Goldman v. Blum

Opinion by West, J. The court, we believe, on the whole ruled correctlyin holding that under the averments in the pleadings the appellees could jointly sue for the recovery of the amount due to them, and for the foreclosure of the lien on the real estate described in the petition. At common law such a transfer of a part only of the note to two distinct persons, and a reservation of the balance of the instrument to the original payee could not be recognized, and no action at law could be maintained on such a title by any of the parties to it. Hawkins vs. Cardy, 1 Ld. Raymond, 360. Heilbut vs. Nevil, 4 L. R. C.P. at 358. Conover vs. Earl, 26 Iowa, 169. Groves vs. Ruby, 24 Inda., 418. Chalmers Dig. of the Law of Bills, Notes and Checks, Art. 115, and cases there cited. Field vs. The Mayor of N. Y., 2d Selden, 179. Hughes vs. Keddell, 2 Bay, 324. Miller vs. Bledsoe, 1 Scam., 530. Wait’s Actions and Defences, Vol. 1, 574. With us there is, however, no distinction between legal and equitable rights as to the manner of their assertion, and under the operation of the very liberal rules, as to the joinder of parties plaintiffs, and of causes of action heretofore laid down by the court, the ruling of the district court on this point can be sustained, as justified by the previous practice of the court. Stachely vs. Pierce, 28 Tex. 328. Moore vs. Minerva, 17 Tex. 20. Faulk vs. Faulk, 23 Tex., 653. Lane vs. Squyres, 45 Tex. 383. The action of the court, under all the facts of the case, in holding that on account of the death of the maker, and for other reasons, the plaintiffs were not required to give the six months’ notice as to fore — 30 — closure, required by the deed of trust before bringing suit, was correct. Let us now consider the nature and character of this partial transfer by Owens to the appellees of the instrument in question. What effect did it have upon the character of the instrument ? Did it take away its negotiable qualities ? The record discloses the fact that though the note and the deed of trust to secure it have a different date from thac of the partial transfer from Owens to appellee, yet as a matter of fact they are of the same date, or at least constitute one transaction. The record shows that the execution of the note, the agreement on the back of it,, the deed of trust, and the articles of partnership "between Borden, Owens and Shelton, and the execution of his notesby by Owens to appellees, were all in fact contemporaneous. They are in law but one transaction, and all relate in part to the same matter, and must be considered as executed practically at the same time. The partial transfer by Owens on the back of the note had the effect of making it (or a part of it) collateral security for his own notes of that date, which notes were given for an antecedent indebtedness of his to the appellees. He, at the same time, became a guarantor for the prompt payment of the entire amount of the note, and also in the same instrument waived protest and notice. The instrument on its face, gave notice that it was secured by a deed of trust on land, in which deed it was provided that the land should not be sold even after the maturity of the note without six months notice of the intention to foreclose, being given to the maker. The character of notice was also carefully provided for. This partial transfer was prepared and written on the back of the note by the appellees either before or at the time of its execution. The evidence leads to the conclusion that it was under their direction written on the note.before the signature of the maker, and it may have been, and likely was, signed by Owens, before Borden himself signed the instrument. Be that as it may, before its final delivery it was all arranged and understood between Borden, Owens, and the appellees; what the body of the instrument should contain, and what should be written on the reverse side of it, over the signature of Owens; and one of the appellees was in advance — 31 — agreed, upon, as trustee before the note and deed of trust were signed. There was an averment in the pleadings of appellees, that Owens owned no part of the instrument after his transfer of it to the appellees. But the evidence failed to sustain the allegation. The correspondence between appellees, and Owens and Borden shows the fact, that Owens still owned it, or held at least the legal title to it. The effect of this partial transfer was to split the title of the note into three separate and unequal parts. Two parts of it belonged separately to the appellees, the unpaid balance belonged to Owens. All this plainly appears from the contemporaneous stipulation of the parties on the face, and the reverse of the note in question. The title to the note was thus in the three, and Owens, according to the testimony of one at least of the appellees, and no doubt in accordance with the agreement and understanding of all of them, was to surrender the possession of the note and leave it in the hands of the appellees, they holding in addition to their own interest, his interest also, as collateral security for the payment of his antecedent indebtedness to them, still unpaid, and represented by his own promissory notes of equal date. The result of this arrangement, all agreed upon and understood by the parties, before the execution and delivery of the note, and evidenced by it, was, in our opinion, under the facts of the case as disclosed by the note and the collateral agreement of the parties, on the back of the note, taken both together, to effectually strip the instrument of its negotiable characteristics. The relation too in which the parties then stood to each other, the unusual provision of the deed of trust, which was a part of the same transaction, and drawn under the direction of appellees, that no foreclosure should be had without six months notice to the maker, given in a particular way, arid necessary even after the maturity of the paper, the fact that the note was delivered by Owens, to be used and held as collateral securily for his antecedent debts; the fact that the property in it was before its execution parcelled out between Owens and the two firms, who were his creditors; that the remaining balance Owens was also to allow them to hold as additional collateral security for his debt, due to them, and that he was to waive protest and notice and guarantee the entire note, would strongly indicate that it — 32 — was not transferred in the due course of trade, and was in fact out of the usual and ordinary course of business of parties dealing with commercial paper even if that fact did not appear as it does from the face and back of the instrument. The reason of this is well stated by Mr. Edwards in the 3rd and last edition of his valuable work on Bills and Notes, Vol. 1., section 396, marg. p. 279. After