Court Opinion

ID: 3380774
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:28:12.186611+00
Date Added: 2024-06-11T12:45:51.614492
License: Public Domain

It is an established principle in the law of negotiable instruments that the recital of the consideration for the instrument, even though this may indicate an executory undertaking on the part of the payee, not only does not affect the negotiability of the instrument, but does not put the purchaser upon the duty to inquire whether the counter promise constituting the consideration has, or has not, been performed. Such a recital is at best but the suggestion of a potential equity, that is, if the consideration has failed or should fail, an equity will result in favor of the maker. Such suggestion does not rise to the level of notice, nor put the purchaser upon inquiry. This is according to the weight of authority in the United States. Detroit Savings Bank vs. Towers, 42 Penna. Sup. 246; Producers National Bank vs. Elrod,68 Okla. 248, 173 P. 659; U.S. National Bank vs. Floss,38 Or. 68, 62 P. 751, 84 Am. St. Rep. 752; Jennings vs. Todd,118 Mo. 296, 24 S.W. 148, 40 Am. St. Rep. 373; Hakes v. Thayer,165 Mich. 476, 131 N.W. 174; Bigelow on Bills, Notes and Checks (3rd Ed.) par. 482, page 373.
The case of Sumter County Bank vs. Hayes, 68 Fla. 743,67 Sou. Rep. 109, when properly understood, is not to the contrary, as seems to have been construed by the annotator in L.R.A. 1918-F, pages 1018-1019. That case involved notes which had been conditionally delivered and what was said in the opinion must be construed in the light of what was before the court for its consideration. There the notes were delivered to a trustee conditioned upon the erection of a canning plant and the delivery of stock therein. In the event of a breach of the condition the notes were to be redelivered and were to be utterly *Page 649 
void, so the case was not one strictly of failure of consideration only, but involved a breach of conditional delivery which was held good as a defense, because the endorsee took the notes with knowledge of the circumstances.
The recent Federal case of Jackmus v. Clarissen  Knight,47 F.2d 766, so construes the case of Sumter County Bank v. Hayes, supra, and I think that construction of it is correct.
It seems to me that the great weight of authority is to the effect that where a negotiable promissory note is valid at its inception, a default in the performance of an executory agreement between the original parties will not defeat a recovery by a transferee for value, before maturity, though he had knowledge of the agreement (Kinkel vs. Harper, 7 Colo. App. 45,42 P. 173) though we have held that a different rule prevails when the note is acquired after maturity. See Harper vs. Bronson, decided at the present term, opinion filed January 23, 1932, reported in 139 Sou. Rep. 203.
It seems to me that Sumter County Bank v. Hayes is not inconsistent with the weight of authority, but it is to be read in the light of what the court was there called on to decide. See Smitz v. Wright, 64 Fla. 485, 60 Sou. Rep. 225. That decision must be confined to cases where not only the consideration, but the title of the transferee, is in question.
BUFORD, C.J., AND TERRELL, J., concur.