Napa Valley Wine Co. v. Rinehart

42 Mo. App. 171, 1890 Mo. App. LEXIS 355

Opinion

Smith, P. J.

This an action by attachment. The facts out of which the action arose are that the plaintiff sold and delivered .to defendant Rinehart a bill of California wines amounting to four hundred dollars on four months’ time. The defendant being indebted to the interpleader bank in the sum of four thousand dollars, and in order to secure said indebtedness, executed to it a chattel mortgage, whereby he conveyed to it all of the goods in his store, which included the goods which had been sold and delivered to the defendant by the plaintiff, and which had not been paid for. The plaintiff brought its suit against defendant, and caused the goods which it had sold defendant and which were then in the hands of the interpleader to be levied upon under the writ of attachment. The interpleader interposed its claim to the goods under the mortgage which the defendant had executed to it. The court, being requested by the parties to make a finding of the facts in the case and conclusions of law thereon, thereupon made the following special finding of the facts and conclusions of the law thereon •

“First. That the plaintiff sold to the defendant in attachment suit, James H. Rinehart, the goods levied on by the sheriff under the' writ in said suit, the purchase price of which is sued, for in said suit, and that the goods have not been paid for, and that there is due plaintiff for them the amount claimed in the petition.

‘‘ Second. That the title and right of the interpleader depends upon the mortgage read in evidence by said Rinehart which was given simply to secure a pre-existingdebt, viz., a debt existing prior to the sale of the goods by the plaintiff, and that possession was given to inter-pleader by Rinehart of the goods, for the price of which suit is brought, under the mortgage, prior to the issuing and levying of the writ, and that no other consideration passed from the interpleader to said Rinehart for said mortgage. The court concludes the law to be, that, upon the facts above found, the judgment should be against the interpleader.”

The finding and judgment were for the plaintiff. The interpleader appealed.

I. The first question presented by the record before us for our decision is : “ Can the right of a seller conferred by section 4914, Revised Statutes, 1889, to subject the personal property sold by him to the payment of the purchase price thereof, be enforced by attachment under circumstances justifying a suit by attachment against'the vendee?” Upon the authority of Parker v. Rodes, 79 Mo. 91, and State ex rel. v. Mason, 91 Mo. 132, this question must be answered in the affirmative.

II. The second and decisive question in the case is, whether a mortgage of the vendee in possession of the personal property sold by the vendor to the vendee, where the sole consideration of the mortgage was a debt, which existed at the time of the sale of the property on which the mortgage was afterwards given, is an innocent purchaser for value without notice within the meaning of said statutory provision, section 4914. This question may be best answered by a reference first to the adjudged case in this' state.

In Goodman v. Simmonds, 19 Mo. 107, it was said that “we do not say that a bill of exchange passed to a person, in payment of a pre-existing debt, would be liable in Ms hands, without notice to the equities or defenses of the original parties; but that the holders of a bill merely as collateral security for a pre-existing debt, having given no value for it, no consideration for it, hold it liable to such equities.” In Feder v. Abrahams, 28 Mo. App. 454, it was said that “plaintiffs claim that the decision in Deere v. Marsden, 88 Mo. 512, questions the rule stated in Hess v. Clark, 11 Mo. App. 492. This is, however, an obvious mistake. The supreme court in that case simply reaffirms a proposition which has been the law of this state since Goodman v. Simmonds, supra, that one who takes collaterals for a pre-existing debt, without any new consideration to support the transfer, is not a purchaser for value of such collaterals. A similar ruling was made in Terry v. Hickman, 1 Mo. App. 123, and in Brainard v. Reavis, 2 Mo. App. 490. In Logan v. Smith, 62 Mo. 455, it was said : “ Logan took Smith’s note as a collateral security, not for a pre-existing debt, but for a debt created at the time and in the faith thereof, with notice of no equities and he thereby undoubtedly became a holder for value.”. In Deere v. Marsden, 88 Mo. 512, it is declared that “ As to a pre-existing debt, if there is an express agreement on the part of the creditor to forbear suit until the collateral shall mature, the agreement to delay constitutes the transferee a holder for value. The extension of time for the payment of past indebtedness, if for a day only, constitutes a new and sufficient consideration.” Daniel Neg. Inst. [3 Ed.]829 ; Oates v. Bank, 100 U. S. 247 ; Smith v. Worman, 19 Ohio St. 148.

