Coulson v. Stevens

Smith, C. J., delivered the opinion of the court. This is an appeal from a decree dismissing an original bill.' The appellant, claiming a lien on certain property to secure the payment of the promissory note executed and delivered to her by the appellee, exhibited her bill in the court below against the appellee, praying for a decree for the amount claimed to be due her and for the sale of the property for the payment thereof. The material facts are, in substance, as follows: In 1916 the Coulson Lumber Company, a corporation domiciled in Memphis, Temí., owned and operated a sawmill in Leflore county, and in addition to the sawmill and its equipment was in the possession of fortyr acres of land leased by it from Nichols for a mill site, etc., and of a right of way over Nichols’ land for a tram railroad. This lease was to run for five years from the 14th day of February, 19161, and provided for a renewal at the expiration thereof for another period of five years at the option of the lessee. The rent to be paid by the Coulson Lumber Company was five hundred dollars a year, evidenced by its promissory notes. In — 805 — March, 1916, the Coulson Lumber Company and the appellant, who held a lien on a portion of the property to secure a indebtedness due her by the lumber company, sold the sawmill and other property and assigned the Nichols lease to the appellee for the sum of three thousand dollars, oné thousand and five hundred dollars in cash and a promissory note to the order of the appellant due and payable one year after its date. This sale was negotiated for the lumber company and the appellant by W. N. Coulson, president of the company and husband of the appellant. According to the appellee Coulson wanted the note made payable to the appellant or bearer, but he declined so to do. This was denied by Coulson. In October, 1916, the appellant indorsed this note in blank and Coulson deposited it with the People’s Bank & Trust Company of Memphis as security for a loan from the bank to the Coulson Lumber Company, or delivered it to W. N. Coulson with permission so to use it, and a few days thereafter Horace N. Smith, an officer of the bank, carried the note to the office of the Coulson Lumber Company and had E. C. Aldridge, one of the company’s stenographers, to change the note by inserting therein after appellant’s name the words “or bearer,” making it thereby payable “to the order of Mrs. Hannah L. Coulson or bearer.” This alteration was made without the knowledge or consent of Mrs. Coulson or her husbaxíd. Several days thereafter Aldridge advised W. N. Coulson thereof, but he did not communicate this fact to the appellant. At the time this change was made ini the note by Smith and Aldridge section 4001, Code of 1906, was in force, and by it in an action by the assignee of a note payable to the payee or order the maker thereof was allowed the benefit of any defense had by him against the payee prior to notice of the assignment. Such a defense was not available against the assignee of a note payable to bearer. — 806 — Prior to the maturity of the note W. N. Coulson wrote the appellee several letters offering to discount the note if he would pay it before maturity. Just prior to its maturity the Memphis bank forwarded the note to a bank at Greenwood, Miss., the home of the appellee, for collection. While the note was in 'the hands of the bank at Greenwood, Nichols instituted a suit in chancery against the Coulson Lumber Company, Mrs. Coulson, and Stevens-, under the provisions of section 537, Code of 19-06 (section 294, Hemingway’s Code), alleging that the rent due him had not been paid and praying that the amount due Mrs. Coulson on the note here sued on be subjected to the payment thereof. Stevens answered this bill, admitting its allegations, and paid the amount of the note to the clerk of the court to be dealt with as the court should direct. The Memphis bank claimed the money and was preparing to give: a bond therefor when Nichols dismissed his suit and Stevens withdrew his deposit. Afterwards, when Stevens declined to pay the note, this suit was instituted by the appellant, to whom the note either had been or was afterwards returned by the Memphis bank. The bill of complaint set forth the alteration of the note with its attendant circumstances. The instrument by which the sawmill, etc., was sold and the Nichols lease assigned to the appellee contained the following agreement: “It is distinctly agreed by and between the parties hereto that the said Stevens takes said property relieved from any and all liability which the parties of the first part, or any of them, may be under to the said C. G. Nichols; it