Currie-McGraw Co. v. Friedman

Sykes, P. J., delivered the opinion of the court. The appellant, plaintiff in the circuit court, brought suit against the defendants, a copartnership, for one thousand five hundred dollars with interest, based upon a check executed by these defendants payable to one P. E. Kramer or his order, and by Kramer properly made payable to appellant. The appellant accepted the check in good faith for value received. The declaration alleges the presentment of the check in due course for payment and the refusal of the bank to honor same at the instance and request of the defendants. The check is dated April 1, 1922. To this declaration there was a plea of the general — 710 — issue and several special pleas. These special pleas were demurred to by the appellant, the demurrers were overruled, the appellant declined to reply thereto, and judgment final was entered in favor of the appellees. From which judgment this appeal is prosecuted. It becomes necessary to consider the sufficiency of these pleas. The first special plea demurred to alleges, in substance, that the check sued on was executed because of a contract which was made on Sunday between Kramer, the payee in the check, and the defendants; that the check itself was made and delivered on Sunday; and for this reason both the contract and check are void. Another special plea alleges that the cheek was delivered to the payee, Kramer, to be held in trust by him until Kramer had complied with a certain agreement, and that in disregard of this trust Kramer transferred the check to the plaintiff; and nothing was ever paid to the defendants by Kramer for the check. Another special plea in substance alleges the same facts. None of the above pleas deny that the plaintiff (appellant) was a holder in good faith for value. Another special plea alleges that plaintiff was not a holder in due course, because the check was postdated by a matter of six days when delivered by defendants to Kramer, and that the plaintiff received the check two days before its maturity; and that under federal law postdated checks are required to be stamped and canceled; that this cheek was not stamped and canceled and this failure put the plaintiff on notice of the defenses of defendant to the check which are stated in the above pleas. Another special plea merely alleges the fact that the check was postdated, received by plaintiff two days before its maturity date, and therefore plaintiff was put on notice of the defenses of defendant to this check. From the contents of these pleas, there are two questions presented for decision: (1) Is a check which bears a legal date, issued on Sunday, in pursuance of a business transaction and — 711 — agreement made on Sunday in violation of our Sunday law, void in the hands of a holder in due course? (2) Is a postdated check transferred to a holder before the due date, which does not contain proper revenue stamps duly canceled, subject to the defenses existing between the payer and payee ? Section 1102, Hemingway’s Code (section 1366, Code 1906), makes it a misdemeanor to do certain work on Sunday. Under this law this court has held that notes executed on a secular day in compliance with contracts made on Sunday are void. Kountz v. Price, 40 Miss. 341. Likewise it is held that a promissory note executed on Sunday to secure payment of a balance found due is void. Miller v. Lynch, 38 Miss. 344. We have examined all the decisions of this court which have been called to our attention, and which we have been able to find, dealing with this question. These cases are all between the parties who made the contract and who had knowledge that it was made on Sunday; in short, tbey were suits between parties who were in pari delicto. The rights of innocent holders for value were not there discussed. The case which is perhaps nearer in point than any of these cases is that of Duggan v. Champlin, 75 Miss. 441, 23 So. 179. In that case the court used this language: “Her signature on Sunday is a void act against one with knowledge of that fact, but the delivery of the deed on a secular day to a grantee not cognizant of the fact that it was signed on Sunday, is valid as to the wife and all persons claiming under her.” In the case of Elkin Henson Grain Co. v. White, 98 So. 531, this court held a check void in the bands of an innocent purchaser when given in payment for intoxicating liquor. Headnote 3 in that case is as follows: “The general rule is that illegality of consideration is no defense to an instrument in the bands of a bolder in due course, but to this rule there is the well-established exception that when a statute, expressly or by necessary — 712 — implication, declares the instrument absolutely void, it ' acquires no validity by its transfer to an innocent holder for value, and no recovery can be enforced thereon.” Section 1102, Hemingway’s Code, makes it a misdemeanor to do certain kinds 'of labor or work on Sunday. It does not expressly make the giving of any instrument on that day void. In the Elkin case, supra, the statute expressly made void the check. We are not called upon in this case to decide whether this Sunday or Sabbath law by necessary implication would make void, an instrument dated that day. In the case at bar the check is given a legal daté, namely, April 1st. It is in the hands of a holder in due course without notice of the fact that it was issued on Sunday. This holder is an innocent purchaser for value without notice. To permit this defense would be to allow these defendants to take advantage of their own wrong, to profit by the fact that they had violated the Sunday law; while, on the other hand the plaintiff has violated no law and had no knowledge of its violation by the defendants. To permit this defense would be to allow the party who alone has been guilty- of a breach of the law to set up his illegal act as a defense to a suit by an innocent party. This court will not entertain such a defense. The court of appeals of Alabama, in passing upon a similar question says: ‘ ‘ The great weight of authorities seem to hold that one who gives to an instrument a legal date, thereby authorizing innocent parties to deal with it as such, cannot be heard to deny the legality of date in a suit against him by an innocent holder, who came into possession