Case Name: AYUB et al. v. SALOMAN
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1923-04-19
Citations: 252 S.W. 291
Docket Number: No. 1434
Parties: AYUB et al. v. SALOMAN.
Judges: 
Reporter: South Western Reporter
Volume: 252
Pages: 291–295

Head Matter:
AYUB et al. v. SALOMAN.
(No. 1434.)
(Court of Civil Appeals of Texas. El Paso.
April 19, 1923.
Rehearing Denied May 31, 1923.)
1. Pleading <§=»403(3) — 'Where defenses are stated in petition, immaterial whether defendant pleads them.
In action on note defended on. the ground that the consideration was illegal, where the affirmative allegations of the petition showed the character of the transaction out of which the note originated and the consideration upon which it was based, it was immaterial whether this defensive matter was pleaded by defendants.
2. Bills and notes <§=>359i — Cancellation of pre-' • existing debt held) valuable consideration; “value.”
Under Negotiable Instruments Act, § 25 (Vernon’s Ann. Civ. St. Supp. 1922, art. •6001 — 25), where indorsee in part payment for a note transferred to him, canceled and surrendered a note for $1,600 which he held against his transferor, this constituted value.
[Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Value.]
3. Bills and notes ®=»353 — Giving nonnegotia- . ble note held not giving value for note.
Where, as part of the consideration for the • transfer of a note to him, indorsee gave an instrument sigped by him reading, “Pay to the order of” the transferor “$1,300 in American money with * * * interest, if he fails to do it in time he is willing to pay all expenses,” held, that such obligation was not a negotiable promissory note, as it contained no unconditional promise to pay, as specified in Negotiable Instruments Act, § 184 (Vernon’s Ann. Civ. St. Supp. 1922, art. 6001 — 184), hence was not the giving of value as respects the question of purchaser for value, especially where it was still owned by the transferor of the note, in view of section 54 (article 6001 — 54).
On Rehearing.
4. Contracts <3=>I0I(2) — What law governs question of illegality stated.
The law of the place where the contract was made and where it is to be performed must both yield to the law of the forum if the former contravenes the plain public policy of the forum.
Appeal from District Court, El Paso County; P. R. Price, Judge.
Action by R. Saloman against Miguel Ayub and others. From judgment for plaintiff, defendants appeal.
Reformed and aflirmed.
Z. L. Cobb, of Los Angeles, Cal., for appellants.
O. A. Kinkel, of Long Beach, Cal., and F. G. Morris, of El Paso, for appellee.

Opinion:
Statement of Case.
HIGGINS, J.
This suit was brought by Saloman against the appellants, Ayub, Revil-la, and Lopez, to recover a balance of $3,000 due upon a negotiable note in the sum of $4,-000, payable in monthly installments of $500 each, the first installment being due March 3, 1922, payable to the order of E. Azar, dated at El Paso, Tex., February 3, 1922, and transferred by Azar to Saloman. The place of payment is not specified in the note.
The evidence discloses that the notes were given in part payment for certain shares of stock purchased by the makers of the payee in the "Club Latino-Americano," hereinafter called the Latin-American Club, a corporation organized under the laws of Mexico, domiciled and doing business in the city of Juarez, state of Chihuahua, republic of Mexico. The case is presented upon pleadings and a record somewhat different from cause No. 1435, Ayub v. Automobile Mortgage Co., 252 S. W. 287, this day decided. The right of a holder in due course also arises in this case, an issue which was not presented in cause No. 1435. The petition is in the ordinary form in actions upon notes.
