Merchants Nat. Bank v. Smith ( 1918 )

July 16, 1918. The opinion of the Court was delivered by The two cases above stated were heard together, and are known as the Bank case and the Hickman case, for convenience of reference. The Bank case is a suit on a note dated January 14, 1907, due October 1, 1909, for $1,000, and the Hickman case is a similar suit on a note of the same date for $1,000 due October 1, 1910. Both notes were given for a stallion sold the defendants by J. Crouch Son, of the State of Indiana. The plaintiffs claim to be purchasers of value before due of said notes, without notice of the defenses relied upon by the defendants.

The suits were filed in the Court of Common Pleas for Pickens county August 26, 1910. Long after the issues were made up in the cases, on the 19th day of October, 1914, the plaintiffs procured assignments of the original contracts of sale of said horse, and on the 25th day of September, 1915, filed supplemental complaints, setting up in each case a second cause of action arising out of these contracts and assignments. The defendants in their answers deny that the plaintiffs are purchasers before due, in good faith, for value, of said notes, and set up failure of consideration in said notes, breach of warranty, and fraud in procuring the contracts, and alterations of said notes after they were given, and allege that the plaintiffs took said notes with notice, and occupy the same position as J. Crouch Son, with whom all the contracts were made. On these pleadings the cases were tried before Judge F.B. Gary at the March, 1916, term of Court. At the close of the testimony the plaintiffs made a motion for directed verdicts. The motion was refused in both cases; the trial Judge holding that they should both go to the jury. He afterwards changed his mind as to the Bank case, and directed a verdict for the plaintiff, but sent the Hickman case to the jury, which resulted in a verdict for the defendant. From the judgment in the Bank case the defendants have appealed, and in the other case Hickman has appealed.

In the Hickman case the appellant by ten exceptions alleges error in not directing a verdict for the plaintiff, and in the Bank case the appellants by six exceptions allege error in directing a verdict in favor of the plaintiff. The exceptions in the Bank case are overruled. His Honor had ample authority for directing a verdict under the facts of the case as developed in evidence and under the authorities of this Court. Bank v. Stackhouse, 91 S.C. 455, 74 S.E. 977, 40 L.R.A. (N.S.) 454; Bank v. Wallace, 97 S.C. 52,80 S.E. 460; Bank v. Grimes, 98 S.C. 218, 82 S.E. 420; Edensv. Gibson, 100 S.C. 354, 84 S.E. 1005; Bank v. Given,103 S.C. 174, 87 S.E. 998; Bank v. Crawford, 103 S.C. 340,88 S.E. 13; Trimble v. Carlisle, 103 S.C. 411, 88 S.E. 28;Cannon v. Hardware Co., 103 S.C. 538, 88 S.E. 284; Harrisonv. Crosby, 104 S.C. 350, 88 S.E. 1102. Farmers Mechanics Bank v. Whitehead, 105 S.C. 100, 89 S.E. 657.

In the Hickman case the facts are identical, but as to the alleged interlineation of the words "without offset" in the note his Honor charged the jury that, even if the interlineation had been made after the execution and delivery of the note, it did not amount to an alteration of the note in a material particular and could not affect the validity of the note. There is no exception or appeal from that ruling on the part of his Honor. An alteration of a note in any immaterial particular will not affect its validity.

The other circumstances claimed to constitute notice that the annual interest on the note was past due and unpaid at the time the note was assigned, but before the maturity of the note, are not sufficient to affect the purchaser with notice, or put him on inquiry concerning the same, or to constitute such a circumstance as to carry the case to the jury. The note sued on is dated January 14, 1907; maturity October 1, 1910; date of transfer, July 19, 1910; interest to be paid annually. The mere fact that the interest was not paid cannot affect a bona fide purchaser for value of negotiable paper, as it is a mere incident of the debt, and the holder loses no right as against the parties, whether makers or indorsers, by failure to demand it, and does not constitute a circumstance to put purchaser on notice or to make inquiry. The fact alone that installments of interest were overdue and unpaid, disconnected with other facts, is not sufficient to affect the position of one who takes a negotiable note for value before maturity and becomes a bona fide holder, and Hickson's note is not subject to the defenses set up. We think the exceptions of Hickman should be sustained, and that his Honor was in error in not directing a verdict in favor of the appellant.

The judgment of the Court is that the judgment of the Circuit Court in the case of Merchants National Bank be affirmed, and that in the case of C.W. Hickman that the judgment be reversed, and the case remanded to the Circuit Court, with instructions to the clerk of Court of Pickens county to enter up judgment for the plaintiff for the sum of $1,059.32, with interest at 6 per cent. per annum from October 1, 1910, and 10 per cent. attorney's fees, under the authority of Naval Stores Co. v. Hamer, 92 S.C. 427,75 S.E. 695.

MESSRS. JUSTICES HYDRICK and GAGE concur.