Stevens, J.,
delivered the opinion of the court.
This action was instituted by the appellee, Bank of Hickory Flat, ag*ainst the appellant to recover upon a note for three thouasnd dollars executed by W. T. Adair in favor of the Memphis Mining* & Manufacturing Company, or bearer. It appears that the note was given as the consideration- for the purchase of three thousand dollars of the bonds and three thousand seven hundred and fifty dollars of the capital stock of the Memphis Mining & Manufacturing Company. The sale to Adair was negotiated by Marion Allen, treasurer of the mining company, and at the time the note was executed, and as a part of the same transaction, the following written agreement in the form of a letter was addressed to and delivered to the appellants :
“Doddsville, Miss., Dec. 13, 1913. Mr. W. T. Adair, City — Dear Sir: We accept your ninety day three thousand dollar note in payment of capital stock of this company, with the agreement that if at the maturity of the said note you do not care to pay for same, for any reason, we will cancel same and return to you. Tours truly, Memphis Mining & Mfg. Co., by Marion Allen, Treas. Witness: W. H. Arrington.’’
In pursuance of the so-called option evidenced by this letter, Mr. Adair advised the Memphis Mining & Manufacturing Company at the maturity of the note that he did not care to pay the note and accept the bonds and stock. It appears, however, that the payee of the note transferred and assigned the same to the Bank of Hickory Flat, which filed suit upon the note. To the declaration the defendant filed seventeen special pleas, eleven [43]*43of which seem to have been successfully demurred to, and the case proceeded to trial on the declaration and five special pleas. On the trial of the case the plaintiff introduced the promissory note, and when it did so counsel for the defendant claimed the right to open and close the case. Thereupon the defendant introduced testimony in reference to the execution and delivery of the note, the understanding between the maker and the payee, and in reference to who was the real owner of the note at the time the suit was tried in the circuit court. The defendant introduced the deposition of Marion Allen as a witness for the defense, and Mr. Adair testified in his own behalf. "When the defendant, who had been granted the right to open and close, rested, the plaintiff thereupon moved to exclude the defendant’s testimony and to grant plaintiff a peremptory instruction. The motion was sustained, and this action of the court is.assigned for error. Complaint is also made at the action of the court in sustaining certain demurrers to special pleas. There is a wealth of pleading. We refrain from setting out herein the many special pleas, some of which were held insufficient on de-' murrer. These pleas, among other things, charge fraud in the procurement of the note, charge that the bonds and stock of the Memphis' Mining & Manufacturing Company were practically worthless, charge that the Bank of Hickory Flat was not a bona-fide purchaser for value of the note, but that the note was assigned to the bank for the purpose of cutting off the defenses and equities of the maker, and special plea No. 1 especially relied on the written agreement, by the terms of which Mr. Adair was privileged to decline the stock and have his note canceled. Marion Allen, the “promoter” who made the contract with Mr. Adair, testified that he was secretary and treasurer of the Memphis Mining & Manufacturing Company; that he represented his company in the negotiations with Mr. Adair, admitted the execution of the collateral agreement herein above copied, stated that the [44]*44note “was given primarily by Adair, who was already a bondholder and stockholder of said company to tide said company over a period of financial stringency,” that “soon after the maturity of the note, when payment of same was refused by Adair, the Bank of Hickory Flat was credited on the books of the mining company with three thousand dollars, the amount of the Adair note, to offset a corresponding debit of the Bank of Hickory Flat;” that when Adair refused to pay the note there was a new agreement between the Memphis Mining & Manufacturing Company and the bank whereby the mining company ‘1 executed sc note in favor of the bank, for six thousand odd dollars, covering its entire indebtedness at that time, and collateraled the said six thousand odd dollar note by certain bonds of the company, and also by certain other notes made payable to the company, including the W. T. Adair note for three thousand dollars;” that at the time the note was first assigned to the bank the mining company “was indebted to the Bank of Hickory Flat in the sum of several thousand dollars evidenced by ■overdraft;” that witness sent the note to the bank “after a telephone conversation” between the cashier and the witness in which it was agreed that the bank was to use its best efforts in discounting the note and passing the proceeds to the credit of the Memphis Mining & Manufacturing Company, “it being understood at the time that the Memphis Mining & Manufacturing Company would be allowed to check only two thousand dollars of such proceeds, the balance to be applied as a credit against the then existing indebtedness of the mining company to the bank. ’ ’ When Mr. Adair attempted to testify in his own behalf, there was objection to any statements as to what transpired between him and Mr. Allen in reference to the execution of the note “until they first show that the Bank of Hickory Flat was not a bona-fide purchaser for value,” and the court on this objection excluded some of the tesr timony of the ■ defendant, and excluded, among other [45]*45things, any consideration of the written agreement relied on. The objections interposed by counsel for the plaintiff appear to have been based upon the assumption that the burden of proof rested all the while upon the defendant to negative the bona fieles of the bank and to show affirmatively that the bank did not part with valuable consideration. The record further shows that pending the litigation Messrs. Baird & Warmack were substituted as plaintiffs in the case, and the suit proceeded for their use and benefit. Mr. Allen in his testimony states that Baird & Warmack “are large stockholders and bondholders” in the Memphis Mining & Manufacturing Company, and that both have been at different times directors and officers.