In addition to the general denial the defendants set up that the note was given in part payment for shares of stock in the Latin-American Club, a corporation organized under the laws of Mexico, to operate a gambling place in Juarez, Mexico, under a concession granted by the Governor of the state of Chihuahua on August 18, 1921, permitting gambling, and under arrangements made from time to time, and intended to be made, with the Mexican authorities, permitting gambling in said club, as authorized in the concession, and additional thereto; that.the stock representing the interest of Azar in the corporation stood in the name of others, and that Azar and Saloman knew that the club was organized to operate a gambling house and for public gambling, and was so.operated with a restaurant, bar, and other facilities to induce Americans and others from El Paso to patronize the bar and gambling; that at the time of the sale of said stock to defendants and the execution of the note the defendants were the owners of practically all of the stock in the corporation, and it was their intention and the purpose, of Azar and Saloman, for the defendants, through said corporation, to operate public gambling in the club at Juarez, Mexico, and to pay the note out of profits arising from such gambling, by reason whereof the note and the contract of purchase and sale was immoral, against public policy, illegal, and void; that plaintiff was not a holder in due course.
By supplemental petition .the plaintiff specially and in detail denied the special defenses set up by the defendants, and averred that at the time of the execution of the note and prior thereto the bar and liquor business and cabaret conducted by said club was legal and authorized ,in Juarez, Mexico, and if it was agreed between defendants and Azar that the note was to be paid from the profits of gambling plaintiff knew nothing about it; that at the date of the execution of the note and for several months prior thereto the Latin-American Club had been earning profits from its bar, restaurant, and cabaret, and that the club at the time of the execution of the note and the transfer of said stock had valuable assets 'consisting of real estate leases, improvements on its buildings, and the premises held under the leases and in restaurant, bar and cabaret furniture, fixtures, and equipment, and a large stock of valuable liquors, valued at approximately $55,000, so that such stock represented and was based upon tangible assets and values equal to the par value of the stock.
, By trial amendment the defendant alleged that the plaintiff was not a holder in due course, for the reason that, if he paid anything for the note, which was denied, such payment consisted of the cancellation, of a pre-existing debt from Azar to the plaintiff in the sum of $1,600 and the execution and delivery by Azar of his note^ for the sum of $1,300, which note has never been paid by Azar, and is still owned by him.
Defendant offered in evidence the Larra-zola concession, which, according to the statement of facts, granted "the privilege to said Larrazola to establish a club or casino to be named Latin-American, in the city of Juarez, Chihuahua,- Mexico, said club to be organized for the purpose of dispensing cold drinks, wines, liquors, beer, cigars, and tobacco, and also for the purpose of conducting various games, among others, to wit, poker;" also the articles of incorporation of the Latin-American Club, organized by virtue of such concession, the statement of facts showing:
"The object of said club, among other things, being for the purpose of conducting a restaurant, café, dance hall, dispensary of refreshments, wines, liquors, beer, and cigars and tobacco, and in appropriate departments there shall be played such games as are permitted by law and by the- expressed terms of the aforesaid concession and none others."
The case was submitted to a jury upon special issues, which found:
(1) That plaintiff did not acquire the note subsequent to May 3, 1922. (In this connection it should be stated that the installments due March 3d and April 3d were paid at or before maturity.)
(2) That plaintiff at the time he purchased the note from Azar had no notice, actual or constructive, that same was given in consideration of stock in the Latin-American Club sold by Azar to the defendant Ayub.
(3) That at the time the note was executed and delivered to Azar it was not agreed between Azar and Ayub that the note should be paid from the profits of gambling to be conducted in the Latin-American Olub in Juarez.
Judgment was rendered in favor of the plaintiff for the balance due upon the note.
Opinion.
Upon the trial of this case the evidence related, in large measure, to the gambling operations of the Latin-American Club, and to the alleged agreement between Azar and the makers that the note was- to be paid out of the profits arising from such gambling. The jury found against appellants upon the alleged agreement, and the evidence supports the finding. So far as concerns the gambling operations of the club it is unnecessary to determine whether that would affect the validity of the note, because, as between the original parties to the note, their rights are controlled by the ruling made in cause No. 1435, Ayub v. Automobile Mortgage Co. The allegations of the plaintiff's supplemental petition affirmatively show that the note was given in part payment for stock in the Latin-American Club, a corporation engaged in the liquor business in Juarez, Mexico, and whose assets in large measure consisted of a stock of intoxicating liquors.
