CLARK v Thompson

CLARK v. THOMPSON et al.

(Supreme Court of Alabama, 1915. 194 Ala. 504, 69 South. 925.) Suit by Ida Clar a!ai"#t $. A. %homp#o" a"d a"other for the &a"&ellatio" of a mort!a!e. 'rom a de&ree di#mi##i"! the bill, &omplai"a"t appeal#. eer#ed a"d re"dered. Somerille, *. Complai"a"t file# her bill for the &a"&ellatio" of a &ertai" mort!a!e e+e&uted by b y her#elf  a"d her hu#ba"d o" her realty to #e&ure their oi"t "e!otiable "ote. %he bill alle!e#, a"d the eide"&e, -e thi", ery &learly #ho-#, that the mo"ey for -hi&h the "ote a"d mort!a!e -ere !ie" -a# le"t to the hu#ba"d, "ot to the -ife, a"d that her relatio" to the debt -a# that of a #urety o"ly. %hi# -a# the fi"di"! of the &ha"&ellor, but the bill of &omplai"t -a# di#mi##ed o" the theory that the re#po"de"t -a# a pur&ha#er for alue i" due &our#e of the "ote a"d mort!a!e, -ithout "oti&e of the i"firmity &har!ed. e#po"de"t bou!ht the "ote a"d mort!a!e from the payee, $. A. A. %homp#o" the "ote bei"! payable to %homp#o", or order. I" order to free the "ote of the defe"#e aailable to &omplai"a"t a!ai"#t the payee, it -a# "e&e##ary for re#po"de"t, to a&/uire it i" due &our#e by i"dor#eme"t, a# pre#&ribed by the e!otiable I"#trume"t# a-. Code,  50035014. %he i"dor#eme"t mu#t be -ritte" o" the i"#trume"t it#elf or upo" a paper atta&hed thereto. Code, 4976. %hi# i# but a #tatutory affirmatio" of the rule of the old la- mer&ha"t, -hi&h allo-ed i"dor#eme"t# to be made upo" a" allo"!e that i#, upo" a #lip of paper ta&ed or pa#ted o" to the i"#trume"t #o a# to be&ome a part of o f it. Cra-ford8# A"". e!. I"#t.  690 Crut&hfield . a#to", 1:  Ala. ::3 ;ro-" . . I#bell, I#bell, 11 Ala. 1009, 1013. ;ut the u#e of the allo"!e -a# allo-able o"ly -he" the ba& of the i"#trume"t it#elf -a# #o &oered -ith preiou# i"dor#eme"t# that &o"e"ie"&e or "e&e##ity re/uired additio"al #pa&e for further i"dor#eme"t#. Authoritie#, Authoritie#, #upra. Se&tio" 4976 of the Code #a"&tio"# the u#e of the allo"!e, but &ertai"ly it -a# "ot i"te"ded to e#tabli#h the loo#e a"d u"de#irable pra&ti&e of mai"! re!ular i"dor#eme"t# of &ommer&ial paper by a -riti"! o" o " the ba& of a"y other paper p aper or do&ume"t to -hi&h it mi!ht be temporarily atta&hed, a# by pi""i"!, pi""i" !, a"d, more e#pe&ially, -he" there i# ample #pa&e for i"dor#eme"t o" the ba& of the i"#trume"t it#elf. I" a &a#e lie thi#, ari#i"! u"der the la- mer&ha"t, the Supreme Court of ebra#a ha# rea&hed a lie &o"&lu#io". Said the &ourt< $eb#ter defi"e# the -ord =al lo"!e5 to mea" =a paper atta&hed to a bill of e+&ha"!e for re&eii"! i"dor#eme"t# i "dor#eme"t# too "umerou# to be -ritte" o" the bill bi ll it#elf.8 I" the &a#e at bar the mort!a!e a"d "ote -ere "ot atta&hed or fa#te"ed to!ether a"d, had they bee", a# there -a# ple"ty of room remai"i"! bla" o" the ba& of the "ote for i"dor#eme"t thereo", it -ould be for&ed a"d i"admi##ible &o"#tru&tio" to treat the mort!a!e a# a" allo"!e of the "ote. >oll . ?olle"ba&, 19 eb. 6:9, 64:, 27 . $. 276, 277.  A" e+hau#tie di#&u##io" of the #ube&t, -ith &itatio" of ma"y authoritie#, -ill be fou"d fou"d i" the &a#e of  ;i#hop . Cha#e, 156 @o. 157, 56 S. $. 