Court Opinion

ID: 6515737
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:26:28.350055+00
Date Added: 2024-06-11T15:55:01.137636
License: Public Domain

PIE AD, J.
I concur in the opinion of Justice McClellan that the judgment of the city court should be reversed on account of the failure of the plaintiff to pay into court, at the institution of the suit, the sum admitted to be owing on the note and mortgage sued for ; but, upon due investigation and study, I am impelled to a *515different conclusion upon the question of the negotiability of the note, as affected by the terms of the mortgage given to secure it, in the hands of one who acquired the note from the payee, with notice of those terms. We are agreed that the two papers — the note and the mortgage — in the hands of appellant., who purchased both from the payee, at the same time, must be read together as one, and the question for decision determined upon the agreement of the parties evidenced thereby.
It is a cardinal rule that in enforcing a written agreement the court will seek to ascertain and give effect to the intention of the contracting parties. That intention will be gathered from the terms of the agreement itself, and, when necessary, a consideration of the situation and circumstances of the contracting parties, known to them at the time the agreement was entered into, and to the party claiming under them, at the timé his rights accrued. What then was the intention of the parties, to the present contract, fairly deduced from the two instruments read together as one? It is maintained in the opinion of my brother McClellan , that this contract contains the four statutory requisites of a commercial paper, good against all equities and defenses existing between the original parties, in the hands of a bona fide purchaser for value without notice, viz., a promise in writing to pay, (1), a certain person ; (2), a certain sum of money ; (3), at a certain time ; and, (41, at a certain designated place of payment; and that neither of these requisites or elements is, in any wise, affected or impaired by any other stipulation of the contract. I do not controvert the proposition as to the first and second elements stated ; but, as to the third and fourth, I maintain that the intention of the parties, fairly deduced from the agreement itself, was, that the note might be paid, before maturity, in uncertain partial payments, at uncertain times, to be determined and made certain by deliveries and sales of cotton to, and by, the Keeble Co., which the promissor, Crenshaw, obligated himself to deliver as rapidly as the same could be prepared for market; hence, that the note would not be put in circulation, but would be retained by the Keeble Co. whereby the maker was entitled to notice of any transfer thereof, as in case of other nonnegotiable securities. ' The mortgage shows that the Keeble Co., the payee of the note, was a cotton factor *516and grocer in Selma, Ala.; that appellee, Crenshaw, was a farmer, engaged in growing cotton, in an adjoining county, and that the consideration of the note was for advances to enable him to make a crop that year, 1890. The other special stipulations important to be considered are as follows: 1. Inasmuch as the crops conveyed had not been planted, (January 21st, 1890,) it was provided that Crenshaw should, as soon as the crops were planted, execute to the Keeble Co. a supplemental conveyance as the said company may require, "so as to invest in said corporation the complete legal title to said crops.” 2. "That the undersigned will deliver all the cotton grown, raised, received or controlled by him during said year to the said H. C. Keeble Co., at the said city of Selma, as rapidly as the 'same can be prepared for market, the same to be sold by said corporation, as agent and factor of the undersigned, at the usual commission of one dollar per bale; and the net px’oceeds thereof shall be applied to the payment of the debts and liabilities herein secxxred; the same to- be first applied, however, to any debts or liabilities of the undersigned arising out of the premises other than the debt evidenced by said note.” 3. "That the H. C. Keeble Co. is engaged in the business of selling cotton on commission, and the purpose' of the above advances is to promote that business by securing the sale of cotton.” And the mortgagor warrants that he will ship five bales of cotton by the first of January next thex'eafter, or pay one dollar for each bale not shipped. 4. "That if the undex’signed fail to execute said supplemental conveyance, when required, or to deliver said cotton as stipulated, or to pay and discharge said debt and liabilities as the same accrue axxd mature, or to keep and perfox-m any covenant or agreement herein eoxitaixxed, or make any default in the premises, then, in either or any such event, the said H. C. Keeble Co., its agexits and assigns, are hereby authorized and empowered to enter upon and take possession,” &c. ; following with fxxll authority to take and sell the property and cx’ops and apply the proceeds to the payment of expenses and secxxred liabilities.
