Marlar v. Smith

Ethridge, J., delivered the opinion of the court. Marlar was the owner of certain lands, and sold them to Smith for the sum of fifteen hundred dollars of which price Smith assumed an indebtedness of five hundred dollars and gave Marlar his note for three hundred dollars and delivered to him a note executed to Smith by W. T. Bennett with certain collateral by which said Bennett note was secured. Subsequent to this transaction Bennett marked the deed of trust which secured the collateral notes satisfied on the record. Afterwards' Bennett died, and was at the time of his death insolvent, and the notes and collateral which secured it were each uncollectable. The transfer was not made in writing, but the note, being payable to the order of Smith or bearer, was transferred by delivery. After the discovery of Bennett’s insolvency and the loss of the collateral this suit was filed against Smith for the seven hundred dollars represented by the Bennett note. Parties disagreed in their testimony as to the understanding under which the Bennett note and collateral were transferred to Marlar, and the chancellor found as to this issue in favor of Smith, and entered a decree giving judgment for the three hundred dollars, with a lien thereon, but denying a recovery against Smith for the seven hundred dollar item; from which this appeal is prosecuted. The appellant relies upon section 49 of the Negotiable Instruments Act (chapter 244, Laws of 1916; section 2627, Hemingway’s Code) which reads.as follows: “Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferor. But for the' purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.” [848] In our opinion this section has no application to a suit on a note payable to bearer. A note so payable is negotiable by delivery, and needs no indorsement. The chancellor reached the same result, and the judgment is affirmed. Affirmed.