In Hodges v. Black, 8 Mo. App. 389, it is said that “if negotiable paper be taken without notice, before maturity, in absolute payment of a simple contract debt, then due and unsecured, and not merely collateral to it, though no security was given up for the notes, the mere giving of time would seem to be parting with a valuable right which plaintiff had. * * * This places plaintiff in the position of an innocent holder for value.” And this statement of the rule was subsequently approved by the supreme court in the same case. 76 Mo. 537. Fitzgerald v. Barker, 96 Mo. 661, was where the notes sued on were taken in satisfaction of a much larger debt, etc., and in that case it was said: ‘ ‘ The point whether a transferee of notes in such circumstances, who takes them before maturity without notice and in absolute payment of an antecedent debt, is to be regarded in the same light as one who pays cash for them in the ordinary commercial way. * * * The correct rule in such cases is that such transferee is to be regarded as a bona fide purchaser for value. In Hess v. Clark, 11 Mo. App. 492, following the ruling made in Butters v. Haughawout, 42 Ill. 18, it was held that, “where goods are sold and delivered to a creditor by his debtor in payment of an antecedent debt, such creditor, if he acts in good faith, is a purchaser for a valuable consideration, and will be protected against any claim of the original owner just as he would have been had he paid a new consideration for the goods at the time he purchased them. In Lawrence v. Owens, 39 Mo. App. 318, we held that “the absolute extinguishment of an antecedent debt in consideration of a transfer of personal property constitutes the vendee a purchaser for value to the same extent as if he paid the money for such goods.” It may be said that Goodman v. Simmonds has been overruled by the later case of Boatman's Saving Inst. v. Holland, 38 Mo. 50. The former case was not noticed in the opinion in the latter. And it will be observed that it is not considered as an overruled case in the still later cases where it has been referred to. Crawford v. Spencer, 92 Mo. 498; Logan v. Smith, 62 Mo. 455; Fitzgerald v. Baker, 96 Mo. 661; Deere v. Marsden, 88 Mo. 512. On the contrary it is recognized in each of these, cases as stating a rule of commercial law in force in this state.

The rule it announces was expressly invoked and applied in Terry v. Hickman, 1 Mo. App. 119, and in Hodges n: Black, 8 Mo. App. 389. In the latter of these cases the former is cited with approval, and the supreme court, on appeal in the latter to that court, adopted the conclusions of the court of appeals, and affirmed the judgment. 76 Mo. 537, already cited. In Tufts v. Thompson, 22 Mo. App. 564, the rule laid down in Goodman v. Simmonds was quoted with approval. So that the case in 38 Mo. has been passed by in the more recent cases just as it passed by unnoticed the previous case in the 19 Mo. This diversity of judicial opinion has involved the law on the subject of commercial paper in this state in what is a seeming inextricable confusion. But we think in the course of judicial decision on the subject the appellate courts 'have recognized Goodman v. Simmonds, and to it we must look for the rule of law now prevailing in this state applicable to negotiable paper taken as collateral security, where there is no consideration other than a pre-existing debt. Prom these decisions we deduce these conclusions :

First. That the rule as to the taking of negotiable paper for an antecedent debt is applicable to the taking of personal property for that purpose ; second, that the holder of negotiable paper as collateral for a pre-existing debt, having given no consideration for it, holds it liable to the equities existing between the original parties; third, that the taking of negotiable paper as collateral security for a debt, created at the time on the faith thereof, without notice of equities, renders the taker a holder for value. So, the taking of negotiable paper as collateral for a pre-existing debt where there is an express agreement that the creditor will forbear suit until the maturity of the collateral. So, where there is an extension of time for the payment of past indebtedness if for a day only. So, where negotiable paper is taken in extinguishment or satisfaction of a pre-existing debt then due and unsecured.

Applying these rules to the facts of this case, and it becomes apparent that the interpleader was not an innocent purchaser of the property in question for value. The property was not taken from the defendant in consideration of the satisfaction or extinguishment of a pre-existing debt, nor was there an extension of time or forbearance, or anything parted with or lost by the interpleader. He occupies the attitude of a holder of a negotiable note merely as collateral security for a pre-existing debt; having given no value nor consideration for it he holds it subject to the equities of the original parties. The result under the rule applicable to this case is just the same as if the defendant instead of transferring to the interpleader wines had transferred to him a negotiable note made to him by plaintiff and not due, one which was subject to certain equities of which the interpleader had no knowledge. ’ The transfer in either case being to secure a pre-existing debt would not cut off the plaintiff’s equities. Whether commercial paper or personal property the rule in such cases is identical. The interpleader in this transaction cannot be held, within the meaning of any of the rules referred to, a purchaser for a valuable consideration, and, therefore, he is not protected against the equities of the plaintiff.