Crenshaw delivered to the Keeble Co., in the fall, five bales of cotton without notice that the note axxd moxhgage had beerx transfex’red.
I think it can not be questioned that,-under this agree*517ment, the Keeble Co. had the right to demand of Crenshaw delivery of all the cotton grown, raised, received or controlled by him during that year, as rapidly as the same could be prepared for market, without regard to the fixed maturity of the note ; that Crenshaw had the legal right so to deliver it, and that the parties were, respectively, invested with legal remedies to enforce these rights. Such, it seems to me, are the plain terms of the contract, expressed without doubt or ambiguity. In this connection, we know as common knowledge, and the contracting parties will be presumed to have known, that a large proportion of the crops of cotton is, according to the growth of the product, and the customs of agriculture, gathered and prepared for market before the 15th of October'; and that such crops are so prepared, in bales, in instalments, as the same may be gathered in sufficient quantities running through the harvest season. That they aro so prepared in instalments, is contemplated by the very terms of the stipulation, that the cotton shall be delivered as rapidly as the same can be prepared for market. The stipulation, we observe, also, manifestly implies the duty and obligation on the part of Crenshaw, so to prepare the same, as rapidly as practicable. Whenever, therefore, a material part of Crenshaw’s crop was made ready for market, he exercising diligence in preparing it as rapidly as practicable, it became his right and duty to deliver it, and the right of the Keeble Company to demand its delivery, although the 15th of October, the specified maturity of the note, had not then arrived. Let us suppose then, one or more bales were delivered at different times, we will say, in the month of September, as, under contract, might lawfully have been done. Just here the question, out of which the main contention grows, arises: What were the relative rights and duties of the parties in reference to the cotton so delivered? It is insisted in support of the negotiability of the note, that under the contract, these deliveries were made to the Keeble Co., a,s the agent and factor of Crenshaw ; that the cotton should be sold by the Keeble Co., as such agent and factor, and the proceeds held by it, as such agent and factor, until the maturity of the note ,and be then applied to its payment or held, at least, until sufficient cotton should be delivered and sold to raise the full amount of the note, and then *518applied to its payment. It is contended that such is the meaning of the stipulation: “the same to be sold by said corporation, as agent and factor of the undersigned, at the usual commission of one dollar per bale, and the net proceeds thereof shall be applied to the payment of the debts and liabilities herein secured. ”
On the contrary, I maintain that the rights secured by the contract to the Keeble Co. to demand, and to Crenshaw to deliver, grow out of, and have reference to, the mortgage security of which the cotton is the subject; and that the stipulation that the cotton shall be sold and the proceeds applied to the payment of the secured debts means that it shall be sold, as delivered, and the proceeds at once so applied. The issue is thus squarely presented. Unless one or the other of these propositions, viz., that the Keeble Company was to hold the proceeds until the maturity of the note and \ hen apply them; or until a sufficient sum accumulated, and then apply them, is successfully maintained, I will undertake to demonstrate that the note cannot be regarded as commercial paper. It will not be supposed that the parties intended by the special stipulation, under consideration, authorizing the company to sell as a factor, to ignore the right and title of the Keeble Co., under the mortgage, to the cotton delivered to it, and its unquestionable right to have it made available for the payment of the secured indebtedness ; and contemplated that only the relation of principal and agent existed between the parties, in respect of the cotton delivered and its proceeds, prior to the maturity of the note, whereby the dominion and control of the cotton and its proceeds, in the hands of the company, were retained by Crenshaw, just as would appertain to any other principal, in reference to property in the’ hands of his factor; hence, the proposition is, that the intention was that the proceeds should be held by the Keeble Company as Crenshaw’s agent, until the maturity of the note, at the latter’s risk; and yet, by virtue of the interest the company bad in them as mortgagee, free from any power on the part of Crenshaw to direct or control the manner or means of their deposit or safe-keeping. In