The learned circuit court was in error in excluding the defendant’s testimony and in granting the peremptory instruction in favor of the plaintiff. The declaration charges that the plaintiff bank “is the holder, owner, and assignee by indorsement in writing of said note for valuable consideration before maturity, and without notice of any defect, offsets, or defenses.” The testimony shows that the bank was really satisfied, and the note was charged back to the Memphis Mining & Manufacturing Company. The latter company accepted the six thousand dollar note with bonds and other collateral attached, and embraced in this note was the amount advanced by the bank in first discounting the note sued on. There was, according to the proof, a novation as to this indebtedness, and thereafter the Memphis Mining & Manufacturing Company was the real owner of the Adair note. It is true that, according to the testimony, the Adair note was attached to the six thousand dollar note as collateral security, but the plaintiff does not here sue as pledgee of a collateral note, but relies upon the prior discount of the note.
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Stevens, J.,
delivered the opinion of the court.
This action was instituted by the appellee, Bank of Hickory Flat, ag*ainst the appellant to recover upon a note for three thouasnd dollars executed by W. T. Adair in favor of the Memphis Mining* & Manufacturing Company, or bearer. It appears that the note was given as the consideration- for the purchase of three thousand dollars of the bonds and three thousand seven hundred and fifty dollars of the capital stock of the Memphis Mining & Manufacturing Company. The sale to Adair was negotiated by Marion Allen, treasurer of the mining company, and at the time the note was executed, and as a part of the same transaction, the following written agreement in the form of a letter was addressed to and delivered to the appellants :
“Doddsville, Miss., Dec. 13, 1913. Mr. W. T. Adair, City — Dear Sir: We accept your ninety day three thousand dollar note in payment of capital stock of this company, with the agreement that if at the maturity of the said note you do not care to pay for same, for any reason, we will cancel same and return to you. Tours truly, Memphis Mining & Mfg. Co., by Marion Allen, Treas. Witness: W. H. Arrington.’’
In pursuance of the so-called option evidenced by this letter, Mr. Adair advised the Memphis Mining & Manufacturing Company at the maturity of the note that he did not care to pay the note and accept the bonds and stock. It appears, however, that the payee of the note transferred and assigned the same to the Bank of Hickory Flat, which filed suit upon the note. To the declaration the defendant filed seventeen special pleas, eleven [43]*43of which seem to have been successfully demurred to, and the case proceeded to trial on the declaration and five special pleas. On the trial of the case the plaintiff introduced the promissory note, and when it did so counsel for the defendant claimed the right to open and close the case. Thereupon the defendant introduced testimony in reference to the execution and delivery of the note, the understanding between the maker and the payee, and in reference to who was the real owner of the note at the time the suit was tried in the circuit court. The defendant introduced the deposition of Marion Allen as a witness for the defense, and Mr. Adair testified in his own behalf. "When the defendant, who had been granted the right to open and close, rested, the plaintiff thereupon moved to exclude the defendant’s testimony and to grant plaintiff a peremptory instruction. The motion was sustained, and this action of the court is.assigned for error. Complaint is also made at the action of the court in sustaining certain demurrers to special pleas. There is a wealth of pleading. We refrain from setting out herein the many special pleas, some of which were held insufficient on de-' murrer. These pleas, among other things, charge fraud in the procurement of the note, charge that the bonds and stock of the Memphis' Mining & Manufacturing Company were practically worthless, charge that the Bank of Hickory Flat was not a bona-fide purchaser for value of the note, but that the note was assigned to the bank for the purpose of cutting off the defenses and equities of the maker, and special plea No. 1 especially relied on the written agreement, by the terms of which Mr. Adair was privileged to decline the stock and have his note canceled. Marion Allen, the “promoter” who made the contract with Mr. Adair, testified that he was secretary and treasurer of the Memphis Mining & Manufacturing Company; that he represented his company in the negotiations with Mr. Adair, admitted the execution of the collateral agreement herein above copied, stated that the [44]*44note “was given primarily by Adair, who was already a bondholder and stockholder of said company to tide said company over a period of financial stringency,” that “soon after the maturity of the note, when payment of same was refused by Adair, the Bank of Hickory Flat was credited on the books of the mining company with three thousand dollars, the amount of the