Case Name: Bancroft, Betts & Marshall vs. Alexander J. McKnight
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1858-12
Citations: 11 Rich. 663
Docket Number: 
Parties: Bancroft, Betts & Marshall vs. Alexander J. McKnight.
Judges: O’Neall, Wardlaw, Withers, Glover and Munro, JJ., concurred.
Reporter: South Carolina Law Reports
Volume: 45
Pages: 663–671

Head Matter:
Bancroft, Betts & Marshall vs. Alexander J. McKnight.
Promissory Notes — Collateral Security.
Where one having possession of a promissory note payable to bearer, surreptitiously transfers it to a lona fiüe holder as collateral security for advances then made and thereafter to be made, such holder, having-advanced the full amount of the note before notice, may recover the full amount from the drawer, although some of the advances were made after the note fell due.
BEFORE WITHERS, J., AT WILLIAMSBURG-, FALL TERM, ' . 18S8. :
Tbe report of bis Honor, tbe presiding Judge, is as follows: “ Tbe action was assumpsit by tbe plaintiffs, asN bearers of a promissory note, tbe execution of wbicb was admitted, and tbe terms of it as follows:
“ ‘ Twelve months after date, we, or either of us, pro.mise to pay to James Eppes, or bearer, fifteen hundred dollars, value received, with interest from date: 29th November, 1852. (Signed,) ' ■
“1 NELSON & WHITEHEAD, • “‘alex. j. Mcknight.1
“Tbe firm of Nelson & Whitehead were composed of Wm.' E. Nelson and N. M. Whitehead. -Wm. E. Nelson (who was late Sheriff) was out- of the State, and Samuel J. Nelson died about the Fall Term of the Court, 1855.
“ The defence • was founded upon this, to wit: that Sam Nelson became possessed of the note in Charleston’,'in December, 1853, - after it fell due, upon a temporary loan of §100 to N. M-. Whitehead, who deposited the note with him as collateral security, and who paid tbe $100 back; but did not recover the note, because Sam Nelson bad surreptitiously transferred it to tbe plaintiffs.
“ This defence rested entirely upon tbe testimony of Whitehead, who, with W. E. Nelson as partner, was in trade at Kingstree i'n 1852, and continued that business till the end of 1858, or tbe beginning of 1854.
Whitehead testified that tbe note was made ‘with the intention of borrowing money from Eppes, tbe payee, but he had not the money to lend.’ That he and Sam Nelson, being very intimate, were in Charleston in December, 1853, and falling short of money, he borrowed $100 from Sam, and deposited this note with him until he could come home and return it; that sometime in January or February (in 1854,1 suppose he meant) Sam came here, (to Kingstree;) he returned tbe $100 to him, but Sam did not return the note. ■^Vhen interrogated as to what he told Sam when he let him have tbe note as a pledge, he stated that he told him the note had not been used in any way; not, that he recollected, that he bad so informed this defendant, (though he said he had so told tbe defendant,) nor that it was not to be used. Upon being pressed farther as to what he had told Sam, be added that he told him tbe note had been made to borrow money, and that it had not been borrowed. Upon cross-examination, Whitehead became less positive about time and circumstances, and among the rest about the material one as to the time he parted with tbe note. ‘ My recollection is, (said he,) I am not positive, I deposited this note with S. F. Nelson in December, 1853. I won’t say positive this note was in my possession after April, 1853.’ He admitted that the plaintiffs had notified his firm that they held the note, but could not fix the time; it was before they were sued upon it; and when sued they made no defence. He went to Charleston with Sam when the latter first bought goods, but he could not state whether it was before or after he let him have this note. Did not remember whether he himself had offered to sell the note or to buy goods with it. He told Sam he could use his name ‘ as a reference, if it would do him any good, not that he might use the note in particular.’ He gave Sam no note or memorandum for the $100 borrowed, ne did not think he ever told John Salters that when his firm dissolved he left this note in a pocket-book in a drawer. He said that when he parted with it to Sam he was embarrassed somewhat ; that he had not said much about this affair out of the Court-House; that his embarrassments had so harassed him as to affect a clear recollection of things; that the letters of Nelson and Whitehead had been neglected, scattered about, and he could give no account of them.
“John Salters said, that about two years ago, he asked Whitehead about this note, (at the instance, I believe, of the defendant,) and he said it was signed to raise money, and it failed to answer that purpose; and he threw it away in a pocket-book in a drawer, and did not know how Sam Nelson got it; that Sam had promised to take it up ; spoke of Sam having pawned the note in Charleston, that he (Whitehead) would see that McKnight should not- suffer, and he thought 'he need not give himself any uneasiness about it.