other words, the parties agreed that the cotton should be prepared for market as rapidly as it could be done, and delivered as rapidly as prepared, and then sold, and the proceeds ap- ■ *519plied to the payment of the secured debts — but, nevertheless, the intention was that the proceeds should not then be so applied, but should lie idle in the hands of the company, as Crenshaw’s factor, kept according to its judgment and discretion, free from the control of Crenshaw, but at his risk of loss, until the maturity of the note, or until a sufficient sum accumulated to pay the note in full. I am persuaded such a conclusion not only does not comport with common experience, but that it is opposed to the plain terms of the agreement itself. 1 It cannot be denied that the right of the Keeble Co. to demand, and compel the delivery of the cotton as rapidly as it was prepared for market, and of Crenshaw to make the deliveries, were alone by virtue of the security which the mortgage afforded, and not by reason of any relation of principal and factor created between the parties. It could not be contended that if, on the 15th of October, Crenshaw then having the cotton in his possession, had paid the mortgage debt with money, the Keeble Co. could thereafter maintain an action against him for the recovery of the cotton, for the'obvious reason that its right to it was only for the security of the debt. • The cotton, therefore, when delivered necessarily went into its possession as mortgagee. It was its stipulated duty to sell and apply the proceeds to the payment of the mortgage debt. I cannot avoid the conclusion, universally applicable as between mortgagor and mortgagee, in such cases, that the law, eo instanti upon a sale, applied the proceeds to the secured debt. The provision that the cotton should be sold by the company, as agent and factor of Crenshaw, at the usual commission, is no more in legal effect, so far as it affects the question now under discussion, than a power of sale in any other mortgage. All such powers are but the creation of agencies coupled with interests, and the uni ver al rule is that they must be strictly pursued. The law recognizes the same relation of trust and confidence between a mortgagor and a mortgagee invested with a power of sale, as obtains between other principals and agents, and holds the mortgagee to strict observance of good faith towards the mortgagor', and rigid conformity to the powers conferred. A stipulation that the mortgagee shall sell as agent of the mortgagor is no moré than the law would have implied without it. The superadded relation of factor, in *520the preseht case, manifestly had no other purpose than to entitle the mortgagee to charge the commission of a factor for making the sales, which, without the provision, probably it could not have done.
If I am correct in this conclusion, it follows, unavoidably, that the contract, in question, was not governed by the commercial law, touching the rights of bona fide purchasers without notice. In that event, a fair statement of its terms would be : A promise by the maker to pay a certain person, a certain sum, at a certain time and place, but subject to the binding stipulation that the maker might discharge the same, in whole or in part, before maturity, by making thereon partial payments, at uncertain times and in uncertain sums, to be rendered certain by the deliveries and sales of cotton, as the same could be prepared for market.
Upon the postulate that the note was intended by the parties to be and remain what, on its face it purported to be — a negotiable promissory note governed by the commercial law — let us notice the practical operation of the contract, if effect be given (as it must as against appellant) to the qualifying stipulation, above mentioned. The note, then, was given to perform the office of money to be used and to pass as money in the business of the country, for such is the nature of commercial paper. The Keeble Co., by the endorsement of its name thereon, could put it in circulation, and, in that condition, it would pass from hand to hand and place to place, through as many successive holders aDd places as the exigencies of commerce, in respect to it, might demand. The indorser, the Keeble Co., who put it in circulation, was under no duty or interest, and possessed of no power, to keep track of it, so as to locate, at any given time, the place or person where or by whom it might be held. It could never return to charge or affect that company, until after maturity, and formal notice to it of dishonor by the maker. The obligation of the maker, Crenshaw, was that he would be ready at the stipulated place of payment, on the day of maturity, to pay the note upon its due presentation there, by the then holder and owner thereof; or have'funds provided, at that time and place, for