact that the paper is past due, is of no importance. Daniel on Negotiable Instruments, 724a. The charge of the court, in view of the uncontroverted facts of the case, was not erroneous; for in the absence of some fact which showed that the bank might legally hold the bond or its proceeds, it was not error to inform the jury that Mrs. Turnley was entitled to recover if the bond was her separate property, and this even though under a different state of facts the pledge of the bond would have been binding on the wife. Under the evidence, to have given the first, third, fourth and fifth instructions asked by the appellant would have been error, for they are all based on the theory that the bank was entitled to the bond or its proceeds, notwithstanding it was the separate property of the wife, if the bank had advanced money to Turnley on the faith of it after its maturity. The second charge asked by the appellant was correct as a legal proposition, but the matter to which it was directed, as the evidence presents the case, was unimportant, and if given, it could not legally have changed the result favorably to the appellant. Questions raised in reference to the introduction of evidence and — 373 — its subsequent exclusion by the court, in the view taken of the case, become unimportant. Under the evidence, no other result than that reached could legally have been attained, and the judgment is affirmed. Affirmed. [Opinion delivered March 7, 1884.]