7 Wash. 332 | Wash. | 1893
The opinion of the court was delivered by
This is an action on a promissory note. The complaint alleges, in substance, that the defendant duly made, executed and delivered to the First National Bank of Walla Walla, a certain promissory note for the sum of §3,324.34; that thereafter said bank, for a valuable consideration, duly sold, transferred, indorsed and delivered said promissory note to the plaintiff, who is now' the owner and holder thereof; and asks for judgment for the amount of said note, with interest, costs and an attorney’s fee of $200. The answer alleges, in substance, that one Lane C. Gilliam and one J. B. Gilliam made their promissory note, and thereby promised to pay to the order of the defendant the
The legal questions involved are — (I) Was the payment of the collateral note under the allegations of the answer a payment by the makers; and (2), under such circumstances does the payment of the .collateral note
On the first proposition the respondent insists, that the transactions set up in the answer have every characteristic of a sale, and stress is placed on the averment that the Gilliams now own and hold the note. This expression construed as an independent proposition would, no doubt, justify respondent’s contention; but to give it such a construction would render it inharmonious with the other averments of the answer, and, in fact, would render the other averments meaningless; and, construing all the allegations together, we think sufficient is stated in the answer to plainly show that the act of W. S. Gilliam in the transaction was the act of Lane C. and J. B. Gilliam. In fact, that allegation is set out in language'plain and unmistakable.
That point being settled, then, was the payment of the collateral note a payment of the original note sued on in the action ? We think the authorities sustain this proposition. Randolph on Commercial Paper, ^ 795, lays down this general proposition: ■
‘ ‘ When the collateral note is collected, and the proceeds received by the pledgee, it operates as a payment pro tanto. of the debt secured. ’ ’
In Hunt v. Nevers, 15 Pick. 500, the following rule was announced:
‘‘ Where a collateral security is received for a debt, with power to convert the security into money, and the proceeds of the security equal or exceed the amount of the debt, the debt is de facto paid, for the same person being the party to receive and pay, no act applying the money to the debt is necessary, but the law makes the application.’’
In Ware v. Russell, 57 Ala. 43, the doctrine of payment is made to depend upon the priority of the transfer; thus it is held that if the collateral be first transferred, it oper
In Cocke v. Chaney, 14 Ala. 65, it was held that, when a creditor who has received a note as collateral security transfers it to another, he must be understood to have elected that mode of payment, and to have made the security a substitute for the debt. The same doctrine was announced in Wesfphal v. Ludlow, 2 McCrary, 505 (6 Fed. Rep. 348). And we think the authorities are uniform in holding that where the transferee is the maker of the collateral note the payment of the collateral note extinguishes the original note.
It was argued by the respondent that, if the bank had power to sell the note, the defense in this action could not be maintained. The general consensus of authority seems to be that unless a power to sell is superadded to the agreement whereby such chose in action is pledged as a collateral security the creditor has no right to sell such chose in action. This was squarely decided in Whitteker v. Charleston Gas Co., 16 W. Va. 717, and in Roberts v. Thompson, 14 Ohio St. 1. But it seems to us that the power of the ci-editor generally to dispose of mercantile paper under such circumstances cannot be raised in this case, for under the allegations of the answer the purchaser in this instance was the maker of the collateral note, and purchased with full knowledge of all the relations existing, and there is no question of innocent purchasers in the case.
Respondent cites several authorities to the effect that the payment of one not a party to the note of the amount
Judgment will, therefore, be reversed, and the cause remanded with instructions to proceed in accordance with this opinion.
Stiles, Anders and Scott, JJ., concur.
Hoyt, J., dissents.