State National Bank v. Cason

The opinion of the Court was delivered by Todd, J. The plaintiff, as holder and endorser of a promissory note executed by the defendant for $2,500, sued to recover the amount thereof, with interest. The defence presented by the answer is in substance that the note was given as collateral security for plantation supplies to be furnished the defendant for the year 1884 by G-idiere, Day & Co., the payees of the note ; that shortly after the execution of the note, and when only a small part of the supplies had been furnished, G-idiere, Day & Co. failed. That one W. A. Pollack succeeded to the business of the firm, and he in turn was succeeded by one C. S. Earrar, by whom advances to the plantation were continued. That by shipments of cotton to the latter her accounts for supplies, which the note was given to cover, was fully paid. That the consideration of the note was known to the bank at the time it became the holder of it. There was judgment in favor of the plaintiff! for the amount of the note, less $271.11, allowed as a credit thereon. Defendant has appealed, and plaintiff asks an amendment of the judgment, rejecting the credit allowed by the lower court. It is shown that the note was transferred to the bank before maturity and for value, and that the bank was informed of the consideration of the note; and the single question is presented whether such knowledge bn the part of the bank deprived it of the right to recover on the note. [867] The consideration of the note was a lawful and valuable consideration. At the time the plaintiff became the holder of the note there had been no failure of the consideration, for it was before the surrender of G-idiere, Day & Co., and when the contract between defendant and G-idiere, Day & Co. was being executed, and part of the supplies had been advanced. As the consideration of the note was a valid one, plaintiff could not have been affected prejudicially by the knowledge of it. If the consideration be lawful the knowledge of that consideration can of itself have no bearing on the rights of the transferee. It is the knowledge of the failure of the consideration or of secret equities between the original parties thereto that would prevent recovery thereon as between said parties. The right of plaintiff to recover on the note is the more apparent when we consider that in this instance, in accordance with the mode in which business is usually conducted between commission merchants and planters, this note we must infer was executed for the purpose of being negotiated, that by means of such negotiation and discount of the note a sufficient sum might be realized and placed to the credit of the defendant to enable her merchants to furnish the promised supplies. Of course there is no need to cite authorities in support of the proposition that the bona fide holder of a promissory for value acquired before maturity is not effected by equities between the original parties. The principle is elementary, but as peculiarly applicable to the instant case and touching the rule where the consideration relates to some • thing in the future is the case of Sadler vs. White, 14 Ann. 177, from which we quote: “Plaintiff received the note before maturity and before a failure of the consideration. Even if it were known to him taking it that the consideration was future and contingent, and that there might be offsets against it, this would not make him liable to the equities between the defendants and payee.” “It cannot affect the negotiability of a note that its consideration is to be hereafter realized, or that from some contingency it may never be enjoyed. Any one having sufficient confidence in another to give his written obligation for something to be given or enjoyed hereafter is at liberty to do so, and the maker cannot censure any future holder for having purchased it, and for seeking to enforce it, for it was the faith of the maker in the payee that he would execute his promise and allow no obstacles to defeat it that created the note and gave currency to it.” [868] However sensitive we may be to cases of individual hardship — and that of the defendant is particularly one, if the allegations of her answer are true — to swerve from this established rule touching the consideration of promissory notes, would be greatly to impair if not wholly destroy their negotiability, for in nearly all cases of the purchase of a note the buyer knows there might be equities between the original parties to the same. We find no ground on which the credit on the note was allowed; there is nothing in the record that we can discover that justifies it. The amendment asked for must therefore be allowed, rejecting it. It is therefore ordered, adjudged, and decreed that the judgment of the lower court be amended by striking therefrom the words “ subject to a credit of two hundred and seventy-one dollars and eleven cents, to date from July 2, 1884.” And as thus amended, it be affirmed, defendant to pay costs in both courts.