Court Opinion

ID: 9664636
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:23:55.381866+00
Date Added: 2024-06-11T18:15:08.043814
License: Public Domain

KLINGEMAN, Justice
(dissenting).
I respectfully dissent. I would reverse the judgment of the trial court that appellant, Wilson Supply Company, take nothing against appellee, West Artesia Transmission Company, and render judgment that appellant recover judgment in the amount of $6,000 against appellee, the amount of the check given by appellee to Gernandt Drilling Company, which check was endorsed by Gernandt Drilling Conpany and delivered to appellant to apply on payment of an indebtedness owed by Gernandt Drilling Company to appellant.
In my opinion, this case comes under and is controlled by the provisions of Subdivision 2, Section 3.303, Tex.Bus. & Com. Code (U.C.C.).1 Appellee relies heavily on the provisions of Subdivision 1 of Section 3.303.2 Our case is not a Subdivision 1 case. Appellant here did not fail to perform anything that it agreed to perform. The check was accepted conditionally, and the account was credited with the amount of the check; and after payment of the check was stopped, the account was then debited.3
*315I believe the better rule is set forth in 11 Amer.Jur.2d, Bills and Notes, Section 336, wherein it is stated:
“An antecedent or pre-existing debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time. Accordingly, where paper is taken in payment of or for credit on, an antecedent indebtedness, or where an antecedent note or other security for a pre-existing debt is surrendered, or the time of payment is extended by the taking of such paper, the taker of such paper qualifies as a holder for value, and may be a holder in due course. A pre-existing debt is sufficient consideration to constitute the holder one for value, even though the instrument is taken only as conditional satisfaction of all or part of a debt, that is, contingent upon the actual payment of the instrument, and the holder does not discharge the debt in whole or in part or extend the time for payment or otherwise forbear in regard to his claim. It is of no avail against the creditor’s status as a holder for value that he parted with nothing in accepting the instrument and did not alter his position as to the debt or prejudice himself in any way.” (Emphasis supplied.)
In Citrin v. Tansey, 107 N.J.L. 368, 153 A. 523 (New Jersey Ct.App.1931), it was stated that it is settled law that a party taking a negotiable instrument in payment of, or as security for, an antecedent debt is a bona fide holder for valuable consideration. The provision that an antecedent debt constitutes value is not limited to cases where the instrument is received on terms of absolute satisfaction, but a transfer is also made for value where the instrument is received on the usual implied terms of a conditional satisfaction of an antecedent debt. See Ahern v. Towle, 310 Mass. 695, 39 N.E.2d 561 (1942); Altex Aluminum Supply Co. v. Asay, 72 N.J.Super. 582, 178 A.2d 636 (App.Div.1962); Fair Loans, Inc. v. Wilkinson, 211 Md. 216, 126 A.2d 851 (Maryland Ct.App.1956); Farr-Barnes Lumber Co. v. Town of St. George, 128 S.C. 67, 122 S.E. 24 (1924); Brodhead Motor Co. v. Mid-States Finance Co., 31 Ill.App.2d 274, 175 N.E.2d 801 (4th Dist. 1961); Citizens Bank of Booneville v. National Bank of Commerce, 334 F.2d 257 (10th Circuit 1964).
While it is my opinion that the check here involved was taken in payment (partial) of an antecedent claim, I also believe it was taken as security for such anteced*316ent claim.4 Appellant became the owner and holder by endorsement of a negotiable instrument given by appellee, and there is no contention by appellee that appellant had notice of any defenses of appellee or that appellant did not take the check in good faith or had any knowledge of any infirmity or defect. Appellant’s credit manager testified that appellant had not relinquished or rejected the check; that they continued to rely on the check and expected p.ayment for it; and that the check was turned over to appellant’s attorney with instructions to file suit and take whatever action necessary to collect thereon against either West Artesia and/or Gernandt Drilling Company. In the suit here involved, Gernandt Drilling Company was not only sued on its account, but also as an endorser of the check. As hereinbe-fore indicated, appellant also credited Ger-nandt Drilling Company’s account with the amount of the check, and only when the check was not paid, did appellant adjust its books to account for the nonpayment of the check.
The holding of the majority would in effect mean that a creditor who takes a negotiable paper to apply on a pre-existing debt when paid, must thereupon cease any effort to collect from his debtor or lose his rights against the maker. The right to collect from the maker of the instrument, free from latent equities, follows the Law Merchant, which placed a high value on negotiability. But an endorsee also has a right to proceed against the endorser, who is the real debtor, and the law should not discourage efforts to collect from the real debtor. I do not construe the provisions of Section 3.303 as having this effect.
I would hold that appellant is a holder in due course for value and is not subject to the defenses available to the maker against the transferor.

. A holder takes the instrument for value: (2) when he takes the instrument in payment of or as security for an antecedent claim against any person whether or not the claim is due.

. A holder takes the instrument for value: (1) to the extent that the agreed consideration has been performed or that he acquires a security interest in or a lien on the instrument otherwise than by legal proceedings.

. The credit manager of Wilson Supply Company testified as follows:
“Q. All right. Now, I believe it’s correct from what you have already testified that this check was returned unpaid by reason of stop payment.
*315“A. Yes, sir.
“Q. And Wilson Industries then debited the account of Gernandt Drilling Company for $6,-000.
“A. Yes, sir.
“Q. What was the reason that Wilson Industries debited the account of Gernandt Drilling Company?
“A. Well, we actually did not receive the money on the check. Our records would not be correct if we had kept something on there until we were able to collect it.
“Q. Had Wilson Industries relinquished or rejected this check, or turned it back to Gernandt or anybody else?
“A. No.
“Q. Has Wilson Industries continued to rely on this check and to expect payment?
“A. Yes, sir.
“Q. And what did Wilson Industries do in pursuant to that?
“A. We turned it over to you.
“Q. With what instructions?
“A. To file suit or take whatever action necessary to collect our money.
“Q. As against who?
“A. Either West Artesia and/or Gernandt. “Q. And West Artesia is the maker of the check?
“A. Yes, sir.
“Q. And Gernandt Drilling Company is the endorser of the check?
“A. Yes, sir.
“Q. And you instructed me as your attorney employed to collect from either one or both as maker or endorser.
“A. Yes, sir.”

. In Brodhead Motor Co. v. Mid-States Finance Co., supra, it was held that one who takes a negotiable instrument in due course without an express agreement that it satisfies a pre-existing debt, nevertheless takes it at least, as security, and may proceed first against the endorser without losing his status as holder in due course.