its payment, on presentation. Meanwhile, it did not concern him by whom or where the note was held. Unless by some accident *521of business or intercourse, he did not know, and could not know, where the paper was, or who the holder thereof, at any given time. The holder would take the paper with the absolute right to demand and receive payment, at the time and place appointed, freed from all infirmities and defenses which might impair it as between the original parties. He was under no duty or interest, meanwhile, to notify the maker, or any indorser, of his acquisition. Indeed, the paper put afloat by the payee, would flow like a bank note, through the channels of commerce, to unknown places, and into unknown hands, until at last, the final holder brings it back to the place of payment, on the day of payment, and visits its obligations upon the parties bound. The maker, when called upon for payment at maturity, was "entitled to production of the note, that he might know the demand was made by the veritable owner. These are elementary principles of the commercial law. The lawbooks, recognizing that the party primarily bound on commercial paper can not know its holder until presentation at maturity, inform us of limited defenses which accrue to him when sued without previous presentation and opportunity to pay; and we are not wanting in authorities which hold, that an action will not lie at all against the acceptor of a bill or maker of a negotiable note, when no opportunity has been given to pay by due presentment, according to law. — Chitty on Bills, Marg. p. 353, and cases cited in note. Other cases hold that it dispenses with the necessity of tender before suit, and that tender, in such case, may be made for the first time by bringing the money into court. — Chitty on Bills, supra. Our own decisions recognize qualified defenses in such cases. — Irvine v. Withers, 1 Stew. 234; Evans v. Gordon, 8 Port. 152; Montgomery v. Elliott, 6 Ala. 701; Connerly v. P. & M. Ins. Co., 66 Ala. 432.
Applying the special qualifying stipulation, as I interpret it, and the logic of the argument in support of the commercial character of the note, must force its advocate to the position, that when the Keeble Co. received and sold a bale of cotton,'the company (or Crenshaw, seeing to it, as he must have had the right to do, that his agent was faithful) must have set forth upon the world of commerce, and through its unknown labyrinths, traced and located the holder of the note and there ef*522fected the partial payment. And let us suppose the task performed and the holder found, and what results? The holder has purchased for value without notice, and is under no obligation whatever to receive the offered payment, and he relies and stands upon his right to demand payment of the whole when the paper matures. But let us suppose the payment accepted, clearly there was no right in the debtor, making partial payment, to demand , a surrender of the paper, and no light or power to require or compel the indorsement of the payment thereon, hence the result, that, though partially paid, the note still stands as a circulating, commercial paper, ready to be transferred the next moment to an innocent holder for value, to return upon the maker at maturity with the •resistless demand of full payment. Thus, we see, obviously, that the two principles, viz., that the note should be a circulating medium under the commercial law, and that the maker was entitled to make partial payments, in the manner I have attempted to show, will not adjust •themselves to each other. They are utterly inconsistent.
“A note or bill must be free from contingencies or conditions that would embarrass it in its course.” — Chitty on Bills, Marg. p. 134, note. As I have endeavored to show, this note must be read, as against appellant, as if it contained, on its face, the special stipulation, in question, authorizing the maker to make undefined, uncertain partial payments before maturity, the times and amounts to be determined by the sales of cotton, as aforesaid. Let us then suppose the stipulation to be incorporated in it, and it is perfectly apparent that it. would represent to the person to whom offered, in commercial dealing, no certain sum whatever which could be collected upon it at maturity. It could not pass from hand to hand and be accepted as a paper which, at maturity, would represent and entitle the then holder absolutely to a certain sum of money freed from all payments, discounts or defenses, for the reason that, on its face, it shows the maker reserved the right to make partial payments, before maturity, and it could be known, at no time after the cotton season bégan, what payments may have been made thereon. It cannot be doubted that such a stipulation would destroy the commercial character of a note, otherwise negotiable.
