Case ID: mo_12/html/0447-01.html
Source: Caselaw Access Project
Author: {"author": "Judge Rutland", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

McDONALD vs. HARRISON.
    1. The holder, of a negotiable note under the statute, endorsed by the payee to A or bearer, is considered the legal owner.
    2. A chose in action which is assignable cannot be set-off by a person to whom it is transferred, if he holds it merely as a trustee.
    APPEAL FROM ST. LOUIS COURT OF COMMON PLEAS.
    STATEMENT? OF THE CASE,
    This was a suit at law to foreclose a mortgage made to George Morton by McDonald and wife and by them assigned to Alfred Tracy and by Tracy to the plaintiff.
    On the trial of the cause the plaintiff, proved by B. B. Dayton the assignment of the mortgage by Morton to Tracy and Morton’s endorsement on the six notes secured by the mortgage. Witness knew nothing of the transactions except from seeing the assignment in his own hand writing and that he wrote the assignment at Morton’s request. The assignment to Tracy was acknowledged and recorded in 1841.
    J. X. Anderson then called for plaintiff, proved the assignment of mortgage by Tracy to Harrison. On cross examination testified, that in May or June 1847, Morton came to him to raise money on the notes and that being all due, he refused at first, to take them, but as Morton insisted he let him have $100 on the notes 5 that some time after he wrote to McDonald to come and take up the notes and that McDonald then served a notice upon him that he had paid the notes or had a defence against them—that then he called upon Morton to come and pay t he $100 and take up the notes, Morton said they were Tracy’s and that Tracy would settle it when he came up from New Orleans. When Tracy came up, he said he would arrange it and 'brought Harrison to-the office and Harrison paid the $100 and the assignment was made to Harrison—thinks he told Harrison of McDonald’s notice. At the time Morton got the money, he said the mortgage Was Tracy’s. Plaintiff the'n read the mortgage, and an assignment of Morton to Tracy, dated -October 1st 1841, transferring the mortgage arid his interest in it, and the debt secured thereby. The assignment by Tracy to Harrison dated Oct. 1st 1847, was then read.
    The plaintiff then read the notes sued on. These notes were negotiable notes under the statute, endorsed, pay Alfred Tracy or bearer, George Morton. It was admitted that the endorsement was tilled up by the attorney previous to bringing the suit. The plaintiff then closed his case, and the defendant asked the court to exclude from the jury, the notes given in evidence by the plaintiff, there being no assignment of said notes to the plaintiff, and to Instruct the jury that- the plaintiff is not entitled to recover upon the case as made by him in ,proof, wh-ich instruction was refused—the defendant excepted at the time-.
    The defendantthen called S. Jackson, who proved the endorsement of Williato Metcalf to Phillip McDonald of George Morton’s note for $600, this endorsement was made about July 3847, that M'etcalf left the note in his hands to give to McDonald when he called for it, the note was as follows:
    $600 00 St. Louis, October 1, 1838.
    Three years after date I promise t-o pay to William Metcalf junior or order six hundred ■dollars. GEORGE MORTON.
    Endorsed-, For value received I assign the within note without recourse on me in any event ■to Phillip McDonald or order. WILLIAM METCALF.
    The plaintiff objected to the reading the note to Metcalf and then and there excepted to the decision of the-court allowing said note to be read.
    Defendant then called John McDonald, who testified that he kfiew Morton ; that Morton called on his father for money twice, fiist, early in 1846; that he received $15. He called again in the fall of 1846—had a conversation with his lather, and got $20. More: After that he called again, arid wanted money, and said the matter mustbe settled, thathe Morton Was much pressed for money, that he had waited a long time, and must have the money In April or May, 1847, thathe and defendant went to Morton’s house, and defendant said that he had called lo settle the mortgage. Morton, alter a pause, said that the mortgage and notes were not in his possession, but that he would see about it on the -morrow, and that be would meet McDonald next day.
    Cross-examined-—Staled that on his way to Morton’s houke his father stated that he had a note of Morton’s of about the amount of the mortgage, and if Morton would agree to it the matter could be easily settled; but that Morton was not told that McDonald had such a note. This was before May 5th 1847—thinks a few days. McDonald had the Metcalf note at that time.
    Defendant then rea'd the notice of McDonald to J. J. Anderson,dated July 14th 3847, noti- . lying him that McDonald held a legal payment and set off against the notes in Anderson’s hands.
    The plaintiff then íd rebuttal introduced Archibald Carr, who testified that he knew of the arrangement betweeen McDonald and Metcalf concerning Morton’s note; It Was transferred in July or August 1847, and the agreement was that McDonald was to give $500 conditionally; the money was to be placed in my hands, and in case McDonald could use the Metcalf note as a set off against the mortgage given to Morton, then he was to pay the money over to Metcalf, but if it could not be used, he was to hand the money back to McDonald. The plaintiff then proved that during the summer of 1847, Tracy’s family was in St, Louis, staying at. Morton’s, Tracy remaining in New Orleans, where he was said to be engaged in business. This closed the case on both sides. The court then gave an instruction as follows i
    If the jury believe from the evidence that the defendant obtained the note offered as a set off from Metcalf, upon the understanding that it should be his property only upon the contingency of his getting the off set allowed, be cannot be regarded as the bona fide holder of the note and therefore it cannot be a set off in this action.
    To the giving of which instruction the defendant excepted at the time.
    The*clefendantthen filed his motion for a new trial, which the court overruled, to which the ■defendant excepted and brings the case to this court by appeal.
    Whittelsey & Crockett, for appellant.
    1. The court erred m refusing the instruction asked by defendant at the close of the plaintiff’s case. It appears that the notes were never endorsed in full to Tracy, to correspond with the assignment iipon the mortgage, and a special assignment of the mortgage would not carry the title to the notes without a delivery of the same. The notes were not delivered but remained in Morton’s hands and he pledged them to Anderson, who received notice of the set off, at that time the notes were over due and Harrison was informed of the defence at the time he bought the notes. The notes were all over due at the time of the delivery by Morton to Tracy as far as appears by proof, and notes over due are liable to all equities between maker and payer. Thej then become subject to the general rule, that persons taking notes over due, take them cum atiere. The notes are endorsed payable to bearer, the assignment of the mortgage is specially to Harrison, the evidence would hardly support the complaint.
    2. The court erred in the instruction given as to the note offered as a set off by the defendant, for these reasons, 1st the suit was not upon the notes directly, taken by s.bouajide holder for value before due, for there is no proof that the notes were ever delivered fo Tracy, or that the deed of assignment was delivered, and as appears from testimony, they were taken by Tracy over due, and he received notice of set off at time of delivery of bills to him, and so did Harrison. The set off was therefore properly admitted in evidence and the instruction of the court took away the defendants case from the jury and left him no defence—Frazier vs. Gibson 7 Mo. 271, 2nd said instruction was wrong in tins, that it was perfectly immaterial to the plaintiff what consideration McDonald gave for the note as Morton justly owed that debt, and the contract between McDonald and Metcalf was perfectly immaterial and into which the plaintiff had no right to enquire. Moore vs. Cordell 11 Mo. 614, 615, where the court decide that the consideration between assignor and assignee cannot affect the liability of the maker.
    3. The instruction given was wrong in this, in allowing the written endorsement to be explained away by parol testimony and that too by a party having no concern with it, contrary to all law, evidence to vary a written statement is not admissible. Hightower vs. Ivy, 2 Porters Aia. R. 30S, nor to show a note, absolute on face, conditional. Farnham vs. iDgham 5 Ver. 514.
    The law of negotiable bills taken bona fide before due does not apply to mortgages, or petitions to foreclose.
    McPherson for appelleé.
    The instruction asked by the defendant below at the close of plaintiff’s testimony wrs properly refused by the court. The interest in the notes was all conveyed by the assignment of the mortgage, if there had been nothing more, but aside from this the endorsement to Alfred Tracy or bearer would have authorized Harrison to sue in his own name. The question is so plain that I will nottroubla the court with authorities on this point.
    The mortgage sued or was assigned by Morton to Tracy in 1841 and long before any notes became due, this assignment was acknowledged and recorded with the mortgage on the 30th of December 1841 and thus became notice to all the world, The notes were negotiable notes and were endorsed by Morton, before they became due, so (hat in either view the debt was exempt from ali offset against Morton. An offset! cannot be made of a debt against any one other than the plaintiff on the record. Johnson vs, Bridge 6 Cowen 693. Wheeler vs. Raymond 5 Cowen 231. Holland vs. Makepeaces Mass, Rep. 418. Knapp vs. Lee, 3rdrieker-ing 452. Rev. Stat. Mo. 1005.
    Harrison as the assigner of Tracy took the notes exempt from all claims against Morton. His purchase was bona fide, without fraud, and even if he had notice of the claim against Morton, he had a right to look to the date of the assignment to Tracy for his protection.
    Morton’s possession of the notes and the pledging them with Anderson & Co. is easily explained. Tracy was (he Son-in-law of Morton—was engaged in business in New Orleans, his family were spending the summer at Morton’s house in St. Louis, and Morton may have with propriety acted as the agent of Tracy and been anxious to raise money for the use of Tracy’s family.
    The instruction given by the court was correct, the testimony of Carr shows that the note was only conditionally sold to McDonald. That in truth McDonald held the note as an escrow or as trustee dependant upon the success that might attend his efforts to get set off against the notes executed to Morton, if he failed it was no purchase, consequently he was nota bona fide holder, but held it viitually lor Metcalf’s benefit. Babington on set off, 12, 13, 4th Lane Library, 16th East 130.
    The authorities cited by appellant’s counsel to show that parol testimony cannot be introduced to explain the assignment, have no application to such a case as this. If they did the objection comes too late, the witness Carr was re-examined without objection and he explained a part of the contract.
    It is therefore contended—that the note offered in evidence could not be admitted as an off set against Harrison who stands as a bona fide holder for a valuable consideration, and therefore no error could be committed in excluding the note by the instructions, and secondly that the instruction was properly given because the evidence shovs ed it was only a conditional property in the note hold by McDonald as trustee of Metcalf.
   Judge Rutland

delivered the opinion of the court.