“ George Carey was called for the plaintiffs, and he testified, in very positive terms, that on the 22d or 23d April, 1853, the plaintiffs derived the note now in suit from Sam Nelson, and had let him have goods upon the faith o,f it from time to time: the amount of $244 09, when the note was received, for which a note (before the witness) was given, dated 23d April, 1853; that on the 8th September, 1853, he gave another note (then before him) for $259 25 ; that on the 20th October, 1853, another note was given, signed Nelson & Strong, for $576 17; and on the 4th April, 1854, another signed by the same firm for $586 68. The two first mentioned notes Carey said he saw Sam Nelson sign; that of the 20th October, 1853, he did not know who signed; (Strong afterwards testified that be did, having become the partner of W. R. Nelson, the note having been sent up by the plaintiffs.) It turned out that Carey’s information, independent of what he had gathered from the plaintiffs, whose bookkeeper he was, arose from this, which he saw and heard, to wit; That on the 22d or 23d April, 1853, Betts refused to trust Sam Nelson for goods, unless he gave security; that Sam went away, but returned to the store next day; the note now in suit was on his (Carey’s) desk, and Sam proceeded to select a parcel of goods, and gave the note for $244 09 ; that subsequently Sam procured goods for hiiri&elf and for Nelson & Strong, as the notes above stated indicate. Carey had never seen Strong, and did not then know him. Judgments had been obtained upon all the above-recited four notes by these plaintiffs. Carey testified that from April, 1853, to the time when this note was placed in the hands of Messrs. Dargan & Porter for suit, it had been continuously in the possession of the plaintiffs; and he, Carey, treated it as a pledge for Sam Nelson’s purchases, on any account.
“ Such was the case upon which it is alleged, in the first ground of appeal, that the presiding Judge ought to have charged the jury in the terms there employed. I did not so instruct them, because I thought I ought to leave it to the jury to determine the main fact — the contested fact — whether the plaintiffs received the note after or before it fell due; and to give them instructions as to the defendant’s liability, founded upon the ascertainment of that fact, one way or the other. They were so instructed, and (as I presume) in a manner not objectionable to the defendant, touching the law. The doctrine, stated briefly now, was thus laid down: that if the plaintiffs, in the course of trade, took this commercial instrument from Sam Nelson, as bearer, before it fell due; with no notice of any thing but what appeared upon its face, they could recover, against either maker, so much as was stipulated at the time of its transfer, or before it fell due by the bearer, Sam Nelson, should be secured by it. But if the note was transferred, as collateral security, after it fell due, the plaintiffs could have no other or higher rights than Sam Nelson had, and if Sam had received it as pledge for $100, and had been repaid, and then transferred the note, no rights would be acquired at all against this defendant. In like manner, I held that Sam Nelson could not, after .the- note fell due, though it may have been deposited before for a specific debt or purpose, enlarge the office of the note as collateral security, and perhaps I went very far for the defendant in such doctrine. It was intended to meet the question, whether any but the two notes signed by S. J. Nelson, for himself alone, should determine the amount of damages, or-whether that of Nelson & Strong, 20th October, 1853, should be added; and that, also, of Nelson & Strong of 4th April, 1854. I held that such debts only could be used to fix the damages as were contracted on the faith of this note, and by agreement made between Sam Nelson, bearer, and the plaintiffs, before the note fell due. All the notes'together made an aggregate transcending that of the note of this defendant; against whom the jury found the whole of the debt and interest of the note sued upon in this case.”
The defendant appealed on the following grounds,:
1. Because it was shown by the evidence that the note sued on was put into circulation by one of three joint and several makers, after it was past due, and it is respectfully submitted that it was not competent for either of the makers to bind the others, after the note by its own terms had ceased to be negotiable, and the presumption of an agency of either to act for the others wás at an end; and his Honor should have so instructed the jury.
2. Because the note was not put into circulation until after it was due, and tbe testimony established that Samuel E. Nelson, to whom it was then delivered, only paid $100 for tbe same, and that having been repaid to him, tbe verdict should have been for the defendant.
3. Because, even if the note was delivered to Samuel E. Nelson before it was due, and by him transferred to the plaintiffs before it was due, still the strongest inference from the testimony was, that it was only pledged as collateral security to the plaintiffs for two parcels of goods purchased from them by Samuel E. Nelson, amounting to $504 76, and the verdict of the jury is without evidence for its support over that amount, with interest.