1070, 39 Am. St. ep. 515, &ited i" 1 $ord# a"d hra#e#, :4:. It -a# there held that a -ritte" tra"#fer of a "ote, made o" a #eparate paper to -hi&h it -a# pi""ed, there bei"! room o" the ba& of the "ote it#elf for the tra"#fer, -a# a" a##i!"me"t merely, merely, a"d "ot a &ommer&ial i"dor#eme"t. I" the i"#ta"t &a#e, -hether the "ote -a# pi""ed to the mort!a!e or "ot, -e are &o"#trai"ed to treat it# tra"#fer, i" the ma""er #ho-", a# a &ommo"la- a##i!"me"t merely, a"d to hold that re#po"de"t -a# "ot a holder i" due &our#e. It mu#t be "oted, ho-eer, that the eide"&e doe# "ot #ho- that the "ote -a# pi""ed to the mort!a!e -he" -he " they -ere tra"#ferred to re#po"de"t, but o"ly -he" they -ere deliered to the payee "early a year before a"d -e &ould "ot pre#ume that #u&h a #uperfi&ial fa#te"i"!, eide"tly for temporary &o"e"ie"&e o"ly, #till e+i#ted at the date of the tra"#fer. It re#ult# that the de&ree of the &ha"&ery &ourt mu#t be reer#ed, a"d a de&ree -ill be here re"dered !ra"ti"! to &omplai"a"t the #pe&ial relief prayed pra yed for i" the bill of &omplai"t. eer#ed a"d re"dered.

GULBRANSON-DICKlNSON CO. v. HOPKINS.

(Supreme Court of $i#&o"#i", 1919. 130 $i#. :26, 135 . $. 9:.)  A&tio" by the Bulbra"#o">i&i"#o" Compa"y a!ai"#t $ilbur . ?opi"#. *ud!me"t for plai"tiff, a"d defe"da"t appeal#. eer#ed, -ith dire&tio"#. A&tio" o". "ote#. %he defe"da"t -a# e"!a!ed i" the !e"eral mer&ha"di#e ;u#i"e## at $e#t >e ere, $i#. %he ;re"ard @a"ufa&turi"! Compa"y -a# a &opart"er#hip i" Io-a City, Io-a, e"!a!ed i" a !e"eral aderti#i"! a"d bu#i"e## promotio" e"terpriDe. E" @ar&h 25, 1916, the defe"da"t a"d the ;re"ard @a"ufa&turi"! Compa"y e"tered i"fo a &o"tra&t by the term# of -hi&h the ma"ufa&turi"! &ompa"y -a# to delier to the defe"da"t &ertai" aderti#i"! matter a"d re"der &ertai" #eri&e# i" promoti"! the defe"da"t8# bu#i"e##, i" &o"#ideratio" of -hi&h the defe"da"t e +e&uted a"d deliered to the ma"ufa&turi"! &ompa"y #i+ "ote# amou"ti"! i" the a!!re!ate to F:40. %he mer&ha"di#e &o"tra&ted for -a# to be u#ed a# premium# or priDe#, to be di#tributed by the defe"da"t i" the ma""er dire&ted, a"d it -a# a!reed that if defe"da"t8# #ale# -ere "ot i"&rea#ed i" a" amou"t #pe&ified that &ertai" payme"t# -ere to be made by the ma"ufa&turi"! &ompa"y to the defe"da"t. E"e "ote, amou"ti"! to F60, -a# paid.E" April 12, 1916, a"d before a"y of the "ote# !ie" by the defe"da"t -ere due, the ma"ufa&turi"! &ompa"y, bei"! i"debted to the plai"tiff, !ae the plai"tiff it# "ote, a"d &o"tempora"eou#ly there-ith tra"#ferred a# &ollateral #e&urity the "ote# i" /ue#tio" by the follo-i"! i"dor#eme"t < ay to the order of Io-a City State ;a", Io-a City, Io-a, for &redit a&&ou"t of Bulbra"#o" >i&i"#o" Co. ;re"ard @a"ufa&turi"! Co. %he defe"da"t failed to pay the "ote# at maturity. %hey -ere i"dor#ed by the Io-a City State ;a" to the 'ir#t atio"al ;a" of Chi&a!o, by -hom they -ere retur"ed to the Io-a City State ;a". %hereafter the plai"tiff brou!ht thi# a&tio". %here -a# a ury trial. %he ury by #pe&ial erdi&t fou"d< (1) %hat the plai"tiff did "ot be&ome the o-"er of the "ote# i" /ue#tio" i" due &our#e of bu#i"e## for a aluable &o"#ideratio" (2) that there -a# a failure of &o"#ideratio" to the defe"da"t of the "ote# remai"i"! u"paid a"d #ued upo". Gpo" motio" of the plai"tiff the a"#-er to the fir#t /ue#tio" i" the #pe&ial erdi&t -a# &ha"!ed from "o to ye# a"d upo" the erdi&t #o ame"ded, ud!me"t -a# re"dered for the plai"tiff for F:23.50, pri"&ipal a"d i"tere#t, a"d &o#t#. 