being understood that the parties of the first part (the lumber company, W. N. Coulson, and Hannah L. Coulson) are to pay to the said C. G. Nichols the annual rental for the right of way fori said" tramway across the land of the said Nichols, in accordance with the contract with the said Nichols.” — 807 — According to Nichols no part of the rent agreed to be paid to him by the Conlson Lumber Company for the years 1917, 1918, and 1919 has been paid. The lumber' company admits that a part of this rent has not been paid, but claims that Nichols is indebted to it on account of mutual dealings between them, and that it is ready and willing to pay whatever balance it may be due Nichols, and that it had tried without success to effect a settlement with him. This Nichols denied. The first contention of the appellee is that the note has been fraudulently and materially altered since its execution. Aldridge and Smith being strangers to the note, the change therein made by them was a mere spoliation and does not affect its validity unless authorized or ratified by the appellant (2 C. J. 1233; Croft v. White, 36 Miss. 455; Bridges v. Winters, 42 Miss. 135, 97 Am. Dec. 443, 2 Am. Rep. 598; Ferguson v. White, 18 So. 124), or bv her duly authorized agent. 2 C. J. 1237. This rule’ is admitted by counsel for the appellee, their contention being that the change made in the note by Aldridge and Smith was ratified by the appellant’s agent, W. N. Coulson. Coulson had no express authority to ratify the making of this addition to the note and no snch authority can be implied from that expressly granted to him by the appellant, which was to accept, hypothecate, and collect the note. Hunt v. Gray, 35 N. J. Law, 227, 10 Am. Rep. 232; Bigelow v. Stilphen, 35 Vt. 521; Langenberger v. Kroeger, 48 Cal. 147, 17 Am. Rep. 418; note to Burgess v. Blake, 86 Am. St. Rep. 105. The authority of an agent implied from that expressly granted to him is that only “which is proper, usual, and necessary to the exercise of the authority actually granted” (2 C. J. 576), and authority to alter or to ratify an alteration by another of a promissory note is neither proper, usual, nor necessary to the exercise of the authority to accept, hypothecate, or collect it. — 808 — The second contention of the appellee does not clearly appear from his answer to the bill, but is stated in the brief of his counsel to be that the consideration for the note has failed, and in support thereof they say that a part of the consideration for the note sued on is the agreement of the appellant to relieve the appellee from any liability to Nichols because of the assignment to him of the lease and to pay Nichols “the annual rental for the right of way for said tramway across the land of the said Nichols, in accordance with the contract with the said Nichols,” which agreement they further say appears' from the evidence not to have been complied with. The answer of the appellant’s counsel to this contention as it appears from their brief is. that: “The alleged indebtedness to Nichols has nothing to do with the ease and is no defense against this suit against Stevens. There is no indebtedness to Stevens and the alleged indebtedness to. Nichols is not an offset. The record shows that, both the complainant and the Coulson Lumber Company are solvent, and the lumber company owns considerable property in Mississippi, and can be made to respond to any judgment that may be recovered against it. There was no fraud or misrepresentation in the sale to Stevens, and Stevens knew that liability to Nichols would be, or might be, incurred. He accepted the warranty and retains the property, and the warranty is enforceable and he must rely on it.” This agreement, whether it be called a covenant of warranty or not, is a part of the consideration for the note sued on, and if the appellant has failed to comply with the promises therein contained the consideration to that extent has failed and can be availed of here as a defense by the appellee, but only to the extent of the injury, if any, that hei had sustained because of such partial failure of consideration. Rasberry v. Moye, 23 Miss. 320; 8 C. J. 752. The cases relied on by counsel for the appellant are not in confiict herewith,'being simply to the effect: — 809 — “That where the conduct of a vendor and warrantor of title (who is solvent) is free from misrepresentation or fraud, a mere defeot in, or cloud upon, the title conveyed, will not relieve the vendee against payment of the purchase money, unless there has been an eviction by title paramount; but the purchaser will be remitted to his action on the covenants of warranty in the deed. ’ ’ Reversed and remanded.