The established rule of the supreme court of the United States, in respect to the taking of commercial paper as security for a pre- existing debt, is exactly the conversé of that which has been declared, as we understand it, by the supreme court of this state. In that court it has been held that a tona fide holder, taking a negotiable note as a security for a pre-existing debt, is a holder for a valuable consideration, entitled to protection against all equities between the antecedent parties. Railroad v. Bank, 102 U. S. 14; Swift v. Tyson, 16 Pet. 1; People's Sav. Bk. v. Bates, 120 U. S. 556 ; Terry v. Hickman, 1 Mo. App. 119. But that qourt makes a distinction between commercial paper and other property, and in People's Sav. Bk. v. Bates, 120 U. S. 556, supra, declared that the doctrine that the bona fide holder for value of negotiable paper, transferred as security for an antecedent debt merely, and without other circumstances, is unaffected by equities between prior parties, of which there was no notice, does not apply to instruments conveying real or personal property as security in consideration only of pre-existing indebtedness. The court declares that the rules established in the interest of commerce, to facilitate the negotiation of mercantile paper, which, for all practical purposes, passes by delivery as money and as the representative of money, ought not, in reason, to embrace instruments conveying or transferring real or personal property as a security for the payment of money. It is declared, further, that there is nothing in the usages of merchants, so far as is disclosed by the adjudged cases,' indicating that the necessities of commerce require that chattel mortgagesbe placed upon the same footing in all respects as negotiable securities which have come into the hands of a bona fide holder for value before maturity. In the opinion a number of authorities are referred to, to sustain the conclusion reached that “ the claim of the bank, to be a subsequent mortgagee in good faith, cannot be. sustained, because the mortgage of February 13, 1881, although first'filed, was not given in consideration of its having surrendered/br agreed to surrender or to postpone, the exercise of, any substantial right it had against the mortgagors, but merely as collateral security for past indebtedness. Under such circumstances, the mortgage which was prior in time confers a superior right.” Boxhieimer v. Given, 24 Mich. 372, cited, too, in the People’s Sav. Bank v. Bates approvingly, was where, in a suit brought to foreclose a recorded mortgage, the defendant relied upon a subsequent deed of the mortgagor, which he was induced to take under the representation of the latter that the mortgage debt had been paid. After sustaining the claim of the plaintiff on certain grounds, the court said the defendant must fail in the suit upon the further ground that, although he acted in good faith, he was not a bona fide purchaser or incumbrancer for value, with equities superior to those of the plaintiff, because it appeared that the conveyance to him was merely as a security for a precedent debt, without his paying, or agreeing to pay, any other consideration, or relinquishing any remedy or right he may have had.

And it is stated by Mr. Pomeroy, in his work on equity jurisprudence, volume 2, section 749, that “ A conveyance of real or personal property as security for an antecedent debt does not, upon principle, render the transferee a bona fide purchaser, since the creditor parts with no value, surrenders no right, and places himself in no worse legal position than he was before.” This author notes the distinction between the transfers of commercial paper and other property which we have already referred to. And in this state, in respect of the conveyance of land, “subject, in the hands of the grantor, to prior unrecorded conveyances, vendor’s liens, resulting trusts, or other secret equities,” it has been uniformly held that, “ in order to entitle the innocent grantee to protection against a prior unrecorded conveyance, vendor’s lien or other equity, he must have parted with something of value as a consideration, before receiving notice of the prior conveyance or equity.” Conrad v. Fisher, 37 Mo. App., loc. cit. 412; Aubnchon v. Bender, 44 Mo. 560; Halsa v. Halsa, 8 Mo. 303; Choteau v. Burlando, 20 Mo. 482 ; Paul v. Fulton, 25 Mo. 156; Digby v. Jones, 67 Mo. 107; Bishop v. Schneider, 46 Mo. 482; Rice v. Bunce, 49 Mo. 235 ; Fox v. Hall, 74 Mo. 317.

Whether we apply the rule in relation to the taking of commercial paper as security for a pre-existing debt, when there is no other consideration, as it exists in the jurisprudence of this state, or that which obtains in the supreme court of the United States and in other jurisdictions, in respect to the transfer of real and personal property for a pre-existing debt, to this transaction, it results that it cannot be upheld as a transfer of personal property for a valuable consideration. The essential element of consideration is wanting, so that the inter-pleader was not an innocent purchaser for value. The interpleader took the property subject to any equities that it might lawfully be subjected to in the hands of the defendant. The question, no doubt, will ultimately narrow itself down to one of bare priorities, as in Boyd v. Ward Furn., Stove & Carpet Co., 88 Mo. App. 110. There is no question of estoppel suggested here, as in Lawrence, Manning & Cushing v. Owens, 39 Mo. App. 324.

It follows from these considerations that the circuit court did not err in its rulings and finding, and, therefore, its judgment is affirmed.

All concur.