First National Bank v. John McGrath & Sons Co.

Sykes, J., delivered the opinion of the court. This suit was brought in the circuit court of Madison county by the appellant, First National Bank of Iowa City, against John McGrath & Sons Co., Inc., for a balance of two hundred and fifty dollars and interest due by appellees upon the following’ note, viz.: “No. 8827. Chicago, Illinois, July 16, 1909. For value received, the undersigned promises to pay at Chicago, Illinois, to the order of the Puritan Mfg. Co. five hundred dollars as follows: two hundred and fifty dollars January 1st after date, two hundred and fifty dollars August 15,1910. A discount of six percent, will be given if the full amount of this instrument is paid at maturity of first installment. Nonpayment of any installment for more than thirty days after maturity renders remaining installments due at holder’s option. John McGrath & Sons Company, James J. McGrath, Secretary & Treasurer. ” Indorsed on back: “Pay First National Bank of Iowa City, Iowa, or order. Puritan Manufacturing Company, by M. H. Taylor, 1/22/10 pd. two hundred and fifty dollars. ’ ’ The above note was given by the appellee to the Puritan Manufacturing Company, which is domiciled also at Iowa City, Iowa, for the purchase of a certain bill of goods consisting of jewelry. The first installment of two hundred and fifty dollars was paid, and this suit is for the second installment. On September 9, 1909, the Puritan Manufacturing Company assigned this note to the appellant as part of some collateral security for a loan then made to the Puritan Manufacturing Company of one thousand dollars by the said appellant bank. This note of 'the Puritan Manu [880] factoring Company to toe bank for one thousand dollars has been renewed several times, but no part of it has ever been paid. After several requests for payment were made upon the appellee by the appellant, this suit was instituted. The defendant in the court below, appellee here, pleaded the general issue and gave notice under it that it would prove that the appellant bank was not the owner of the note herein sued on, and also that the entire transaction of the sale of the. goods for which the note was given constituted fraud, deceit, and misrepresentation on the part of the agents of the Puritan Manufacturing Company. The defendant also pleaded specially a failure of consideration, in that the goods were worthless and did not come up to the contract. Issue, in short, was joined on the special plea. At the trial the appellant introduced in evidence the note and showed by depositions that the bank was the bona-fide holder of same as collateral security for its unpaid debt of one thousand dollars due it by the Puritan Manufacturing Company. The appellee, defendant in the court below, over the objection of the appellant, plaintiff in the court below, was allowed to prove that the goods were not the kind ordered by him and were billed to him at a different price from that stated in the contract of purchase. At •the conclusion of the testimony, the plaintiff asked a peremptory instruction, which was denied by the court below. In this we think the lower court erred. The note was payable in the city of Chicago, 111., and for that reason the anti-commercial statute of Mississippi cannot be invoked, but the law of Illinois, the place of payment, governs. Emanuel v. White, 34 Miss. 56, 69 Am. Dec. 385; Johnson County Savings Bank v. Yarbrough, 106 Miss. 79, 63 So. 275; Harrison v. Pike, 48 Miss. 46. The state of Illinois some years ago adopted the uniform negotiable instruments law which was adopted in Mississippi this year. This case is practically on all fours with that of Johnson County Savings Bank v. Yarbrough, above cited. It is the general law of the land [881] where the negotiable instruments law is in effect that, where a note is assigned as collateral security for an indebtedness than made, the assignee becomes a holder for value of same, and the negotiable paper is thereby freed of any" defenses existing as between the maker and the payee. 7 Cyc. 930. The fact that the original- note of the Puritan Manufacturing Company to the Bank of Iowa City has been renewed several times does not in any way alter the position of the bank with reference to being a bona-fide holder or purchaser for value of the note here sued on. 7 Cyc. 877 and 879; Mix v. Bank, 91 Ill. 20, 33 Am. Rep. 44; Cansler v. Sallis et al., 54 Miss. 446. It therefore follows that the defenses interposed in this case are not maintainable against the appellant. It is insisted by the appellee that the appellant should have taken advantage of these defenses by a demurrer to the special plea and notice, instead of by a motion for a peremptory instruction. The plaintiff in the court below had the right to do either or both as he desired, and he lost nothing by failing to demur. Reversed and remanded.