Harrison v. Morgan-Curry Co.

Kirby, J., (after stating the facts). Appellant contends that without regard to any defenses that might have existed between the original parties to the transaction, he is the bona fide holder of the note, having acquired the same for value before maturity and without notice of any defenses thereto, while the appellee contends that the note was not in fact endorsed to the appellant until long after its maturity; that he was not, therefore, an innocent purchaser, and that it had a complete defense to the note as against the payee thereof within the doctrine announced in Main v. El Dorado Dry Goods Co., 83 Ark. 15, and American Standard Jewelry Co. v. Hill, 90 Ark. 78. The note was not in fact endorsed to the plaintiff until after its maturity, but the uncontradicfed testimony shows that he purchased the - note of the Iowa National Bank for which this was held as collateral security in December, 1909, and that the principal note and the collateral, in-■eluding this note, was delivered to him 'at the time. This would not, however, give Mm standing as an innocent purchaser, there being no written endorsement of it to said bank or to him. (1) In Webster v. Carter, 99 Ark. 460, the- court said.: “The ¡authorities ¡appear to be unanimous in holding that one who takes a negotiable note payable to order by delivery merely, and without written assignment, is not ¡an innocent purchaser, and takes subject to all equities between the original parties.” Cyc. says: “Endorsement is the only method recognized by the law merchant for the complete legal transfer of a bill or note payable to order, * * * and uMess negotiable paper is payable to bearer, * * * endorsement is necessary to constitute the holder of such paper a purchaser in the ordinary course ¡of business, ¡and where he receives the paper from the original payee by assignment or sale instead of endorsement, he obtains no title superior to that of payee.” 7 Cyc. 791-926. (2) There is no question but that the Iowa National Bank having made the loan to the Puritan Manufacturing Company and having taken this unendorsed note as collateral security therefor, thereby acquired the equitable title to the same. 7 Cyc. 818,1 Dan., Neg. Int., § § 664-741. “The assignment of any particular claim is considered an eqmtable assignment of all securities held by the assignor to the assignee. Thus, the assignment of a debt by whatever form or transfer carries with it any bill or note by wMch if is secured, and the converse of the proposition is equally true, that the transfer by endorsement or assignment ¡of a bill or note carries with it all securities for its payment, whether they exist by way of mortgage, deed of trust, or otherwise.” 1 Darnel on Negotiable Instruments, § 748. (3-4-5) The Iowa National Bank by the, delivery of this note to it as collateral thereby became the holder of the equitable title to same and had it endorsed by the payee: “Pay Johnson County Savings Bank, Iowa City, or order,” and placed it with said endorsee for collection. This endorsement was not restrictive and transferred the legal title, hut since it wias in fact placed for collection, it did not constitute the Johnson 'County 'Savings Bank a bona fide purchaser. Second National Bank v. Bank of Alma, 99 Ark. 386. Notwithstanding this is true, the Iowa National Bank being the equitable owner of the paper, and its agent being the legal holder thereof iby said endorsement, it acquired the entire title to the note, having the right to direct its legal transfer, thereby becoming a bona fide holder thereof as effectually as though it had been properly endorsed to it in the first instance. After it became such owner or holder, the appellant herein acquired of said bona fide holder in December, 1909, the principal note with this note as collateral in the usual course of business, and became a bona fide holder thereof, with the same right to enforce its collection as the Iowa National Bank had. After .the note was acquired by appellant, the sum due thereon in February, 1910, was paid without any complaint or intimation that any defenses existed as against the payee, and this long before 'the amount sued for herein became due. He took it from a bona fide holder and acquired all his rights thereunder, notwithstanding the endorsement was not in fact made to him until after maturity. “A party with notice of defects in negotiable paper may still be a bona fide holder within the meaning of the law merchant, as if he took it from a bona fide endorsee or bearer, who purchased it for value before maturity, as he then obtains all the title and rights of such endorsee or bearer. Thus, where a party acquires paper after maturity from a bona fide holder, who took it before maturity for a valuable consideration; he is to all intents and purposes himself a bona fide holder.” 7 Cye. 938; 1 Dan., Neg. Inst., § 762a-782. (6) The appellant purchased this note, and it was in fact delivered to him long before the amount sued for thereon became due, and, having acquired it from a bona fide owner and holder, he is entitled to collect it without regard to the defenses existing between the original parties, and notwithstanding it was not in fact endorsed to him, until .after maturity. The court erred in not directing a verdict for the ■amount sued for. Its judgment is reversed and judgment will be entered here for the amount of the note with interest. It is so ordered.