stating that the right of property in a note (e. ,g. Owens’ right of property in the-note of Borden), necessarily implies the right to sell it, or make such other disposition of it, as the owner and holder may see fit, he goes on in the same connection to observe : “ Bur, the payee or indorser of a note cannot assign or transfer a part of the sum due thereon, so as to enable his indorser to maintain an action on the note against the maker.” “ The reason is,” says Mr. Edwards, “ that no one can recover on a Jiote unless he shows a title to the instrument and he cannot deduce his title through an. endorsement, which is not made in compliance with the established custom of merchants, and this custom of merchants does not allow the contract to be apportioned so as to subject the parties liable thereon to separate and distinct actions.” “That custom directs that the indorsement should be made in writing on the note or bill appointing the contents to be paid to some third person, but does not recognize a partial endorsement. The language of the books is that an endorsement transfers the property of the note or bill to the indorsee. What does less than that is not strictly an endorsement, and hence says Mr. Justice Bayley, an indorsement cannot be made for the transfer of less than the full sum that appears to be due upon the bill or note.” Story on Prom. Notes, Sec. 23-24. Roberts vs. Hall, 7 Conn., 212. Waits Actions & Defences, 1 Vol., p. 612 & 613, also p. 590 & 591, also p. 585-586. Parsons on Notes and Bills, 2 Vol., Ch. 6, Sec. 3, p. 146-149. In Douglas vs. Wilkeson, 6 Wend., 640, Chief Justice Savage, Judge Marey and others composing the court, a similar question was presented. In that case the note was for $2500, and the holder (the payee) endorsed the same to the plaintiffs for $750, a part only of the contents of the note. The question was whether that was' a transfer in the due and ordinary course of business. After discussing the question fully and ably, the court speaking with reference to the — 33 — contract created by this character of partial endorsement, say:— “ When, therefore, the contract between the payee of a negotiable note and a third person is of such a character as to give the latter no rights, as against the maker, that contract is not an indorsement of the note vnthinthe custom of merchants.'''' Chancellor Kent, 3 Com., p. 59, says : — “ The bill cannot be endorsed for a part only of its contents, unless the residue has been extinguished.” In this case we have seen the appellees refuse to credit the balance as paid. The law then applicable to non-negotiable instruments furnishes the rule for determining the respective rights of the parties in this transaction. If the appellees knew, or by the use of ordinary diligence and inquiry of the proper sources from which it was reasonably certain or probable that all necessary information could be obtained, they could have ascertained the facts as to the true relation in which Owens stood to the note, then they are charged with such knowledge. Bacon vs. O’Connor, 25 Tex, 213. Wethered vs. Boon, 17 Tex. 143. This subject of notice was entirely a matter of fact to be ascertained from the evidence. The whole question on this subject was one for the jury to pass upon, after considering all the facts and circumstances surrounding the transaction. The charge of the learned judge, who tried the case, was not entirely and in every respect'satisfactory on this subject, and did not. fully submit all these matters to the jury with a sufficient explanation of the law governing the case. It, however, in most respects, was not objectionable. (1 vol. Addison on Con., pp. 448-450. The articles of partnership between Owens, Borden, and Shelton, bearing the same date in fact as the other papers, should have been allowed to go the jury, not only in relation to the appellants claim against Owens, but also as throwing light on the issues raised by the pleadings between appellant and appellees. It was calculated to show how, and under what conditions, and for what consideration, Borden had executed the instrument in question. Taking in connection, with the fact that the appellees knew that Borden was to be a partner of Owens in his mercantile relations, and if they had commercial dealings with him in the future, they would deal with him in all likelihood in that capacity, these articles might — 34 — to some extent at least assist the jury in arriving at the real truth of the matter. For the same reason we are of the opinion that the court erred iu excluding from the consideration of the jury the papers mentioned in the appellants’ bills of exception as exhibits “ A,” “B” and “C.’> They hvere calculated to some extent at least to explain the circumstances surrounding all the parties when the note iu question was made, and might be useful in enabling the jury to determine whether the appellees did -not understand, or could not have learned that the note in question was intended as a basis for future credit, and not to pay the old debts of Owens to appellees, long past due, and in which Borden had no interest, and in reference to which he was under no obligation, moral or legal, and of the existence of which, as may be inferred from Shelton’s evidence, he was kept in ignorance. In cases of this character, where the maker of the notéis dead, and his widow and administrator are ignorant of the true history of the transaction, resort must be had to the best legal testimony that the nature of the case will admit of, in the absence of positive proof. If dirt ct and positive evidence cannot be obtained, circumstantial evidence, if it exist and is lawful testimony, can be resorted to. In Wells vs. Fairbanks, 5 Tex. 584, judge Wheeler observes :— “Great latitude is justly allowed by the law to the reception of indirect and circumstantial evidence, the aid of which is constantly required to remedy 1he want of direct evidence. Iu the absence of direct evidence, that which conduces in any degree to establish a material fact alleged, is in general admissible.” Any fact may be submitted to a jury, provided it can be established by competent means, which affords any fair presumption or inference as to the question in dispute. 1 Starkie Ev. 57, 58.” See also Chandler vs. Meckling, 22 Tex. 36; Cooper vs. the State, 19 Tex., 458, 457. What was said and done by the parties while the business was being arranged, and while the transaction was then depending, et dum fervet opus, is admissible in evidénce as part of the res gestae, and is considered as well calculated, in the absence of direct evidence, to shed light on the real character of the transaction. 1 Green Ev. 113. The judgment is reversed and the cause remanded. — 35 — There was a motion for re-hearing filed. In disposing of it the court delivered the following opinion:—