52 Miss. 902 | Miss. | 1876
delivered the opinion of the court.
Bill to enjoin the First National Bank of Jackson from
The facts are these: By act of the legislature, approved February 19, 1867 (Laws, p. 391), the auditor was directed to apportion or distribute the interest due the counties entitled on the Chickasaw school fund. By this act it was declared that “the act approved 7th March, 1856, entitled an act to-provide for the payment of interest on the Chickasaw school fund, and for other purposes, shall be strictly observed in all respects, and declared hereby to be in full force and effect.” The auditor was required to make distribution, and issue his warrants on the treasurer of the state, May 1, 1867. Accordingly the auditor notified the county treasurer of Lafayette county that there was due that county the sum of $13,259.69. The notice from the auditor is made an exhibit to the bill. The treasurer of Lafayette procured from the probate clerk of' the county the certificate, required by the act of 1856, to entitle him to draw the money. A copj’- of that certificate is filed as an exhibit to the bill. It is averred that the treasurer of Lafayette county authorized J. M. Lyles, a resident of, and banker in, said county, to receive said money from the state, as-the agent of the county treasurer, and to bring it in person to-him for the use of the county. A copy of the order empowering J. M. Lyles to draw said money is made an exhibit to-the bill, and is in these words: “Pay the within amount, thirteen thousand two hundred and fifiy-nine dollars and sixty cents, to the bearer, J. M. Lyles. (Signed) A. McLeod, county treasurer.” In pursuance of this authority the war
It is further averred that Lyles deposited the warrants in-the First National Bank of Jackson, as collaterals, under am agreement that, on paying the claims to which they were collateral, the warrants should be returned to the said Lyles ; that such action of Lyles was wholly unauthorized, and without, any power or authority, and was a breach of the trust reposed, in him by the county treasurer; that his acts were illegal,, and gave to the bank no right to hold said warrants, or to-collect the same; that the warrants showed on their face that they were trust funds, and were issued on account of interest due on the Chickasaw school fund ; that the said bank is not the bona fide holder of said warrants ; that the said bank holds said warrants subject to the order of the treasurer of' said county of Lafayette; that said J. M. Lyles informed complainant that the warrants were deposited with said bank, subject to the order of said county treasurer, and,, if so directed by the' board of police, he would bring said warrants and place them in the possession of said complainant, with a prayer for inj unction and relief.
The answer of the First National Bank avers that by the order of complainant to Lyles, for the warrants, he violated his fiduciary duty, and assumed the risk of all the consequences ; denies that complainant authorized or empowered J. M. Lyles to receive said funds as the agent of complainant, and bring them to him for the use of Lafayette county ; on the contrary, the order was absolute on its face, and not in any fiduciary character. Avers, without personal knowledge on the part of respondents, that the equivalent of such absolute arrangement was made between the complainant and Lyles. Respondents believe and charge that some arrangement was made, on which the complainant took the responsibility to. assign the fund here, not to Lyles as agent, but in a form which gave him absolute title and control of the fund. Avers that Lyles, after procuring the warrants, presented them to the treasurer for payment, and they would have been paid if the money had been in the treasury to pay them. Avers that the warrants were not deposited in the bank by Lyles, but were indorsed by him in blank, and paid into the bank by Avant, for Avant & Lyles, absolutely, and for a valuable consideration. Respondents had no notice, at the time, of any claim by com
An answer is also filed by J. H. Echols, the state treasurer, and one of the defendants herein, who adopts the answer of the Greens, and adds some material facts. He shows that the warrants in question were received by him into the treasury on July 29 and 31, 1867 — all subsequent to July 25 ; that he was personally and pecuniarily interested in the transactions involved; that in his action he was advised by the then attorney general of the state, who concurred in the course he pursued.
The deposition of Ward G. Vaughan was taken, who testified that he heard a conversation between John M. Lyles and Angus McLeod, treasurer of Lafayette county, with reference to the warrants involved, which conversation occurred at the ofiice of the circuit clerk, in Oxford. Lyles said he could not .get the money on the warrants; that he had them issued in "the name of Angus McLeod, and deposited them with Messrs. 'Green, subject to his order. This conversation was on July 1, 1867. Lyles had just returned from Jackson. Witness was circuit clerk; McLeod was county treasurer, and was in the office with witness. Witness knew that McLeod had sent for the warrants by Lyles.
