Connerly & Co. v. Planter's & Merchants' Insurance , 66 Ala. 432 ( 1880 )

BEIOKELL, C. J.

The plea of non est factum, interposed by Catherine Connerly, was matter of defense purely personal. In actions ex contractu, if one of several defendants plead matter in his particular discharge, not directed to the merits, it is the right of the plaintiff to enter a nolle-prosequi, or discontinuance as to him, without producing a discontinuance as to the other defendants. — 1 Chitty’s Pl. 604; Mock v. Walker, 42 Ala. 668; Reynolds v. Simpson, at the last term,

The instruments, on which the action is founded, have every quality of negotiable promissory notes. Each is for the payment of a specific sum of money, absolutely, at appointed times, and designated places, to a partnership, by its firm name; and the statute declares, that they are subject to, and governed by, the commercial law. — Code of 1876, § 2094. Looking alone to the face of the paper, the primary duty resting on the maker, though the payees had indorsed it, was payment at the times and places appointed.- The passiveness of the holder — laches in making presentment of them, or in demanding payment — would not lessen the duty of the maker, nor relieve him from liability, unless continued until the statute of limitations would bar a recovery.

The evidence offered of the solvency of the maker, and of the indorsers (the payees), when the notes became due, and of the ability of the maker to have protected himself from loss, if he had been then notified the notes were unpaid, to say the least of it, priyia facie, was irrelevant, and properly excluded. If the fact that the notes were accommodation paper, made without consideration moving from the payees to the maker, and that as between them the duty of making payment rested on the payees, would cast on the holder the necessity of giving notice of non-payment to the maker, it should have been shown that he knew, at the time of its maturity, the character of the paper, and of the relation subsisting between the maker and the payees. Men can not, without their knowledge, be subjected to duties of this kind, and to loss, if they are not observed. There was no evidence tracing to the holder any notice, until after the maturity of the paper, and the suspension of business by the payees, that it was not precisely what on its face it purports to be — . an unconditional promise, on a valuable consideration, for the payment of a specific sum of’money, at an appointed time and place ; and every holder for value had the right of so regarding and dealing with it. Though payable at particular places, presentment there was not a condition precedent, or necessary to fix the liability of the maker. If he was there in readiness to meet them, or if there he had deposited funds to meet them, a matter of defense might arise, if loss was to ensue from the failure of the holder to make prompt presentment and demand of payment. But, that not being the fact, the failure to demand payment would not lessen his liability.—Wallace v. McConnell, 13 Peters, 136; Irvine v. Withers, 1 Stew. 234; Evans v. Gordon, 8 Porter, 142; Montgomery v. Elliott, 6 Ala. 701.

It is not matter of dispute, that the notes were in fact what is known as accommodation paper; a mode adopted for a loan of credit by the maker to the payees, by which the maker, as to every holder for value, to whom the payees should, in the usual course of business, negotiate the notes, assumed the obligation and relation of a debtor, and the principal and only debtor to the payees, though they were under the duty of protecting him from the payment of the notes, and of indemnifying him, if he was compelled to payment. So long as the notes remained in possession of the payees, they were, of course, wanting in every element of debts. When negotiated in the ordinary course of business, not having been made for any specific purpose, or to be applied to particular uses, but made to aid the payees in the general transaction of their business as factors and commission-merchants, they became precisely what on their face they import — negotiable promissory notes, for the payment of which the maker was bound primarily and unconditionally. The holder, acquiring them, whether before or after they were due, may or not have been informed of their character, and of the relation which, by the separate and extrinsic agreement, not incorporated into, but purposely excluded from the notes, existed between . the maker and the payees. If he knew they were accommodation notes, he knew also that they could not answer the purposes of their creation, until negotiated by the payees, and when negotiated, that the maker should stand in the relation, and bear the liability expressed on their face.—Grant v. Elliott, 7 Wend. 227; Brown v. Motts, 7 John. 361.