These affirmaRve allegations show the character of the transaction out of which the note originated and the consideration upon which it is based, and it is thus immaterial whether this defensive matter was pleaded by appellants. Keith v. Fountain, 3 Tex. Civ. App. 391, 22 S. W. 191; Osage, etc., v. Caulk, 243 S. W. 551; Mullin v. Nash-El Paso Motor Co., 250 S. W. 472, recently decided by this court, and not yet [officially] reported. Those allegations bring tfie case within the rule announced in the Automobile Mortgage Company Case so far as concerns the original parties to the notes. This defense, however, as between the original parties to the note, is not available if Saloman is a bolder in due course. Under tbe findings tbe only question which arises respecting bis status as such is whether be is a purchaser for valúe.
In part payment for the note Saloman canceled and surrendered a note for $1,600 which he then held against Azar. This constituted value under section 25 of the Negotiable Instrument Act (Vernon's Ann. Civ. St. Supp. 1922, art. 6001—25), as well as under oúr decisions prior to the enactment of that law. Heffron v. Cunningham, 76 Tex. 312, 13 S. W. 259; Greneau v. Wheeler, 6 Tex. 515; Herman v. Gunter, 83 Tex; 66, 18 S. W. 428, 29 Am. St. Rep. 632.
The balance of the consideration consisted of what Azar and Saloman designate as Saloman's note in favor of Azar dated April 27, 1922. The instrument is in some foreign language, and is thus translated by Azar, viz.:
"Pay to the order of E. Azar $1,300.00 in American money with eight per cent, interest, if he fails to do it in time he is willing to pay all expenses."
Upon the obligation evidenced by this instrument $250 has been paid by Saloman, and the obligation was still owned by Azar at the date of the trial on November 23, 1922.
It has been held that the negotiable note of the indorsee, given to the indorser in payment for a note purchased, constitutes the indorsee a purchaser for value. Wilson v. Denton, 82 Tex. 531, 18 S. W. 620, 27 Am. St. Rep. 908. But the instrument given by Salo-man contains no unconditional promise to pay, and for that reason alone is not a negotiable promissory note. Section 184, Neg. Inst. Act, (Vernon's Ann. Civ. St. Supp. 1922, art. 6001—184). It seems to partake more of the nature of a bill of exchange or check, but is incomplete'as such because the drawee is not named nor otherwise indicated.
Under section 130 of the Negotiable Instrument Act (Vernon's Ann. Civ. St. Supp. 1922, art. 6001—130) an instrument in form of a bill of exchange under certain circumstances may be treated.by the holder as a promissory-note, but this instrument cannot be so treated because of its incompleteness in the particular indicated. Furthermore, it is still owned by Azar, and section 54 of the Negotiable Instrument Act (Vernon's Ann. Civ. St. Supp. 1922, art. 6001—54) provides:
"Where the transferee receives notice of an infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed tó be paid therefor, he will be deemed a holder in due course only to the extent of the amount theretofore paid by him."
Saloman, therefore, is entitled to protection as a holder in due course to the amount of $1,850 only which he has theretofore actually paid.
Those assignments which complain of the refusal to grant a new trial on the ground of newly discovered evidence are without merit, sufficient diligence not being shown. Tomlinson v. Noel (Tex. Civ. App.) 223 S. W. 1028.
In the state of the pleading the written transfer to Saloman by Azar of the note sued upon, which transfer was by indorsement in the usual form, fully established the title of plaintiff to the note, for which reason the court did not err in refusing to submit special issue A requested by defendants. Article 588, R. S.; Grounds v. Sloan, 73 Tex. 662, 11 S. W. 898; Schauer v. Beitel's Ex'r, 92 Tex. 601, 50 S. W. 931.
The judgment will be reformed and affirmed in appellee's favor for $1,850, with interest and attorney's fees as provided in the note, together with foreclosure of attachment lien as in the court below.
Reformed and affirmed.
other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes