Case ID: ala_26/html/0730-01.html
Source: Caselaw Access Project
Author: {"author": "CHILTON, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MINELL & Co. vs. REED et al.
    1. The holder of endorsed nicreanlilo paper before maturity, is presumed in law to have acquired it bona fid': and for valuable consideration : and Ihe party who seeks to defend against it, by reason of some, payment, set-off, or equity against.the payee or some intermediate holder, is required to show that the holder did not give value for it, or to raise a presumption of that fact sufficient to require an explanation from the holder of the mariner in which he received it.
    2. A deed of trust, if properly recorded, is constructive notice of the lion in all contests respecting the properly ; hut this constructive notice does not run with mercantile paper, secured by the deed, so as to charge a bona fide holder before maturity with knowledge of its recitals : if there is nothing on tho face of the paper itself which could give the holder such notice, or put him upon inquiry, he cannot ho affected by any payments, discounts, sots-off or equities existing between the antecedent parties.
    Appeal from tho Chancery Court at Montgomery.
    Heard before the Hon. J. W. Lusemste.
    This bill was filed by tho appellant^, on behalf of themselves and the other creditors of Oliver Reed, deceased, against his heirs-at-law and administrator, to set aside certain alleged fraudulent conveyances made by their debtor in Ms lifetime. The complainants’ debt, as evidenced by the exhibit to their bill, was a promissory note for §955, executed by said Oliver Reed and one J.' S. Carter, due tho first day of January. 1838, negotiable and payable at the Branch Bank at Mobile, io the order of John ET. Tliorington, by whom it was endorsed in blank ; but the bill docs not anywhere allege the time at which the complainants-became the holders of said note.
    The defendants set up several distinct defences to the bill, alleging, among other things, that the note which the complainants held against said Oliver Reed, with others of oven tenor and date, was given for the purchase money of a tract of land sold by said Tliorington to said Reed and Carter ; that said vendees, at the same time, executed to said Thor-ington a deed of trust, or mortgage, containing a power of gale, to secure tho payment of ag.it] notes; that under said power of sale, said Tliorington sold said land at public auction, for a sum exceeding the aggregate amount of the notes then due and unpaid ; and respondents insist that this operated a payment and extinguishment of said notes. The defendants admitted, that the note on which complainants founded their bill was, after its maturity, in the hands of said complainants, or their attorney; “ but at what particular time — whether before or after its maturity — said note came to the hands of complainants, defendants neither know, nor have any information, and therefore can express no belief on that point.”
    A letter from Henry B. Holcombe, assistant commissioner of the Branch Bank at Mobile, to one of the attorneys in this case, which was, by consent of the parties, “considered and treated as his deposition, subject to objection on the ground of the irrelevancy of the testimony,” gives the following “ history of the note ” held by complainants, “ as shown by the records of said Bank “It was received from the Mechanics’ Bank, New York, for collection, and entered on the books on the 29th December, 1837 ; protested for nonpayment on the 4th January, 1838, and enclosed in a letter to John Leonard, Esq., cashier, by D. H. Burke, clerk of the Bank, on the 5th January, 1838. John W. Townsend was the notary public of the Bank at the date of the maturity of the nóte ; but I am without the means of declaring from the record that he protested it: it may have been protested by some other notary, though it is highly probable the regular notary of the Bank did it. Mr. Tpwnsend is dead. I hope the information furnished maybe sufficient,, as it is all the books appear to contain in reference to the note.”
    The chancellor held, that the sale under the deed of trust by Tliorington constituted a full and complete payment of the note; and he therefore dismissed the bill, with costs.
    The decree of the chancellor is now assigned for error.
    Marxist & Baldwin, for the appellants.
    Williams & Cocke, and Belsee & Rice, contra.
    
   CHILTON, C. J.

—The decree of the chancellor in this case cannot be supported. It is shown that, when Thorington .gold the lands embraced in the mortgage, and indeed before this'note fell due, he had parted with this paper, and that it had come to the possession of the appellants. The letter of lí. B. Holcombe, which is admitted as evidence, shows that the paper, which is mercantile, had been endorsed by Thor-ington to Minell & Co., and had been deposited in the Bank at which it was payable by their endorsee, the Mechanics’ Bank of New York, on tiro 29th December, 1837, two days before its maturity ; and that after it was protested, it was returned, on the 5th January, 1838, to said Mechanics’ Bank. Now, it is well settled, that where a party shows he is the holder of endorsed mercantile paper before it falls due, the law presumes he holds it bona fide and for a valuable consideration, and requires the party who seeks to defend against it, by reason of some equity, set-off, or payment, existing against, or made to the payee, or some intermediate holder, to show that the holder did not give value for it, or to raise a presumption of that fact, requiring' an explanation of the manner in which he acquired it.

In the case of Swift v. Tyson, 16 Peters 1, this doctrine is distinctly asserted, and is classed among the fundamentals of the law, and it is affirmed by this court in Pond v. Lockwood, 8 Ala. 674. As there is not a particle of evidence in this record that Minell & Co. did not give value for this note, and as the law implies they did give value in the absence of rebutting testimony, it follows that, in legal contemplation, they were the bona fide holders of this demand, (having acquired it before it fell clue,) when it is alleged that payment was niado to Thorington, and that such payment cannot be set up against them.

The position that the deed gave Thorington power to pay himself by a sale, and that the appellants held the note subject to this power, cannot be supported. The deed, properly recorded, was constructive notice as to the lien upon the property in all contests as to it; but that it should run with mercantile paper, and constructively charge all persons with a knowledge of its recitals, so as to affect the rights of bona fide holders of such paper, is a proposition to which wo cannot subscribe. In the mercantile world, parties negotiate upon the faith of rights which result from the face of the paper itself and the genuineness of tlie siguatiq-es, If they receivg it in duo course of trade, before it falls due, and are thus bona fide holders for value, and the face of the paper shows nothing which could give them notice, or put them upon inquiry, they are exempt from payments, discounts, sets-off, or equities, existing between the antecedent parties.

As the court is not full, (Justice G-oldthwaite not sitting in this cause,) and Justice Ligón is on the eve of quitting the bench, I have not time allowed me to give the other questions presented by the argument of counsel the consideration they deserve ; and as they were not decided by the chancellor, and may possibly be made to assume a different shape in the court below upon another trial, we have deemed it proper to confine our opinion to the question of payment, as to which we entertain no doubt.

Let the decree be reversed, at the cost of the appellees.