Nor would the title of the holder be affected, because.he may have acquired the paper after its maturity. When accommodation paper is not made for a specific purpose; when there is, by the understanding of the parties, no restriction upon its use; there can be no inference, or presumption, that it is to become valueless, or that the authority of the party intrusted with its use ceases, if it is not negotiated before its maturity. Negotiation after maturity may serve the very purpose of its making — in that way only, it may be, the intended loan of credit can be made effectual; and certainly, putting in circulation accommodation paper, after its maturity, can not be esteemed fraudulent, or malafides attributed to the party who has the right of using it.—Charles v. Marsden, 1 Taunt. 224; Brown v. Mott, supra; Lincoln v. Stevens, 7 Metc. 529.

When Oonnerly consented to make the notes, for the use and benefit of the Weavers, and to intrust them with their negotiation in the transaction of their business as'merchants, he placed himself in the front, and must abide' the consequences. To every holder for value, to whom no fraud can be imputed, he must be deemed the maker upon a valuable consideration, and liable in that capacity. — 2 Amer. Lead. Cases, 242. In no aspect of the case, was evidence admissible in reference to the solvency of the Weavers, and of Connerly’s ' ability to protect himself from loss, if he had been notified of the non-payment of the notes. It was his duty, if he had desired protection, to inquire whether the notes had been negotiated; and if they had not, to have regained possession of them.

The several instructions given on request of the plaintiff, are free from error prejudicial to the appellant. The good faith of the appellee, in the acquisition of the paper, was undisputed; nor was it insisted, the payees were guilty of bad faith in its negotiation. The point of contention was, whether the appellee was a holder for value, protected against the want of consideration as between the maker and the payees. These instructions place the holder in the situation in which he would stand if this were not accommodation paper, made for the purpose of enabling the payees to obtain credit from third persons — as if there had been a valuable consideration intended, which had no existence, or which had failed, or an illegal consideration, or there was fraud infecting the transaction between the maker and the payees. The weight of authority seems in favor of the proposition, that if accommodation paper is taken as a security for a preexisting debt, or on■ any other valuable consideration, the. holder, acquiring it in good faith, may enforce it, though there was a want of consideration between the original parties. — 2 Am. Lead. Cases, 242. Whether the rule could- be adopted here, without infringing upon the rule, so long' adopted that it can not be departed from without disturbing transactions it may have influenced, that a holder of negotiable paper as collateral security for a pre-existing debt is not a bona fide holder for value, protected against equities and defenses existing between prior parties of which be had no notice, we do not consider. This is conceded to the appellant by these instructions, which assert, in other respects, no more than well settled rules of commercial law. All holders of negotiable paper, acquiring it before maturity, in the ordinary course of business, are presumed to have acquired it on a valuable consideration. The rule here prevailing is, that when it is shown there was illegality, want or failure of consideration, or bad faith in giving it circulation, the holder must prove that he acquired it on a valuable consideration, before maturity, or his title can not be protected.—Ross v. Drinkard, 34 Ala. 434; 1 Brick. Dig. 276, § 356. And whenever it is shown that the holder acquired it before maturity, by the payment of money, or giving for it other thing of value; or that he ceded,' forbore, or suspended his legal rights, or was induced to change his position for the worse, he is a holder for value, whose title must be protected. — 2 Am. Lead. Cases, 223-245. This is the proposition embodied in the instructions ; and we repeat, they are free from error prejudicial to the appellant.

It is urged, however, that as there was evidence tending to show that the notes were taken as collateral security for particular debts contracted by the payees, which had been paid, there was a just defense against them, and the instructions .are erroneous, because they do not direct, but divert the attention of the jury from this phase of the case. It is obvious this question was not presented to, or considered by the -Circuit Court; but the whole defense was limited to the point, whether the appellee was a holder of- the notes in good faith, and upon a valuable consideration; and for this reason, it •can not now be considered. There was evidence in support of the instructions as given, and evidence in conflict with that, which tended to prove the notes were taken and held as security for particular debts. It was the right of the appellee to request instructions based on that view of the evidence favorable to a recovery; as it was the right of the appellant to request instructions based on that view of the evidence which would have defeated a recovery. Instructions, .given on either hypothesis, are not objectionable, because they refer to, and are based on a part of the evidence only. .Any injury apprehended from them must be avoided by the request for instructions adapted to each and every hypothesis the evidence tends to establish.

We have examined and considered every cause of error •assigned, and can not find that they warrant a reversal.

The judgment is affirmed.