Dozier, -for motion.
Where there is nothing to warrant the finding of a jury, or when the Court cannot perceive how the jury could have drawn from the evidence before them the conclusion upon which they must have based their verdict, á new trial will be granted: Executors of Wight-man vs. Butler, 2 Speer, 359 ; City Council vs. Tálele, 3 Rich. 301; Dogan vs. Ashby, 1 Strob. 435 ; Brassfield vs. Brown, 4 Rich. 298; Vierdier vs. Trowell, 6 Rich. 169. Where the Court is not satisfied that the evidence is sufficient to sustain the verdict, a new trial will be granted: Cox vs. Buck, 3 Strob. 373 ; Bucher vs. Fraser, 4 Strob. 93 ; Butts & Co. vs. Scott, MSS. 185.
Dargan and Porter, contra.
As to 3d ground — the only ground insisted on by defendant’s counsel — Story, Prom. Notes, §§ 194, 195; 8 Yes. 531; 1 Stark. Rep. 1.

Opinion:
The opinion of the Court, was delivered by
Whxtneb, J.
This case is analogous in many respects to the cases of Chambers and Frost ads. The Bank of Charleston, in wbicb the judgment of tbe Court bas been already announced.
The points therein ruled need not again be elaborated. This, too, was a case in which a negotiable paper had been transferred as a collateral security, but because of the alleged existence of certain facts which might impeach its validity as between antecedent parties, certain preliminary questions were to be first settled before such defence could avail. Whether the note had been transferred before it fell due, was resolved by the jury in' favor of the plaintiffs. The grounds of appeal challenging the verdict in this particular have not been pressed, and need not, consequently, be now considered.
The struggle has been to restrict the verdict to a partial recovery of the sum secured to be paid upon the face of the paper. In the true sense of the rule, as defined in the cases already referred to, the plaintiffs were Iona fide holders for value likewise; and this rested not alone upon the legal presumption that attached, but was ascertained by specific proof; credit was at first refused, but afterwards given to the previous holder on the faith of this note when transferred; partial advances being made at the time, and at different periods subsequently, though each before the note fell due, except the last, and all before actual notice of any matter of impeachment ; the aggregate of such advances transcending the amount of the note now sued upon. On the scrutiny made in reference to these advances before, the jury, the instructions by the presiding Judge were highly favorable to the defendant, for he " held that such debts only could be used to fix the damages as were contracted on the faith of this note, and by agreement made between Sam Nelson, bearer, and the plaintiffs, before the note fell due." The verdict of the jury, therefore, settles the question as to any supposed distinction to be made in reference to the precise character of the advances, and as to the understanding of the parties had at the time, or at least before the note fell due.
Tbis third ground, however, complains that this verdict is without evidence to support it as to the whole amount at' least. But it is to be remembered, as in the former cases referred to, the presumptions are in favor of the holder of negotiable paper, and the burden of proof is upon the defendant; it is his misfortune, therefore, if any disputed fact material to the point in issue is not clearly established by the proof. This Court must see that the verdict is against the evidence, before it is disturbed. The last advance being made subsequent to the day on which this note fell due, would seem to fall within the category of the Judge on circuit when he held that "Nelson could not, after the note fell due, though deposited before for a specific debt or purpose, enlarge the office of the note as a collateral security." But the consideration recognized by the authorities include future as well as past advances ; Story, Prom. Notes, § 195 ; and in the absence of other proof, the presumptioh avails herein also; and surely there is nothing in the evidence to rebut the presumption that this was not within the scope of the agreement previously. Though the case we have may not require an authoritative ruling upon this point, it will at least appear that the objection as to the evidence resting on such distinction derives no aid from the mere fact of an advance after due, under the circumstances.
In looking to the relative rights of the parties, the fact of notice is manifestly the governing principle. Whence the distinction as to negotiable paper transferred before or after due? Specific proof of notice is required in the former, and this because it is indispensable to the security of -commercial transactions. In the latter, no such necessity exists, the dishonor of the paper amounting to an implied notice. In the case we are dealing with, the note was transferred before due, and of course before any dishonor, and the last advance should be likewise protected, for if within the terms of previous stipulations, it is no enlargement of the office of tbe note, and properly within the reason of the rules governing such transactions. There is no pretence of specific notice of any matter of impeachment, and the prima facie title of the plaintiffs to the whole paper must prevail.
The motion for a new trial is dismissed.
O'Neall, Wardlaw, Withers, Glover and Munro, JJ., concurred.
Motion dism,issed.