as a bona-fide purchaser for value, without notice. It would seem that this rule, as applicable to commercial paper, is essentially just, and based on sound reason.” Moseley v. Bank, 3 Ala. App. 614, 57 So. 91; Gordon v. Levine, 197 Mass. 263, 83 N. E. 861, 15 L. R. A. (N. S.) 243, — 713 — 125 Am. St. Rep. 361; Cranson v. Goss, 107 Mass. 439, 9 Am. Rep. 45. In the case of Knox v. Clifford, 38 Wis. 651, 20 Am. Rep. 28, the rule is thus well stated: “Where a party makes and puts in circulation a negotiable note purporting to be made and bearing date on some secular day, he is estopped, as against an innocent holder, from showing that it was actually executed and delivered on Sunday. We cannot well conceive of a stronger case for the application of the doctrine of estoppel than such a case presents.” Another case in point is Johns v. Bailey, 45 Iowa, 241. In the case of Love v. Wells, 25 Ind. 503, 87 Am. Dec. 375, the court said that, assuming that a deed was delivered on Sunday and void, the party who executed it and gave it a secular date could not set up the invalidity of the deed against a subsequent vendee who purchased the land for a valuable consideration without notice of the transaction-having transpired on Sunday. To allow the defendant such a defense would permit him by his own unlawful act to perpetrate a gross fraud upon innocent purchasers, and to such an act the law will not lend its aid or give its sanction. We therefore conclude that the defendant is estopped from pleading the Sunday law in this case. II. The fact that the check was postdated does not destroy its negotiability or permit the making of the defenses existing between the original payer and payee. Section 12 of the Negotiable Instruments Act, section 2590 of Hemingway’s Code, is as follows: “The instrument is not invalid for the reason only that it is antedated or postdated,' provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.” iThe pleadings in this case do not allege that the check waV postdated for an illegal or fraudulent purpose. The — 714 — purpose for which the check was postdated was for the payee, Kramer, to hold until he had complied with certain agreements, which agreements were not illegal or fraudulent. Section 2634, Hemingway’s Code, provides that — “To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect or knowledge of such facts that his action in taking the instrument amounted to had faith.” There is no allegation in any of these pleas that the holder of this check had actual knowledge of any infirmity or defect or knowledge of any facts on which he could he charged with bad faith. While there are some authorities to the contrary, we think the general rule is that a check which is negotiable in form is not rendered nonnegotiable because it is postdated, and that the indorsee of such a check is not put on notice of any defects because the check is negotiated prior to its date. The following authorities sustain this decision: Triphonoff v. Sweeney, 65 Or. 299, 130 Pac. 979; Albert v. Hoffman, 65 Misc. Rep. 87, 117 N. Y. Supp. 1043; American Nat. Bank v. Wheeler, 45 Cal. App. 118, 187 Pac. 128; Wilson v. McEachern, 9 Ga. App. 584, 71 S. E. 946; Johnson v. Harrison, 177 lnd. 240, 97 N. E. 930, 39 L. R. A. (N. S.) 1207. The failure to put the proper revenue stamps on the check, in accordance with the federal law, does not render it nonnegotiable in this state. In the case of Sowell v. Rankin, 120 Miss. 458, 82 So. 317, this court held that— “The formalities to be observed in the making and recording of a deed to real property is a matter of regulation by the state in which the property is situated, and not by the general government, so that the United States Internal Revenue Law providing that unstamped instruments of writing shall be invalid and not subject to record has no application thereto,” — 715 — Hence a deed unstamped is valid, is legally entitled to be recorded, and the fact that it is regarded as an unstamped deed is constructive notice under tbe law of Mississippi in the same manner as if' it was stamped in accordance with the laws of Congress in this respect. The reasoning applied by the court in that case applies in this case. Our Negotiable Instruments Act is silent upon the subject of revenue stamps to be carried on checks or notes, and a failure to comply with the federal law upon this subject does not destroy the negotiability of the instrument in this state. III. It is also perhaps proper to state that the fact that the check was negotiated by the payee in violation of his agreement with the payer is no defense to a suit by the innocent purchaser for value without notice. This rule is thus stated in R. C. L. vol. 3, p. 1013, par. 221; “Where a negotiable instrument is put in circulation fraudulently and in violation of authority by one to whom the owner has intrusted the instrument, a bóna-fide holder for value and without notice of the breach of trust may recover upon the instrument. . . . It is no defense against a bona-fide purchaser for value to prove that the person to whom the paper was intrusted was authorized to use it only for a particular purpose, and fraudulently converted it to a different purpose. . . . A person will be liable to a bona-fide purchaser for value on negotiable paper which he intrusts to an agent for negotiation, and which the agent misappropriates. The theory of these cases is that where a principal clothes his agent with apparent authority to negotiate negotiable paper, i. e. by indorsing such a note in blank, before maturity for a valuable consideration, the act of the agent, though wholly unauthorized, will bind the principal as effectually as if no defect of authority existed. Again, the reason is given, that where one of two innocent parties must suffer a loss, the loss must fall upon the one who, — 716 — by bis trust and confidence has enabled the perpetrator of the fraud to commit it.” See, also, same authority, page 298, par. 208 et seq. See, also, Despres et al. v. Drug Co., 123 Miss. 509, 86 So. 359; Huddleston v. McMillan, 112 Miss. 168, 72 So. 892. The demurrers interposed to these special pleas should ■ have been sustained. The judgment of the court is reversed, the demurrers are sustained, and the case is remanded. Judgment reversed, demurrers sustained and the case remanded.