'rom thi# ud!me"t the defe"da"t appeal#. o#;"berry, *. (after #tati"! the fa&t# a# aboe). %he plai"tiff &laim# that it i# e"titled to re&oer be&au#e it i# a holder i" due &our#e. %hat the i"dor#eme"t i# re#tri&tie a# defi"ed by #e&tio" 1636H 6, .$i#. Stat#. 1913, i# &o"&eded. %he "ote# ar dated at $e#t >e ere, $i#.r a"d are payable by their term# at Io-a City, Io-a, -here the "ote# i" the &o"tra&t appear to hae b ee" #e"t for a&&epta"&e by the payee "amed i" the "ote. o &laim i# made that the la-# of Io-a, -here the "ote -a# payable, a"d -here it -a# tra"#ferred, are "ot the #ame a# tho#e of $i#&o"#i". %herefore -e treat the &a#e a# if the "ote# -ere e+e&uted, deliered, a"d payable -ithi" the #tate of $i#&o"#i" a"d i"dor#ed there. Se&tio" 1636H3, $i#. Stat#. 1913, #tate# the ri!ht# &o"ferred upo" the tru#tee u"der a re#tri&tie i"dor#eme"t. ?e may< (1) e&eie payme"t of the i"#trume"t (2) bri"! a"y a&tio" thereo" that the i"dor#er &ould bri"! (:) tra"#fer the ri!ht# a# #u&h i"dor#ee -here the form of the i"dor#eme"t authoriDe# him to do #o but all #ub#e/ue"t i"dor#ee# a&/uire o"ly the title of the fir#t i"dor#ee u"der  the re#tri&tie i"dor#eme"t. I"dor#eme"t# re#tri&tie a# to per#o"# are of t-o i"d#< 'ir#t, tho#e for the be"efit of the i"dor#er a"d, #e&o"d, tho#e for the be"efit of a third per#o". A" i"dor#eme"t for the be"efit of the i"dor#er  &o"#titute# the tru#tee the a!e"t of the i"dor#er, the be"efi&ial i"tere#t remai"i"! i" the i"dor#er, -hile a" i"dor#eme"t for the be"efit of a third per#o" tra"#fer# the title i" the i"#trume"t to the i"dor#ee.?oo . ratt, 37 . J. :31, :4 Am. ep. 5:9 7 C. *. :66. %he i"dor#eme"t of the i"#trume"t i" /ue#tio" by the ma"ufa&turi"! &ompa"y to the Io-a City State ;a" for the be"efit of

the plai"tiff tra"#ferred the -hole title i" the i"#trume"t to the ba" for the be"efit off the plai"tiff.   %he /ue#tio" the" ari#e#, Ca" the plai"tiff, for -ho#e be"efit the i"dor#eme"t -a# made, mai"tai" a" a&tio" upo" the "ote K %hi# /ue#tio" mu#t be a"#-ered i" the affirmatie. Se&tio" 2605, $i#. Stat#., proide# that eery a&tio" mu#t be pro#e&uted i" the "a me of the real party i" i"tere#t. $hile #e&tio" 2603, $i#. Stat#., proide# that a tru#tee L of a" e+pre## tru#t may #ue -ithout oi"i"! -ith him the per#o" for -ho#e be"efit the a&tio" i# pro#e&uted, it i# permi##ie, a"d doe# "ot re/uire that the per#o" for -ho#e be"efit the tru#t -a# &reated be oi"ed -ith the tru#tee. iotro-#i . CDer-i"#i, 1:7 $i#. :96, 120 . $. I 267 7 C. *. 