Court Opinion

ID: 3879910
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:11:44.816096+00
Date Added: 2024-06-11T07:41:53.658057
License: Public Domain

The plaintiff has filed a petition for a rehearing as to that portion of the judgment of this Court affirming the direction of a verdict in favor of the defendant Planters' Bank upon the grounds:
(1) That there was testimony tending, at least, to show that at the time the notes were negotiated to the Planters' Bank they were in the physical possession of the Home Bank at Barnwell, and that for that reason the Planters' Bank was not entitled to occupy the position of a holder in due course. *Page 155 
(2) That there were such circumstances of suspicion in connection with the transfer as to put the Planters' Bank on notice, which, if pursued with ordinary diligence, would have led to knowledge of the maker's defense to the notes; that the Negotiable Instruments Act of 1914 (Laws 1914, p. 668) has changed the law which prevailed prior thereto, as declared in Bank v. Smith, 110 S.C. 462, 96 S.E. 690, 11 A.L.R. 1274.
As to the first ground: The testimony of R.K. Jennings, vice president of the Fertilizer Company, is to the effect that the notes were payable at the Home Bank of Barnwell; that he forwarded them to that bank for collection prior to maturity; that prior to maturity and prior to negotiation he telephoned for their return, and that he took them to the Planters Bank and discounted them, the bank requiring the indorsement of himself and Smoak, officers of the Fertilizer Company, in their individual capacities. He is uncertain as to the date of his recalling the notes, fixing it as September 24th or 25th, and he is evidently mistaken as to the date of the negotiation, fixing it as the 25th (about), the check itself in payment being dated the 24th. In view of the extreme improbability of the bank issuing its check before the actual indorsement of the notes and their delivery, and in view of the personal indorsements of Jennings and Smoak, which were not necessary in the simple process of collection, it does not admit of doubt but that the notes were actually delivered to the bank at the time of negotiation. In support of this fact, the testimony of the vice president of the bank, who concluded the negotiation, is clear and positive. He testified that the notes themselves were presented for discount; that it was a straight purchase, a business transaction; that he required the signatures of Jennings and Smoak as indorsers; that the notes were returned to the Barnwell bank by his bank for collection on October 22d; that he issued a check for the notes dated September 24th. His records show that on *Page 156 
that day the notes were discounted and entries properly made. It is inconceivable that this transaction should have occurred while the notes were in the Barnwell bank and $4,800 paid out upon the promise of Jennings to get them from the Barnwell bank and have them indorsed by himself and Smoak.
The only shadow of opposition to the bank's positive statement, corroborated by the assignor of the notes, is the discrepancy in Jennings' testimony, to which we have adverted, and the vague and indefinite statement of the cashier of the Barnwell bank that "about September 25th" he received a telephone message from the fertilizer company to return the notes. His statement is not inconsistent with that of Jennings, for the entire transaction occurred on September 24th, "about" the time indicated by the cashier.
As to the second ground: The Negotiable Instruments Act has not changed the well-established rule: "That mere knowledge of facts sufficient to put a prudent man on inquiry, without actual knowledge, or mere suspicion of an infirmity or defect of title, does not preclude a transferee from occupying the position of a holder in due course, unless the circumstances or suspicion are so cogent and obvious that to remain passive would amount to bad faith." 8 C.J. 501.
At page 504 it is declared also:
"The Negotiable Instruments Law expressly provides that, to constitute notice or an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had `actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounts to bad faith.' This provision as to bad faith means that suspicion or facts putting a prudent person on inquiry are not sufficient to preclude one from being a holder in due course, and merely reiterates the common-law rule as laid down in nearly all of the States." *Page 157 
The petition attempts to discredit the authority of the case of Merchants' Bank v. Smith, 110 S.C. 462 96 S.E. 690
11 A.L.R. 1274, by reference to the fact that the decision was by a divided Court. An examination of that decision will show that there was no difference of opinion as to the principle under discussion. The point in difference was the effect of there being unpaid installments of annual interest at the time of the transfer, which in the opinion of two members of the Court was notice of an infirmity in the note.
It is therefore ordered that the petition be dismissed, and the stay of remittitur revoked.