151 N.W. 42 | S.D. | 1915
On or about April 1, 1913, respondent applied
“The statements made in this application are made by me for the purpose of obtaining a loan of money from John Hayes of Fort 'Pierre, South Dakota, and are true to the best of my knowledge and belief. * * * I hereby appoint and constitute S. E. Sanders, my agent, for the purpose of procuring said loan, and to whom I do hereby grant full authority to receive the funds herein applied for. Payment to my said agent of the 'amount due me under this loan shall be construed and held to be sufficient consideration for the execution and delivery to the mortgagee of the papers given for said loan.”
This application was forwarded to John Hayes of Ft. Pierre. Mr. Hayes procured an abstract of title, approved the loan, and sent to respondent two mortgages for execution, both running to appellant Barnes Bros., a corporation, one for the sum of $350, and one for the sum of $43.75. Upon the return of the executed mortgages to him, Mr. Hayes sent all of the papers, including the application, to B'arnes Bros., of Minneapolis, with instructions to deposit the money in a bank at Minneapolis to the ciedit and advice of the Citizens’ State Bank of Ft. Pierre, of which Mr. Playes w.as president. About that time the 'bank at Ft. Pierre was taken in charge by the State Bank Examiner, who ■has proceeded to wind up the affairs- of the bank. The proceeds of the loan have never been paid to respondent nor to 'her agent, S. E. Sanders, but it is claimed by appellants that the money was virtually paid to respondent by reason of the fact that the books of the bank at Ft. Pierre show a credit to her. This action was begun in July, 1913, for the purpose of canceling said mortgages of record. It was alleged in the complaint that Barnes Bros, assigned the first mortgage to appellant Charles Sehmit, by assignment duly recorded. Said defendant answered, separately admitting that the mortgage had been assigned to him, alleged that, before the commencement of ■ the action, he had resold the same to Barnes Bros., and he disclaimed any interest therein. Trial was had by the court, which made findings of fact and conclusions of law for the plaintiff, and entered judgment canceling ■the said mortgages of record. From the judgment and order
“It is perfectly true, as a general rule, that the bona fide ■holder of negotiable paper has a right to sell the same, with all. the rights' and equities attaching to tit in hie own hands, to Whoever may see fit to buy .of him, whether such purchaser was aware of the original infirmity or not. Without this right he would not have the full protection which the law merchant designs to afford him, and negotiable paper would cease to be a safe and reliable medium for the exchanges of commerce. For, if one can stop' the negotiability of paper against which there is no defense, -by giving notice that a defense once existed while it was held by another, it is- obvious that an important element in its value is at once, taken away. But I am not aware that this rule has ever been applied to a purchase by the original payee, nor can I perceive that it is essential to the protection of the innocent indorsee that it should be. It cannot be very important to him that there is one person incapable of succeeding to his equities, and who consequently would not be likely to become a purchaser. If he may sell to all the rest of the community, the market value of bis security is not likely to be affected by the circumstance that a single individual cannot compete for its purchase, especially when we consider that the nature of negotiable securities is such that their market value is very little influenced by competition. Nor do I perceive that any rule or principle of law would be violated by permitting the maker to set up this defense against the payee, when he becomes indorsee, with the same effect as he might have done before it had been sold at all,*147 or that there is -any valid reason against it. * * * If the defendant had a legal and just defense to the note, either in whole or in part, arising from the conduct of the plaintiff, it was the duty of the latter to recognize ’and allow it, and he had no moral right to cut it off, or to attempt so to do, by any transfer. But having done so, and afterwards acquired the note the second time, the law, we think, will not ¡permit him to take advantage of this wrong, but wil'1 remit the defendant to his original rights. Such, we think, should be the rule, because it avoids circuity of action, expense to the parties, and inconvenience to the courts, without, at the same time, endangering any substantial rights.”
See, also, note 54 L. R. A. 673..
Considerable evidence was received, ’both oral and documentary, that was not admissible. But there was sufficient competent evidence to sustain the findings and decision of the trial court.
Finding no prejudicial error, the judgment and order appealed from are affirmed.