724. %he /ue#tio" the" ari#e#, I# the plai"tiff e"titled to re&oer upo" the "ote# a# a holder i" due &our#e K %he defe"da"t &o"te"d# that u"der the proi#io" of #e&tio" 1636H13, $i#. Stat#., -hi&h proide# that a" i"#trume"t "e!otiable i" it# ori!i" &o"ti"ue# to be "e!otiable u"til it ha# bee" re#tri&tiely i"dor#ed or di#&har!ed by payme"t or other-i#e,, the plai"tiff &a""ot be #u&h a holder i" due &our#e, be&au#e of the fa&t that the i"#trume"t# i" /ue#tio" -ere re#tri&tiely i"dor#ed. %he plai"tiff &o"te"d# that the i"#trume"t# i" /ue#tio" pa##ed to the i"dor#ee a# "e!otiable i"#trume"t#, #o a# to &o"#titute the i"dor#ee the holder i" due &our#e, the re#tri&tie i"dor#eme"t be&omi"! operatie o"ly a# a!ai"#t #ub#e/ue"t tra"#feree#. It i# e#tabli#hed beyo"d /ue#tio" that a" i"dor#ee u"der a re#tri&tie i"dor#eme"t tae# a title /ualified either a# to per#o" or u#e. %he deliery of the i"#trume"t !ie# effe&t to the i"dor#eme"t, a"d it pa##e# to the i"dor#ee #ube&t to all re#tri&tio"# impo#ed upo" it. %he i"dor#ee i" thi# &a#e parted -ith "othi"! of alue. $hile a# bet-ee" the ma"ufa&turi"! &ompa"y a"d the plai"tiff the mo"ey -he" paid -a# to be applied to the u#e of the plai"tiff, the plai"tiff -a# "ot i" a"y #e"#e of the term a" i"dor#ee. %he i"#trume"t# i" /ue#tio" -ere "ot deliered to it u"til after due. It had "o le!al title thereto. It# ri!ht to mai"tai" a" a&tio" upo" the "ote# #o i"dor#ed ari#e# out of "o i"&ide"t of the i"#trume"t a# "e!otiable paper, but rather, ari#e# out of the pra&ti&e a&t# -hi&h re/uire the #uit to be brou!ht i" the "ame of the real party i" i"tere#t. It doe# "ot appear that the "ote# -ere deliered to plai"tiff u"der #u&h &ir&um#ta"&e# a# to pa## the le!al title thereto. $hile "o doubt the Io-a City State ;a" by the term# of the i"dor#eme"t &ould hae tra"#ferred or "e!otiated the i"#trume"t i" /ue#tio", the ri!ht# of the tra"#feree -ould hae bee" #ube&t to the term# of the i"dor#eme"t, a"d #u&h #e&o"d i"dor#ee -ould "ot hae the ri!ht# of a holder i" due &our#e. A"y tra"#fer by the Io-a City State ;a" -ould hae bee" #ube&t to the ri!ht# of the plai"tiff, a"d "oti&e to all #ub#e/ue"t tra"#feree# of the plai"tiff8# ri!ht to the pro&eed# of the i"#trume"t i" /ue#tio". Eur atte"tio" i# &alled to ?oo . ratt, 37 . J :31, :4 Am. ep. 5:9. %hi# &a#e, ho-eer, doe# "ot pa## upo" thi# poi"t %he /ue#tio" there i"oled -a# -hether or "ot it -a# i"&umbe"t upo" a" i"dor#ee u"der a re#tri&tie i"dor#eme"t to proe &o"#ideratio", or -hether &o"#ideratio" -a# imported by the i"dor#eme"t. I" . C. ;a" . $e#t&ott, 117 . J. 467, 435, 2: . . 900, 16 Am. St. ep. 331, ?oo .ratt, #upra, a"d $hite . atio"al ;a", 102 G. S. 657, 26 . d. 250, are &ited o" the propo#itio" that a re#tri&tie i"dor#eme"t re"dered the &he& i" /ue#tio" "o""e!otiable. %he i"#trume"t# i" the ha"d# of the plai"tiff -ere therefore "o""e!otiable, a "d #ube&t to a"y defe"#e -hi&h mi!ht hae bee" made a!ai"#t them i" the ha"d# of the ma"ufa&turi"! &ompa"y. $e do "ot oerloo the fa&t that a" i"dor#ee a&&epti"! "e!otiable paper a# &ollateral #e&urity may be a holder for alue. Shaffer . eaey, 161 $i#. 149, 152 . $. 