Court Opinion

ID: 6521478
Source: CourtListenerOpinion
Date Created: 2022-07-19 19:03:52.626007+00
Date Added: 2024-06-11T15:55:09.581990
License: Public Domain

On Rehearing.
THOMAS, J.
Section 5013 of the Code provides: “In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defense as if it were non-negotiable.” Counsel for appellees, Golberg & Lewis, insist on rehearing that the appellees are “holders in due course” of the instrument sued on, which is a negotiable paper, and that it is not open in their hands to the defenses set up in the pleas. This presents for consideration the sole question: Can the payee of a negotiable instrument be a “holder in due course” as against the makers? We think not. Section 5007 of the Code defines a holder in due course as follows: “A holder in due course is a holder who has *259taken, the instrument under the following conditions: (1) That the instrument is complete and regular upon its face. (2) That he became the holder of it before it was overdue, and without notice that it was previously dishonored, if such was the fact. (3) That he took it in good faith and for value. (4) That at the time it was negotiated to him- he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.” All these things must concur, under the plain provisions of the statute, to constitute the holder of a negotiable instrument a “holder in due-course,” and each is as essential as the other to that end. Sub-division 4, quoted above, contemplates that the instrument must be “negotiated” to the holder in order-for the holder to be a “holder in due course.” If there is any doubt from the sub-division itself as to the meaning of the word “negotiated” as therein used, it is clearly removed by another section of the same chapter of' the Code, § 4985, which defines when an instrument is “negotiated” as follows: “An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder-thereof; if payable to bearer it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder, completed by delivery.” — Walker v. Ocean Bank, 19 Ind. 247; Whitworth v. Adams, 26 Va. 333; Blakiston v. Dudley, 5 Duer (12 N. Y. Super.. Ct.) 373; Odell v. Clyde, 18 App. Div. 333, 57 N. Y. Supp. 126; Shanty v. Merchants’ Nat. Bank, 101 U. S.. 557, 25 L. Ed. 892.
From this it therefore clearly appears that the payee-of a negotiable instrument, though the holder of it, is-yet not the “holder of it in due course”; for in order for the holder to be a “holder in due course” under the-present statutes he must have acquired the paper, not as; *260payee, but as the result of a transfer from some prior bolder — either the payee or bearer, if payable to bearer, or some prior transferee or indorsee. The maker of a note cannot in the nature of things “transfer” it or “negotiate” it to the payee named in it; for these terms can only be applicable to something which has an existence, and until the paper, in form a note, is delivered to the payee named in it, it has no legal efficacy or existence whatever as such. Until then it is no more than a blank piece of paper. Legal vitality can be given to it only by delivering it to the payee named in it, or, if it is payable to bearer, only by delivering it to some other person than the maker. By such delivery it rises to the dignity” of a contract — ceases to be nothing and becomes something — becomes a promise on the part of the maker or makers to pay the stipulated sum to the payee named in it, or, if payable to bearer, to the person to whom it is delivered. After such delivery it becomes property, but not before. After it becomes property, it becomes the subject of transfer, but not before. The act on the part of the maker — the delivery — which makes it property makes the person to whom it is delivered, the payee, the owner of it, not as transferee, but as one of the original parties to the contract. Such payee can himself then “negotiate” it, or “transfer” it to other persons just as he can other property he owns; but the maker can never in the nature of things “transfer” or “negotiate” a note he himself makes. When the payee, or bearer, if payable to bearer, “negotiates” the instrument, if a negotiable one, by transferring it to a bona fide purchaser, that purchaser would be protected by our statute against such defenses of the makers as in this case are set up ; for a purchaser can be a “holder in due course,” as defined by our statute, if he brings himself within its terms, but the payee cannot be. This *261construction of our statute makes it in consonance with the rule of the law merchant as laid down in Daniel on Negotiable Instruments, par. 769, to-wit: “It is a general principle of the law merchant that, as between the immediate parties to a negotiable instrument — parties between whom there is a privity — the consideration may be inquired into; and as to them the only superiority of a bill or note over other unsealed evidence of debt is that it prima facie imports a consideration.” Counsel of appellees in support of their contention that appellees, though they are the payees, can he and are “holders in due course” of the instrument sued , upon, urge upon us as authority, not only many cases outside of this jurisdiction, but the decisions of our own Supremé Court in the cases of First National Bank v. Dawson, 78 Ala. 67, and Marks v. First Nat. Bank, 79 Ala. 550, 58 Am. Rep. 620. In the two cases last mentioned the liability to the payee of indorsers, and not sureties on the note, was the question under consideration. Whether under those decisions the same rule of liability should he applied to sureties as was there applied to indorsers we need not determine; for the reason that our statutory “Uniform Negotiable Instrument Law” — those sections of it hereinbefore quoted — has superseded the authority of those cases, if they were ever authority, on the proposition herein considered.
In the case of Rawleigh Medical Co. v. Wilson et al., 7 Ala. App., 60 South. 1001, we collated the authorities on the defenses set up in the pleas in this case.
The application for rehearing -is overruled