Court Opinion

ID: 4893377
Source: CourtListenerOpinion
Date Created: 2021-09-02 23:53:31.805394+00
Date Added: 2024-06-11T08:09:49.399606
License: Public Domain

Moore, Chief Justice.
The defendants in error, R. & T. R. Loggins, instituted this suit by injunction to restrain the sale of a tract of land under a deed of trust executed by them on the 2d of February, 1872, to E. Blanc, as trustee, to secure the payment of a note of ten thousand dollars, executed at the same time by defendants, and payable to Lsander Cannon, under the firm name of Cannon & Co,, or order, on the 1st day of December, 1872, and to cancel said deed and note, which note had been before due transferred or ordered to be paid by Cannon & Co., to the plaintiff in error, Sylvain Blum, a member of the mercantile firm of Leon & H. Blum.
To entitle the defendants in error to the relief prayed for in their original and amended petitions, and decreed them by the judgment against Sylvain Blum, or against the firm of Leon & H. Blum, if said note was transferred to him in payment of an indebtedness of Cannon to said firm, as defendants in error allege, it is necessary to connect them with, or show that they were cognizant of, parties to, or in some way chargeable with the alleged fraud practiced upon defendants in error by Cannon or his agent, in procuring said deed of trust and note, or with the agreement to first exhaust the assets turned over by R. Loggins to Cannon or his agent to pay said note, *135and which it is charged was, by the agreement upon which T. R. Loggins signed the deed, to be applied to the payment of the note before the deed was to be enforced.
The jury by their responses to the special issues submitted to them by the court (no general verdict was asked or returned by them), say that there was no fraudulent combination, devices or representations on the part of Cannon towards the defendants in error, in securing the execution of the deed of trust, and that none of the defendants in the court below were cognizant of any such fraud; that at the time of the transfer of said deed and note, neither Sylvain Blum, nor the firm of Leon & H. Blum, were aware that there were any promises, agreements or understandings between Cannon or his representatives and defendants in error; that the property covered by the previous deed of trust should be exhausted before the second deed of trust should be resorted to; that the note and deed of trust was assigned to Sylvain Blum for the account and benefit of Leon & H. Blum on the 15th of February, 1872 (which was only thirteen days after they were executed, and more than nine months before the note became due). And again, that neither Sylvain Blum nor Leon & H. Blum was aware, or had reason to believe, that said deed of trust was procured through fraud, collusion, deceit or misrepresentation.
It is therefore evident that the judgment against the Blums could not have been rendered upon any supposed fraud on their part in procuring the deed. And as the jury find that but $3,000 had been paid by Loggins on the note, and in no way connect. them with the assets alleged to have been turned over to Cannon or his agent subsequently to the transfer of. the note and deed to Sylvain Blum, if the judgment can be maintained, it must be done on the finding of the jury that said deed and note were transferred to Sylvain Blum for account and. benefit of Leon & H. Blum, for the purpose of liquidating an antecedent indebtedness of Cannon to them.
If the legal effect of this finding is, that any valid defense *136which defendants in error would have against Cannon, if the note was still in his hands, may he asserted against the Blums, notwithstanding the transfer of them before it was due, in view of the finding of the special issues as to Cannon & Co., the judgment may be correct. But is this the legal effect of this verdict? We think not.
It is laid down in a recent work of the highest authority on negotiable instruments, in strict accord as we think with the adjudged cases, that.“mere possession of a negotiable instrument produced in evidence by the indorsee or assignee when no indorsement is necessary, imports prima facie that he acquired it bona fide for full value in the usual course of business before maturity, and without notice of any circumstance impeaching its validity,” and that he, as the owner, is entitled to recover against the maker, notwithstanding there might be a good defense to the instrument against the payee. To let in a defense by the maker against the assignee, the maker must first prove that there was fraud or illegality in the inception of the instrument, or show circumstances which raise a strong suspicion of fraud or illegality. When this is done, it will devolve upon the holder to show that he “acquired the instrument bona fide for value in the usual course of business, while current, and under circumstances which create no presumption that he knew the facts which impeach its validity.” Daniel 1 on Negotiable Instruments, §§ 812-815.
The Blums took the note before due, and therefore while current, before the delivery of the goods and accounts to Cannon, with which the note was to have been paid, and which the jury found were sufficient for its discharge without a resort to the deed, and without knowledge of this agreement, and, as we must conclude, under circumstances which create no presumption that they knew the facts relied upon to impeach its validity. They took it “for the purpose of liquidating an antecedent indebtedness,” which certainly is not out of the usual course of business, in the transfer and assignment of commercial paper. And when taken for such a purpose, is it *137not also taken bona fide for value? It is certainly so to the common understanding. And we believe it has been universally so held when the antecedent debt is released, paid, novated, or discharged by the transfer or assignment. (2 Danl. Neg. Inst., ch. 39, see. 1; Hare & Wallace’s notes to 2 Leading Cas. in Eq., 103 et seq.)
A contrary doctrine is sought to be maintained on the authority of the case of Ayres v. Duprey, 27 Tex., 593, and similar cases. That case decides an entirely different question from' that now under consideration. The point there ruled was, that a credit entered upon an execution. would not constitute the plaintiff a bona fide purchaser for a valuable consideration, under the registration laws. As nothing in fact was paid by the plaintiff, but a mere credit entered upon the execution, which could be set aside, if the land did not in fact belong to the defendant in execution, he would not acquire by such purchase a valid title, merely because the title to the land stood in the name of the defendant upon the record, though in fact and in truth he was neither in law or equity entitled to it.
When the question is in regard to the bona fide transfer for value in the due course of business of negotiable instruments, it is altogether different, as is plainly to be seen by the decisions of this court, both before and since the determination of the case of Ayres v. Duprey. (Grenaux v. Wheeler, 6 Tex., 526; Planters’ Bank v. Evans, 36 Tex., 592.)
When a negotiable instrument is transferred before due and without notice, in such manner as to pass the legal title, whether this is done in payment of a present or pre-existing debt of the assignee, the holder is no doubt protected against defenses which would be available against the original payee. But although the holder may take the legal title, if he does this merely as the agent of the payee, by whom it has been indorsed to him, and has himself no interest in the paper, but merely authority to collect it and apply the proceeds to a debt due him, the maker may, it seems, avail himself against such holder of *138any defense to which he would he entitled if Sued directly by the indorser. (1 Danl. Neg. Inst., 616-7.)
■ Applying these general principles to this case, it will clearly • appear that the verdict of the jury does not warrant the judgment. Indeed, it is with some hesitation that we are led to the conclusion that it is too indefinite and imperfect to warrant a judgment in favor of Sylvain Blum for the amount appar-ently due on the note. There is no direct finding upon the note or as to its amount, but merely that $3,000 had been paid upon it December 4, 1872. And there is nothing in the verdict from which we can infer the character or amount of the -debts on account of which the note and deed were transferred, or whether the transfer was made for the purpose of vesting in Blum an interest in the note, or merely to enable him, as the agent of Cannon, to collect and pay the amount realized upon it in discharge of these antecedent debts.
A number of other questions are presented by the assignment, but as their decision is not deemed essential to the proper determination of the case on another trial, we consider it unnecessary to pass upon them. It may, however, be proper to say that the equity of the petition seems to be fully met and denied by the sworn answers, and we see no good reason why the court should have overruled the motion to dissolve the injunction. (Hansborough v. Towns, 1 Tex., 59; Fulghman v. Chevallier, 10 Tex., 519.)
The judgment is reversed and cause remanded.
Reversed and remanded.
[Opinion delivered March 19, 1880.]