I do not deny that the negotiable quality of a paper *523having a fixed day of payment, with the other requisites, is not destroyed by the incorporation therein of a contingency, upon which the sum thereof may become payable sooner. Such was the nature of the case of Walker v. Woollen, 54 Ind. 164, (23 Amer. Rep. 639), and other cases cited by my brother McClellan. In that case the note was : “Six months after date, or before, if made out of the sale of Drake’s Horse Hay-Fork and Hay-Carrier, I promise to pay James B. Drake'or order, ” &c. There the contingent promise was to pay the whole sum, on the given contingency, just as the absolute promise was to pay the whole sum at the fixed time; and it was properly held that the mere superadded promise to pay sooner, upon a contingency, did not affect the negotiable quality of the paper, since, by the absolute promise, it must at all events be certainly paid at a certain appointed time. Whether paid upon the happening of the contingency, or at the time specially fixed, the result would be the same. The whole contract would, in either event, be discharged and the note withdrawn from circulation and surrendered to the maker. But, suppose, instead of the contingent promise therein made, the note had stipulated that whenever the maker should sell a Hay Fork and Carrier, he should have the right to pay upon the note the amount realized upon the sale, and the creditor should have the right to demand payment thereof ; we see, at a glance that the analogy between that case and the present is complete. Most clearly such a stipulation would have been inconsistent with the uses and purposes of a circulating paper. At no period in its history could it be known to any person to whom it might be offered in commercial dealing, how much was unpaid upon it, and taking it charged with knowledge of the maker’s right to make partial payments, at indefinite times and in indefinite amounts, save only as the time and amounts would be made definite by the sales of machines, the purchaser would, in law, be charged with notice of all such payments as may have been made to any previous holder. Such paper lacks the most vital attributes of a circulating medium. It could not be trusted anywhere as representing any particular sum of money, for no one could know what it would bring, if anything, when presented for payment on the day of maturity. Such, in my judgment, is substantially the nature of Crenshaw’s contract.
*524Nor do I deny that valid commei'cial paper may be payable in instalments; bxit it is well settled that, in order to render it negotiable, the amount and time of payment of each instalment must be certainly expressed in the writing. — Teideman on Com. Paper, § 25 d. note 4. No inconvenience can result from such a paper'. When a given instalment matures, the paper, as to that instalment, ceases to be negotiable, and the maker, paying the instalment at maturity, will be protected against any subsequent holder. And the'instalment, as in case of a note payable in gross, must be presented by the holder for payment, at the proper time and place.
The view I have taken that the parties intended the securities to remain in the hands of the Keeble Co. and be paid as I have indicated, is strongly fortified by the emphatic provision that the purpose of making the advances was to promote its business as a cotton factor, and that the cotton conveyed by the mortgage should be sold by it, as factor, at the usual commission of $1.00 per bale. It can not, of course, be disputed that it was not the intention of the parties that the note should be transferred without the mortgage, for the reason that it was legally impossible to do so, and preserve the integrity of both instruments. The mortgage was inseparable from the debt, and a transfer of the debt necessarily carried the mortgage with it, in equity. Nor can it be denied that if the debt had been transferred and notice thereof given to Crenshaw, the debtor and mortgagor, he would have been bound to deliver the cotton to the transferee. By no sort of construction of the contract could a conclusion be tolerated that he was bound to deliver the cotton to the Keeble Co., knowixig that it had divested itself of all light, title and interest therein, and invested thexn in another. Thus, we see, upon the mere statement of the case, a transfer of the debt, ünder circumstances binding Crenshaw to a knowledge of it, necessarily destroyed the possibility of carrying into effect the controlling purpose with which the contract was xnade, to-wit, that the Keeble Co. should have the sale of the cotton as a factor, and earn the usual commission for that service. Considering that all parties intended to act in good faith; that the person entitled thereto, when the time should come for action, should enjoy the benefits of the security the mortgage afforded, how was *525it possible for the Keeble Oo. to carry out its prime purpose of earning commissions as a cotton factor, if it was not intended and expected that it should retain the possession and ownership of the securities, which would give it the right to the possession and sale of the cotton?
It is very clear that the provision that the mortgage should stand as security for any additional advances which might be made, and which, if made, should be first paid, exerts no influence upon the case, as it comes before us. There was no obligation on the part of the Keeble Co. to make aditional advances. There was no debt, when the contract was entered into, except the note. It was but a precautionary provision to the effect that if, in the future, a further indebtedness should arise the mortgage should stand as security for the same. Such an indebtedness might or might not have arisen. It is immaterial, as.far as concerns the question we have in hand, that it so turned out that it did arise.