Adair note, to offset a corresponding debit of the Bank of Hickory Flat;” that when Adair refused to pay the note there was a new agreement between the Memphis Mining & Manufacturing Company and the bank whereby the mining company ‘1 executed sc note in favor of the bank, for six thousand odd dollars, covering its entire indebtedness at that time, and collateraled the said six thousand odd dollar note by certain bonds of the company, and also by certain other notes made payable to the company, including the W. T. Adair note for three thousand dollars;” that at the time the note was first assigned to the bank the mining company “was indebted to the Bank of Hickory Flat in the sum of several thousand dollars evidenced by ■overdraft;” that witness sent the note to the bank “after a telephone conversation” between the cashier and the witness in which it was agreed that the bank was to use its best efforts in discounting the note and passing the proceeds to the credit of the Memphis Mining & Manufacturing Company, “it being understood at the time that the Memphis Mining & Manufacturing Company would be allowed to check only two thousand dollars of such proceeds, the balance to be applied as a credit against the then existing indebtedness of the mining company to the bank. ’ ’ When Mr. Adair attempted to testify in his own behalf, there was objection to any statements as to what transpired between him and Mr. Allen in reference to the execution of the note “until they first show that the Bank of Hickory Flat was not a bona-fide purchaser for value,” and the court on this objection excluded some of the tesr timony of the ■ defendant, and excluded, among other [45]*45things, any consideration of the written agreement relied on. The objections interposed by counsel for the plaintiff appear to have been based upon the assumption that the burden of proof rested all the while upon the defendant to negative the bona fieles of the bank and to show affirmatively that the bank did not part with valuable consideration. The record further shows that pending the litigation Messrs. Baird & Warmack were substituted as plaintiffs in the case, and the suit proceeded for their use and benefit. Mr. Allen in his testimony states that Baird & Warmack “are large stockholders and bondholders” in the Memphis Mining & Manufacturing Company, and that both have been at different times directors and officers.
The learned circuit court was in error in excluding the defendant’s testimony and in granting the peremptory instruction in favor of the plaintiff. The declaration charges that the plaintiff bank “is the holder, owner, and assignee by indorsement in writing of said note for valuable consideration before maturity, and without notice of any defect, offsets, or defenses.” The testimony shows that the bank was really satisfied, and the note was charged back to the Memphis Mining & Manufacturing Company. The latter company accepted the six thousand dollar note with bonds and other collateral attached, and embraced in this note was the amount advanced by the bank in first discounting the note sued on. There was, according to the proof, a novation as to this indebtedness, and thereafter the Memphis Mining & Manufacturing Company was the real owner of the Adair note. It is true that, according to the testimony, the Adair note was attached to the six thousand dollar note as collateral security, but the plaintiff does not here sue as pledgee of a collateral note, but relies upon the prior discount of the note. It is unnecessary to speculate upon the rights of the bank as a pledgee of „a collateral note deposited after its maturity and after Mr. Adair had given notice of his refusal to pay the same. Under the state of this record £he defendant had the right [46]*46to rely upon, the written collateral agreement and any other legitimate defenses. It is true there is practically nothing, in the testimony to show that the Memphis Mining & Manufacturing Company was insolvent or that its bonds and stock were worthless. As against the payee, however, the defendant had a right to rely upon his contract.
It was competent to plead and to show by the proof also that a material portion of the proceeds of the note were applied by the Bank of Hickory Flat toward liquidating a pre-existing indebtedness. Merchants’ and Farmers’ Bank v. Bank of Winona, 106 Miss. 471, 64 So. 210. There is no proof whatever that the bank was in fact an innocent purchaser for value, and there is no proof just how Baird & Warmack came to be the owners of the note sued on. There was an effort in this case to show that Baird fc War-mack had purchased the property and effects of the Memphis- Mining & Manufacturing Company after the maturity of the note and after the note had'been charged back to the mining company.
It was certainly not competent for the Memphis Mining & Manufacturing Company, payee, to repossess the note from the bank, and thereafter to rely upon the bona fides of the Bank of Hickory Flat. Inasmuch as the cause must be reversed, and remanded for a new trial, it will profit little to discuss separately the various special pleas or the propriety of the several demurrers thereto.
Reversed and remanded.