729. %he trouble i# that the "ote# -ere "ot a&&epted by the plai"tiff, a"d -ere "ot held by the Io-a City State ;a" a# &ollateral, but a# tru#tee for the be"efit of the plai"tiff, a"d the Io-a City State ;a" a# i"dor#ee i# therefore plai"ly brou!ht -ithi" the proi#io"# of the #tatute relati"! to re#tri&tie i"dor#eme"t#. $hile the i"dor#eme"t re"dered the i"#trume"t# "o""e!otiable, they -ere alid a"d tra"#ferable, a"d the plai"tiff i# e"titled to re&oer thereo" i" the ee"t that the defe"da"t failed to e#tabli#h a alid defe"#e thereto. %he plai"tiff further &laim# that the deliery of the "ote to plai"tiff u"ited the le!al a"d e/uitable title, a"d #o &o"#titute# the plai"tiff the o-"er, -ith e+a&tly the #ame ri!ht a# if the or i!i"al i"dor#eme"t

had bee" i" the u#ual a"d u"re#tri&ted form. It appear# from the eide"&e that the "ote -a# "ot deliered to the plai"tiff u"til after due. It &ould "ot, therefore, be&ome #u&h o-"er a"d holder before the maturity of the "ote, a"d -e are "ot &alled upo" to &o"#ider or di#&u## -hat the effe&t -ould hae bee" had there bee" a u"io" of the le!al a"d e/uitable title# before the "ote# be&ame due. %he ury fou"d that there -a# a failure of &o"#ideratio" to the defe"da"t a# to the "ote# #ued upo". %he &ourt #et a#ide the fi"di"! of the ury upo" motio", a"d held that, there -a# "o failure of &o"#ideratio". %he obe&t a"d purpo#e of the aderti#i"! &ai!" -a# to i"&rea#e the #ale# of defe"da"t duri"! the 12mo"th period #pe&ified i" the &o"tra&t. $hile the ma"ufa&turi"! &ompa"y a!reed that, if l7MN per &e"t, of the defe"da"t8# !ro## #ale# did "ot amou"t to F:40, it -ould pay to the defe"da"t a"y defi&ie"&y, i" &a#h, a"d the defe"da"t te#tified upo" the trial that he had "o &laim u"der that &lau#e of the &o"tra&t, that doe# "ot di#po#e of the /ue#tio" -hether or "ot there -a# a #ub#ta"tial failure of &o"#ideratio". It appear# -ith re a#o"able &ertai"ty that the amou"t of the defe"da"t8# #ale# -ere i"&rea#ed, but that i"&rea#ed amou"t of #ale# -a# due to ada"&e i" pri&e# re#ulti"! from -ar &o"ditio"#, a"d "ot to a"y i"&rea#ed betterme"t of bu#i"e##. It &learly appear# that a &o"#iderable part of the !ood# &o"tra&ted for -ere "eer #hipped, or, if #hipped, -ere "eer re&eied by the defe"da"t, that the &ai!" -a# "ot put o" i" the ma""er a"d at the time# #pe&ified i" the &o"tra&t, a"d there i# eide"&e from -hi&h the ury -a# -arra"ted i" beliei"! that the bu#i"e## of the defe"da"t -a# i"ured rather tha" promoted by rea#o" of the ma"ufa&turi"! &ompa"y8# failure to &arry out it# &o"tra&t a&&ordi"! to it# term#. $ithout attempti"! to re&ite the e"tire eide"&e, -e are &learly of the opi"io" that there -a# #uffi&ie"t eide"&e to #u#tai" the ury8# a"#-er to /ue#tio" 2 that there -a# a failure of &o"#ideratio" a# to the "ote# remai"i"! u"paid a"d #ued upo". %he trial &ourt -a# therefore i" error i" #etti"! a#ide the a"#-er to /ue#tio" 2, a"d that part of the erdi&t #hould hae bee" allo-ed to #ta"d. %he plai"tiff "ot bei"! a holder i" due &our#e for alue, a"d the defe"da"t hai"! e#tabli#hed a alid defe"#e to the "ote#, ud!me"t #hould hae !o"e a&&ordi"!ly. *ud!me"t reer#ed, -ith dire&tio"# to di#mi## the plai"tiff8# &omplai"t