Pond v. Lockwood

COLLIER, O. J. In Swift v. Tyson, 16 Peter’s Rep. 1, the Court say, there is no doubt that a bona fide holder of a negotiable instrument, for a valuable consideration, without any notice of the facts which implicate its validity, as between the antecedent parties, if he take under an indorsement made before the same becomes due, holds the title unaffected by those facts; and may recover thereon, although as between the antecedent parties, the transaction may be without any legal validity. And further, where one acquires negotiable paper before it is due, he is not bound to prove that he is a bona fide holder for a valuable consideration, without notice ; for the law will presume such to be the fact, in the absence of all rebutting evidence. It is therefore incumbent on the defendant to make satisfactory proof to the contrary, and thus to overcome the prima facie title of the plaintiff. We have repeatedly held, that a note negotiable and payable in Bank, and assigned before due, is not subject to a set off against the original payee. [2 Ala. Rep. 367; 3 Id. 297; 6 Ala. Rep. 156.] In Smith v. Strader, Perrine & Co. 9 Porter’s Rep. 451, after citing the act of 1828, (Clay’s Dig. 383, § 11,) whieh declares that the remedy “ on bills of exchange* foreign and inland, and on promissory notes payable in Bank, shall be governed by the rules of the law merchant,” &c., it is said, “We apprehend therefore, that the legislature intended to make promissory notes payable in Bank, negotiable as inland bills of exchange, and to be governed and regulated by the same law.” See also, 6 Ala. Rep. 353. In the Bank of Mobile et al. v. Hall, 6 Ala. Rep. 639, the ques [675] tion directly arose, -whether the indorsement of a negotiable promissory note before its maturity, in payment of a pre-existing debt, or as indemnity against the consequences of a suretyship, invests the holder with a right to recover, which cannot be defeated by proof of a latent equity between the payee and the makers. We there held, that tl^e receipt of a negotiable instrument in payment of a precedent debt, was in the usual course of trade, and if received under the circumstances supposed, could be enforced by the indorsee. “ It appears to us,” (say the Court.) “there is no sensible distinction between receiving a bill in payment of a pre-existing debt, and purchasing it with money or property. In either case, the consideration is a valuable one; and all the reasons which apply to protect the holder against latent equities between the original parties, of which he had no notice, apply with the same force in the one as in the other.” [See also, Brush v. Scribna, 11 Con. Rep. 338.] But where the transfer is made to indemnify the indorsee, and save him harmless from loss on his suretyship, it is not a transaction within the usual course of trade so as to protect the holder from a defence that might have been set up against the payee. [See also, Cullum v. The Branch B’k at Mobile, 4 Ala. Rep. 21.] It is objected by the defendant’s counsel, that it does not appear that the note in question was assigned by Harwell in payment of a debt, but was merely delivered to Messrs. Ball & Crommelin as a security for sundry-demands which, as attorneys at law, they held against Harwell. This is denied by the defendants, who have answered, at least according to their information and belief. Harwell’s deposition was taken at the instance of the complainants, and fully sustains the objection. There can be no question, but this witness testifies what he honestly believes, but it is probable that his memory is at fault. Be this however as it may, the consideration of the assignment is a fact put in issue by the pleadings, and it is incumbent upon the complainants to show such a state of facts as would authorize them to set up the mortgage by Harwell to Houston, and perpetually enjoin a recovery to the extent of the amount which Pond has paid thereon, to discharge the incumbrance. Crom-melin expressly negatives the testimony of Harwell, and thus creates an equilibrium of proof. In this posture of the case, it may be regarded as if no evidence had been taken upon the point, [676] and the answers must, according to the practice in Chancery be considered as true. It was supposed by the plaintiff’s counsel, that the testimony of Crommelin was gratuitously given; that is; that it was not called for by the questions propounded to him. However this may be, in respect to some part of his testimony, we have riot thought it necessary to. inquire; for we think it clear that the interrogatories directly called for a disclosure of the inducements to the transfer of the note, and the circumstances under which it was made. The failure to produce the notes delivered to Harwell in exchange for the complainant’s note, did not authorize the exclusion of Crommelin’s testimony. These notes he affirms were paid off by the exchange, and may, especially as the transaction has been consummated for several years, be presumed to be destroyed, or otherwise cancelled. Besides a notice to produce them would have been unavailing; as Harwell’s testimony show's that they are not in his possession. It is not competent for the complainants to object, that Ball & Crommelin could not receive the. note in payment of demands placed in their hands for collection. Perhaps it might be competent for their clients to refuse to abide by what they have done, and to insist upon charging Harwell .upon his indebtedness, or making them liable for a breach of duty, but such, an objection by any third person is not permissible ; especially after the exchange has been ratified by the clients.. Iri respect to the objection that all the creditors of Harwell who are interested in the note are not made its indorsees, we think it cannot be supported. The consideration for the indorsement was equal- to the- note, viz: the amount of the debts due the indorsees, arid the other creditors whose debts were thus extinguished, ■ The latter would be entitled to receive their demands when collected ; and the indorsees, should they collect it, would hold that amount in trust for them. The fact that all those .who arp entitled to the proceeds of the note, are not made its legal pj'oprietoi's,cmnot enlarge the grounds upon which the complainants may resist its payment. The assignment was certainly made in the due course of trade, for an adequate consideration, and we must intend, in good faith'; as there is nothing in 'the record from which it can be inferred that Messrs. Ball & Cromme677 lin, or their clients, had notice of the equity set up by the complainants, until several years after the transaction took place. The object of the bill was to enjoin the judgment against the complainants, and if unsuccessful in this, then to recover of Har-well the amount they had paid under the mortgage to Houston. In respect to the latter, a Court of law is competent to afford relief, and Chancery could only interpose upon the ground that where a person goes into equity for one purpose, that Court may take jurisdiction of .the entire case, and do complete justice between the parties. It cannot be regarded as a primary ground of equity, but at most consequential only. As to the principal matter, we have seen, the complainants have failed to make out their case, and it is shown that thé law is in favor of the defendants. This being so, there is nothing on which to rest the jurisdiction of the Court, as to the prayer for relief against Harwell. If it could be entertained, because upon the face it appeared unobjectionable, then it would be competent to transfer to equity many cases of pure legal cognizance, by making them dependent upon a supposititious statement of facts. This would be a state of things not to be endured, and need but be mentioned, to show that the Chancellor properly refused to render a decree against .Harwell. Other questions are raised upon the record, and were discussed at bar, but the view taken is decisive of the case, and we will Only add that the decree is affirmed.