There was also filed in evidence a letter from the Greens to W. L. Lyles, under date of July 29, 1867, as follows: ■“ Dear Sir: We were called on a few days since by the county treasurer, accompanied by an attorney, who inquired about the ■state warrants issued on account Chickasaw school fund. Since, we learn that he is getting out an injunction to prevent the treasurer from receiving said warrants. This can only be •done on the grounds that Mr. J. M. Lyles committed a fraud in the use of the warrants — an imputation, we are sure, you
The provisions of the act of 1856 (ch. 56, p. 146) are these: Section 1 made it the duty of the auditor annually to credit Chickasaw school funds account, required to be opened between state and the fund by the 5th section of the act of February 23, 1848 (Hutch., p. 234), with interest, etc., which said interest shall be drawn from the treasury in the manner hereinafter provided.
By § 2, county treasurers were entitled to a distributive share of such interest, upon complying with the conditions, hereinafter set forth.
Section 3 made it the duty of the secretary of state to apportion to the counties entitled their proportionate amount of said interest, and it made it the duty of the auditor to-issue his warrant on the state treasurer for said proportionate amount, upon application to him by said county treasurer in person, or by attorney in fact, accompanied with satisfactory proof that said county treasurer has fully complied with the requirements of this act; and it shall be lawful for any sheriff in this state to cash the orders of the county treasurer of his county, for the amount of the interest due his county; and the auditor of public accounts is hereby authorized to receive said order from such sheriff, in his settlement of state taxes.
Section 4 required county treasurers to give bonds for the faithful performance of the duties required by law in relation to said moneys.
Section 5 provides for a successor to the county treasurer in the custody of this fund.
Section 6 prescribes a penalty for a failure of duty on the part of the county treasurer.
Section 8 requires the treasurer to keep a book and an entry of everything pertaining to this fund.
Section 9 authorizes boards of police to appoint school commissioners in certain cases.
Section 10 is as follows : “ That the interest moneys in each county shall be hold subject to the order of the board of school commissioners of such county, which is hereby authorized to expend the same in accordance to the existing laws, or laws that may hereafter be passed applicable to the respective counties of the Chickasaw purchase, in relation to common schools.”
The remaining sections of said act have reference to the loan of the Chickasaw school funds to the railroads.
Section 5 of the act approved February 23, 1848, reads as follows : “ That it shall be the duty of the auditor of public accounts to open an account between the state of Mississippi and the fund realized from the lease of said lands, in a book to be kept by him for that purpose, in which he shall charge the state with the several amounts received on account of said lands, the whole amount of which, after deducting the expenses of said sales, as well as expenses incurred by the state for locating said lands, shall be a charge upon the state of Mississippi, to be held in trust by said state for the use of schools in the Chickasaw cession, and to be applied to that purpose, as hereinafter provided by law.”
Treating auditor’s warrants as commercial paper, the facts of this case, by which it must be solved according to appropriate rules, are these :
1. Auditor’s warrants are like bank checks in this, that they cannot be entitled to days of grace. In the case at bar they were, on being issued, presented to the treasurer for payment, but there was no money in the treasury and they were then, with the full knowledge of the Greens that they had been dishonored, transferred to the First National Bank, the Greens and
2. The warrants bore on their face evidence of their character, viz., that they were issued “ on account of interest on Chickasaw school fund department.” This was full notice to the holders of the warrants of all the words quoted import. The Greens were thus notified of the law, and its terms, under which these warrants were issued upon a trust fund, held in trust for specific purposes, who could disburse the money only in the mode and for the purposes authorized by law.
3. The Greens were also thus informed, or would have been on inquiry, that Lyles was not the owner- of these warrants, but the mere agent, or “attorney in fact,” under the law cited, for obtaining them, and of conveying them, or the money, to the proper officials of Lafayette county.
The record negatives the theory of respondents, of a prior arrangement between the county treasurer and the firm of Avant & Lyles, bankers, for the sale of these warrants in advance of their issuance. Such a disposition of the warrants would have been a violation of the terms of the law under which they were drawn. But the record does not sustain this theory. Lyles, and not Avant & Lyles, was authorized as “ attorney in fact,” within the letter of the law, to draw those warrants. Any disposition or transfer of them, other than their delivery to the county treasurer, was unauthorized and illegal — of all which, in fact or in law, the Greens had notice.
4. No testimony was taken in support of the answer. In rebuttal of its averments and theories a letter from J. & T. Green to W. L. Lyles, under date of July 29, 1867, copied in full herein, was filed as evidence and made part of the record. This letter shows that these warrants were received and held
5. Although the public believed Avant & Lyles to be men of integrity and pecuniary ability, the respondents, pecuniarily concerned, and probably they only, knew personally that they were financially embarrassed; that their paper and account herein described were overdue; that the Greens had pressed for payment, and that they were relieved from their embarrassment only by the warrants involved.
