Barker v. Lichtenberger

Irvine, C. The appellant Barker brought this action to foreclose two mortgages on the same property. One of these mortgages was made by Alvadus H. Mayne to Barker to secure certain notes. The property thereafter by mesne conveyances passed to Lichtenberger. The decree foreclosed this mortgage, and [752] as to that part of it there is no controversy. The other mortgage was given by Lichtenberger to Clifton E. Mayne to secure three notes made by Lichtenberger to Mayne, each dated February 7, 1888, each for $231.50, with interest at eight per cent from date, and payable, respectively, one, two, and three years after date. The petition alleges that these notes were transferred to the plaiutiff for value before maturity. The answer alleges that the notes were transferred to plaintiff by C. E. Mayne after they had become due, and then pleads a set-off against Mayne of $440.99. The decree, after awarding foreclosure of the first mortgage, finds that prior to the maturity of any of the notes secured by the second mortgage, Clifton E. Mayne sold, transferred, and delivered said notes to one Charles Corbett and that Corbett was a bona fide holder for value; that thereafter, and after the maturity of the first note and prior to the maturity of the other two notes, Barker purchased all of said notes from Corbett for a valuable consideration, and without any notice of any defense which Lichtenberger had on said notes in the hands of Mayne. The decree then finds in favor of Lichtenberger on his counter-claim against Mayne, ascertains the amount due on the second and third notes, awards a foreclosure of the second mortgage to the extent of those notes, and cancels the first note. The district court seems to have proceeded upon the theory that one who receives negotiable paper after maturity takes it subject to any set-off existing against the original holder whether or not the paper was acquired from one who was a bona fide holder before maturity. In support of the decree of the district court counsel cite us to the case of Davis v. Neligh, 7 Neb., 78, where it was held that any set-off to a pi’omissory note which would have been good between the original parties may be pleaded against an indorsee who acquires it after maturity, that such indorsee takes it subject to any right of set-off which the [753] maker had against any prior holder. The court was, however, then considering a case where the paper had never been in the hands of an innocent holder for value before maturity, and the language referred to states the general rule as applicable to the facts of the case under consideration without referring to or deciding upon the rights of one who purchases after maturity from one who became a bona fide holder before maturity. In Koehler v. Dodge, 31 Neb. 328, it was said: “It has become the settled law of this country that where a negotiable note is purchased'’ after due from an innocent holder, the purchaser takes the title of and is entitled to the same protection as his indorser.” The rule so stated is in accordance with the established principles of the law merchant, and is adhered to. The district court, therefore, erred in holding that Barker, having purchased the first note after its maturity from one who was an innocent holder before maturity, could not recover because of the set-off against the payee. The uncontradicted evidence discloses that Corbett took the notes from Mayne in payment of an indebtedness from Mayne to Corbett, and that Barker took the notes from Corbett in payment of an indebtedness from Corbett to Barker. Counsel now urge that a pre-existing debt is not sufficient consideration to protect the purchaser of notes against outstanding equities. Upon this general question there has been a marked conflict in the authorities and courts have indulged in most refined distinctions. We shall not attempt a review of the numerous cases. It is sufficient to say that since the case of Swift v. Tyson, 16 Pet. [U. S.], 1, we think the decided tendency of the cases has been in the direction of protecting such holders against equities where their situation has been in any manner altered to their disadvantage. The necessity for greater uniformity in the law relating to negotiable instruments has become so evident that systematic efforts by the organized bar of the country have, for some years, been made towards [754] accomplishing that object. The mere numerical preponderance of recent authorities is, therefore, entitled to great weight in considering cases relating to commercial paper. Certainly, in this case, where Corbett accepted these notes before their maturity in payment of the former holder's indebtedness, he was entitled to protection. The notes were held by him not as security merely but in payment, and at least until the notes matured his remedy against his indorser on the original indebtedness was suspended. "According to any reasonable view he must be considered a holder for value. The decree of the district court is reversed and a decree entered here similar to the former decree, but omitting that portion canceling the first note, and adding to the amount found due upon the second mortgage the amount of such first note, together with interest to May 11, 1891, the date to which interest was computed in the decree. This amount we compute' to be $291.89. Decree accordingly.