From the statement of this case as agreed upon by the counsel, the only points presented for our adjudication are, first. The decision of the court below in refusing to exclude from the jury the notes given in evidence by the plaintiff, and in refusing to instruct the jury, that the plaintiff is not entitled to recover in this case from the evidence introduced herein by himself—secondly. In giving the instruction as appears from the statement as follows : “ If the jury believe from the ev- idence that the defendant obtained the note offered as a set off from Metcalf upon the understanding that it should be his property only upon the contingency of his getting the off set allowed, he cannot be regarded as the bona fide holder of the note and therefore it cannot be a set off in this action.55

This was a proceeding under our statute to foreclose a mortgage—the facts show that the mortgage had been assigned by Morton the mortgager, to Tracy; that the assignment had been acknowledged and recorded. That the notes were endorsed by Morton, that is, that Morton had written his name on the back of the notes and that the lawyer had filled up the assignment before the suit was commenced.

It appears, that Tracy’s family were living with Morton, and that after the notes were over due, Morton had offered them to J. J. Anderson, who refused to purchase them, but who let Morton have one hundred dollars on the notes. Anderson called on McDonald for the payment of the notes and McDonald informed him he had a payment or a good set off against the notes. Anderson then informed Morton of McDonald’s refusal to pay and required Morton to pay him the money he had advanced him and take away the notes &e. Morton stated that Tracy would be up shortly from New Orleans and would attend to this business. That Tracy and Harrison came to Anderson’s and Harrison paid up the money, the hundred dollars and that Tracy assigned the mortgage over to Harrison and delivered the notes to him. Anderson says that he thinks he told Harrison what McDonald said about his payment or good set off against the notes. These were negotiable notes and were endorsed “pay Alfred Tracy or bearer” George Morton. The plaintiff read the mortgage and the assignment to the jury and read the notes and endorsements to the jury. The defendant moved the court to exclude these notes from the jury and also moved the court to instruct the jury that the plaintiff could not recover in this case from his own showing. Both of which motions the court refused—and this decision of the court is the first point as above stated. I can see nothing authorizing the court to exclude these notes from the jury; nor is there any reason why the court should instruct the jury, that from the plaintiffs own showing lie could not recover in this proceeding.

This point is therefore ruled for the plaintiff below.

The defendant then offered in evidence the note assigned to him by Metcalf—it was Morton’s note to Metcalf for $600, and was assigned by Metcalf to McDonald. The plaintiff objected to this note in evidence as a set off, but the court permitted it to go to the jury. The plaintiff then introduced as rebutting testimony a witness who stated that he “ witness had a knowledge of the arrangement between McDonald and Metcalf, concerning the Morton note. It was transferred to McDonald in July or August 1847, the agreement was that McDonald was to give $500 conditionally, the money was to be placed in my hands, and in case McDonald could use the Metcalf note as a set off against the mortgage given to Morton, then the witness was to pay the money over to Metcalf, but if it could not be so used, the witness was to hand the money back to McDonald ^ McDonald gave the witness $400 of the money which was still in witness’ hands. ” There was no objection made to this testimony ; and the court thereupon gave the instruction as mentioned above, as the second point relied on by the plaintiff in error (or the reversal of the judgment below. Had the defendant objected to the evidence of the witness in relation to the transfer of the Metcalf note to McDonald in the court below, in all probability the question would have been up before us, but he failed to do this. The point therefore about the introduction of parol evidence to vary or alter a written assignment by showing it to be conditional, and that the assignee was merely holding the note as trustee, although the assignment itself appears otherivise, was not raised in the court below; and this court will not therefore say any thing about the law arising on that point. I shall consider the instruction as given upon the evidence without regard to the legality or incorrectness of the testimony itself. The evidence of the witness shows that the transfer of the note from Metcalf and McDonald was only conditional—that it was to be good or not as McDonald succeeded in using it or not as a set off against the mortgage originally given to Morten by him.

“ A chose in action which is assignable cannot be set off by a person to whom it is transferred if he holds it merely as a trustee. ” See Babington on the law of set off and mutual credit, page 28 ; Law Library Vol. 4; see also 16 East. B.ep. 136. “ Where third person holding the acceptance of a trader, who was known to be in bad circumstances, agreed with defendants, as a mode of conveying the amount of the bill that, it should be endorsed to them, and that they would purchase goods of the trader which was to be paid by a bill at three months date or made equal to, cash in three months (before which time the trader’s acceptance would be due) but without communicating to the trader, that they were the holders of his acceptance ; the trader having become bankrupt and his¡ assignees having brought assumpsit to recover the, value of the goods sold and delivered to, the defendant; the court o King’s Bench held that the latter could not set off the bankrupt’s acceptance, which they did not hold in their own right, but in effect for such other persons. ” In my opinion, therefore, the court below did right in leaving the fact to the jury upon the instruction and in giving them the law as laid down therein. I am then for affirming the judgment,, and my brother judges concurring herein, the same is affirmed. The words plaintiff and defendant ai;p used in reference to the court below,.