Referring to the adjudication of this case on demurrer, it will be seen that, with the exception of a single point, the law governing it is substantially, if not definitely, settled. The excepted point is thus stated. It must, however, be conceded that it is certainly for the benefit of the commercial world to give as wide an extent as practicable to the credit and circulation of negotiable paper. But whether it should pass in payment of, or as security for, preexisting debts so as to preclude prior questions, is very questionable, and about which there is considerable diversity of judicial opinion. With reference to this point the court remarked that it was at that time unnecessary to determine it, and the same is believed to be equally true on this occasion, in view •of the controlling facts as above stated. The case is not materially changed and this point is not involved. Our predecessors, in deciding this case on demurrer, said: “ It is the well established doctrine of equity that purchasers for valuable consideration with notice of the trust are in each case held to be trustees for the persons beneficially interested. It is a clearly established principle of equity jurisprudence that, whenever the trustee has been guilty of a breach of trust, and has transferred the property, by sale or otherwise, to any third
It was further said that “Lyles was, in equity, a trustee, and in passing off the warrants was guilty of a broach of trust; yet, if' the bank — or the Greens — took them bona fide and for valuable consideration, without notice of the trust, they held them divested of the trust; but if they received them with notice-of the trust, or without consideration, they took them clothed with a trust.” The case thus becomes simple in its solution. In principle, Prosser v. Leatherman, 4 How., 237, is like the present. There the suit was upon a note which on its face bore evidence that it was the property of an estate, the administrator of which had transferred it in violation of his trust. The court say: “The authorities all agree that an improper transfer, with the knowledge of the purchaser, imposes on him a liability in equity in favor of those interested. * * * The executor having the rightful possession of the assets, a knowledge on the part of the purchaser of the illegal disposition would of course be necessary.” Lord Kenton is quoted as saying: “If, upon the face of the assignment of property, it appeared,” etc. Lord Thurlow is quoted as saying that “.if a party concert with the executor to obtain the effects of the estate, in any manner contrary to the duty of the office of executor, the purchaser or pawner will be liable.” And Chancellor KENT is thus quoted : “That the purchaser is safe, if he is no party to any fraud in the executor, and has no knowledge or proof that the executor intended to misapply the proceeds,
Lord Ellenborough, in Taylor v. Plummer, 3 M. & S., 562, says “ that an abuse of trust can confer no right on the party abusing it, nor on those who claim in privity with him.” In Sturtevant v. Jaques, 14 Allen, 523, and Shaw v. Spencer, 100 Mass., 382, the words “ trust ” and “ trustee ” were held sufficient to put a party, taking an assignment of a note containing those words, on inquiry. The notes were in form discharged, but remained in the bank, in Farrington v. Frankport, 24 Barb., 554, as in the case at bar. The bank in that case was held nota bona fide holder. In Bay v. Coddingtons, 5 Johns. Ch., 54, 20 Johns., 637, the party transferring notes to the Coddingtons as collaterals, as in the case at bar, was indebted to the firm on notes past due. It was held that the notes were not negotiated to them in the usual course of business and trade, nor were they the holders of the notes for a valuable consideration, within the meaning or policy of the law. The notes were received. The notes were received after
It is stated in Story on Prom. Notes, § 190, that the general rule as to defenses between the original parties applies to all cases where the party takes the note, even for value, after it has beep dishonored or is overdue; for then he takes it subject to all the equities which properly attach thereto between the antecedent parties. See the cases cited in notes to ib., §§ 195, 196, 197. And see Byles onBills, ch. 11, Of Transfer, etc. ; Sylvester v. Crapo, 15 Pick., 92 ; Thompson v. Hale, 6 ib., 259 ; Ayer v. Hutchins, 4 Mass., 370 ; Nitsom v. Holmes, 5 ib., 543 ; Rice v. Goddard, 14 Pick., 293 ; Burnett v. Offeman, 7 Watts, 130. Also cases cited in note 1, p. 240, Byles, on Bills, 5th Am. ed.
‘‘ After a bill or note is due,” says Lord ElleNBOROUGH, “it comes disgraced to the indorsee, and it is his duty to make inquiries concerning it.” Byles on Bills, 284. An indorsee of a bill dishonored or after due, with notice, has not all the equity of an indorsee for value in the ordinary course of negotiation. Ib., 283. This author divides the subsequent holders of negotiable instruments, vitiated for the cause stated, into, two classes: transferees without value, and transferees with notice. Ib., 224. And this notice may be explicit, as when the holder has notice of all the particular facts avoiding the bill; or it may be only general, as when the holder has only notice of some ground of vitiating it, which will equally destroy his title. Ib., 225, 226; Byles on Bills, 10, Of the Consideration.
A bona fide holder of negotiable paper is thus defined: One who, for full value, obtains from the apparent owner a. transfer of negotiable paper before it matures, and who has no notice of any equities between the original parties, or of any defect in the title of the presumptive owner, is to be deemed bona fide holder. Story on Notes, § 197, note 3, and cases there cited.
In Ragan v. Gray, 27 Miss., 645, the doctrine is very broadly stated that “it is unquestionably true that the assignee of a note, under our law, takes it subject to all the equities existing-against it in the hands of the assignor.” See Code, 1857, art. 2, p. 355. If possible, stronger language is used in Barringer v. Nesbit, 1 S. & M., 22, wherein it is said: “An assignee takes the place of the assignor, and if the latter has been guilty of fraud in the transaction, the former is equally affected by it.”
The word “ agent’’ being attached to the drawer’s name, and the bill to be charged to the drawer’s own agency, was held, in Davis & Gaines v. Henderson, 25 Miss., 549, sufficient to put a prudent man, taking the bill from the drawer, on inquiry as to the precise terms of the contract between the original parties ; and the court say: “It will be sufficient if enough appears upon the face of the transaction to put a prudent man, upon taking the bill, upon inquiry.’ ’ Watt v. Hicks, 1 Cow., 513. When it can be done consistently with justice and sound policy, an indorsee ought, in all cases, to be confined to the contract as made and assented to by the immediate parties. This rule is only relaxed in favor of innocent holders who, from the language employed by the original parties, have good reason to believe that the contract was subject to no condition or restriction as to the liabilities of the parties appearing to be bound thereby. But the reason of the rule ceases the moment it appears that the indorsee could not,
As understood, the facts in this case, and the rules of law applicable thereto, conduct to a very clear conclusion adverse to the claims of the First National Bank, and this result is inevitable upon the opinion entertained of the facts, that the bank took the warrants with full knowledge. Goodman v. Simonds, 20 How., 343 ; Parker v. Foy, 43 Miss., 260 ; Dozin v. Freeman, 47 ib., 647; Andrew v. Pond, 13 Pet., 29; Thomas v. Bell, 8 Ga., 421; Done v. Hathing, 10 Eng. C. L., 349 ; Clark v. Sigourney, 17 Conn., 511; Emanuel & Barrett v. White, 34 Miss., 56 ; Holmes v. Carman, -, 408 ; Briscoe v. Thompson, ib. 155 ; Shepherd v. McEvers, 4 Johns. Ch., 135; Carpenter v. Bowen, 42 Miss., 28; The Mayor v. Ray, 19 Wall., 468; 2 Story’s Eq. Jur., §§ 1255, 1257, 1258, 1260, 1261; c, 1261; d, 1262, and the authorities referred to in the cases herein cited. Under the circumstances Lyles had no title, aud conveyed none. With reference to the commercial character to be given to state, county, and city warrants, scrip, and checks, a very thorough discussion is contained in the Mayor v. Ray, supra. In the view adopted of the case at bar, however, this subject is not material, as full knowledge on the part of respondents is held to underlie and control alike the rights of the parties and the result. The doctrine of that case is that defenses to these warrants are not as restricted and limited as in case of commercial paper. Two points urged by counsel should not be passed unnoticed. One relates to the limitation of defenses between parties to commercial paper based on its dishonor. The rule as to the receipt of overdue or dishonored paper is invoked only to the extent of putting the party upon inquiry. The defense admissible in the case at bar, if this were the only source of information to the bank, is not intended to be discussed. The other is the claim of material advantages to the bank by the laches of the county treasurer. This argument has been more carefully considered than any other, or certainly not less studied
The decree therefore will be reversed, and this court, pro-needing to render such decree as the court below ought to have rendered, doth order, adjudge, and decree that complainant recover of respondents the amount equal to 90 cents on the dollar for the whole amount of the warrants in controversy, that being the value of the warrants conceded in the ■answer, together with 6 per cent, interest annually, besides costs, etc. The clerk of this court will compute the sums due and enter a decree accordingly.
Note. — Application for reargument was made, and refused by the court.