HARALSON, J.
1. It is settled in this State, that one who takes negotiable paper as collateral security for the payment of a pre-existing or antecedent debt, is not a purchaser for value in the usual course of trade ; that such paper is open in the hands of the assignee to all defenses which could have been made against it, while in the hands of the assignor or original owner; and that one who honestly receives -a negotiable bill or note before maturity, as collateral security for a debt contracted simultaneously, or in pursuance of a previous agreement, made at the time the debt was contracted, is entitled to protection against secret equities or defects of which he had no notice.—Miller v. Boykin, 70 Ala. 469 ; Boykin v. Bank of Mobile, 72 Ala. 263 ; Marks v. First Nat. Bank, 79 Ala. 558. A mortgage to secure such a note, follows, and is of the same character as the note it secures, in this respect. — ;1 Jones on Mort., § 834.
2. The main question in this case is, whether the $3,000 note and mortgage of Maddux to Jordan & Sons, which was assigned by the latter to Robinson & Thompson, are open to defenses in their hands, such as Maddux 'might have made against Jordan & Sons; or in other words, whether Robinson & Thompson were bona fide purchasers of said papers, against whom such defenses can not be set up. The chancellor very properly held, that as against Jordan & Sons, Robinson & Thompson ;were bona fide purchasers of said papers. There is no evidence t-o show that they knew or had any notice, at the time they acquired the papers as collateral, that there was any usury in or other defenses to the account, which said collaterals were transferred to Jordan & Sons to secure;' but, it does show, that they had. no such knowledge or notice. The chancellor also held that as to the complainants they were not bona fide purchasers.
Thompsonin his answer to the bill states, that “Jordan [477]*477& Sons were to keep their account good by the deposit of collaterals from time to time as demanded by Robinson & Thompson that they were already largely indebted to defendants, requested further advances, and desired them to hold for them and not sell about 1,300 bales of cotton, on which they, Robinson & Thompson, had already made large advances, and that they, Robinson & Thompson, agreed to hold said cotton and extend further accommodations to said Jordan & Sons, in payment of their orders and other liabilities, but required said note and mortgage in further security, before complying with said request.
If the deposit of said collaterals was made to secure past indebtedness, according to the terms of a previous arrangement and agreement between the parties, at or before the indebtedness was contracted and as a condition of its being contracted, that such deposit of collaterals should be made to secure the payment of the account, then, under the rulings of this court, Robinson & Thompson, in whosé dealings with Jordan & Sons, as the evidence shows, there was no usury, would be entitled to protection against equities and defects of which they had no notice:—Miller v. Boykin, 70 Ala. 469, supra ; Boykin v. Bank of Mobile, 72 Ala. 763, supra; Smith v. Lehman, 85 Ala. 394.
Examined as a witness in the cause, Thompson stated, that “about the 15th January, 1892, W. J. Jordan, of Jordan &' Sons, in response to my request to further se.~ cure the account, according to our previous agreement, came to Montgomery, and brought with him this note and mortgage of Thos. J. Maddux. At that time, I held about 1,300 bales of cotton'for Jordan & Sons, against which they had already drawn nearly its full value, and cotton was steadily declining. Jordan & Sons wanted me to hold this cotton, stating that they believed the price of cotton would go up. They also wished some further advances. I was unwilling to hold the cotton, and make further advances, without additional security, but agreed to do so, if this note and mortgage for $3,000. were assigned to me as collateral- to protect me against any loss that might be thus incurred.”
It is evident, therefore, according to Thompson’s admissions and evidence, that said note and mortgage were taken as collateral' and additional security for past in[478]*478debtedness, according to previous agreement between the parties, entered* into between them 'at or before the indebtedness was created, and for further advances to be made to them thereafter. The burden of making proof of this defense, which was disputed, rested, however, on Thompson. The burden of proof of a fact, rests upon him who sets it up. —3 Brick. Dig. 433, § 388; Barton v. Barton, 75 Ala. 402 ; Craft v. Russell, 67 Ala. 9.
Jordan, in his examination for complainant, stated that “the Maddux note and mortgage were never transferred to Thompson at any time. They -were simply placed in his hands to indemnify him in holding cotton until the 15th April, 1892. These papers were not placed in his hands to get money on, or to secure him for money already got from him, but was solely, as stated, to get and secure him in holding our cotton until the 15th April, 1892, and longer if necessary, which he had agreed to do in consideration of these papers and othei’s being placed ixx his hands.” Again he says, “our cotton was placed to- secure all our indebtedness to them, and was not intended to secure oxxe item more than another.” According to Jordan’s eviderxce, in denial of Thoxnpson’s defense, the xxote axxd mortgage were only collateral, additional to' the cotton, to secure them against loss in holdxxxg the cotton. It is also manifest froxn Jordan’s statement, that these collaterals were good'in'Thoxnpson’s hands for axxy past indebtedness, that the cotton was pledged for, — a fact distinctly admitted by Jordaxi & Sons in their answer. It should be stated, that it does not appear that .Thoxnpson lost anything, axxd if so, how much, in holding the cotton until he sold it oxx the 4th March, 1892, or what Jordan & Sons lost, if anything, by his sellixig it before 15th April of that year.
We must hold, upoxi this state of px’oof, that Thompson’s defexxse that the note and mortgage were placed in his hands and held by him, in accordaxxce with an agreement by Jordan & Sons that they would deposit them, at the time they contracted said indebtedness, as collateral security for the -debt, fails for the want of proof, and that they were not bona fide purchasers as to the complainant, Maddux.
3. Thoxnpson testified, that after the failure of Jordan & Sons, he visited them, and they agreed, that he [479]*479might take the collaterals transferred to him, in pay-may of his antecedent debt against them, and they were accordingly credited with them on account. For this reason he claims to hold the collaterals as a bona fide purchaser for value. Jordan denies this transaction ; and even if such an agreement as that set up as having been made and executed, would have had the effect to change the character of Thompson’s holding of the collaterals, from that of a mere holder of them as security for a past indebtedness, to that of a purchaser of them for value, — which it is unnecessary for us to decide, — yet, Thompson’s contention as to this matter, which, in any event, he was bound to prove, has not been established by evidence, and would fail on that account.
4.
Free access — add to your briefcase to read the full text and ask questions with AI
HARALSON, J.
1. It is settled in this State, that one who takes negotiable paper as collateral security for the payment of a pre-existing or antecedent debt, is not a purchaser for value in the usual course of trade ; that such paper is open in the hands of the assignee to all defenses which could have been made against it, while in the hands of the assignor or original owner; and that one who honestly receives -a negotiable bill or note before maturity, as collateral security for a debt contracted simultaneously, or in pursuance of a previous agreement, made at the time the debt was contracted, is entitled to protection against secret equities or defects of which he had no notice.—Miller v. Boykin, 70 Ala. 469 ; Boykin v. Bank of Mobile, 72 Ala. 263 ; Marks v. First Nat. Bank, 79 Ala. 558. A mortgage to secure such a note, follows, and is of the same character as the note it secures, in this respect. — ;1 Jones on Mort., § 834.
2. The main question in this case is, whether the $3,000 note and mortgage of Maddux to Jordan & Sons, which was assigned by the latter to Robinson & Thompson, are open to defenses in their hands, such as Maddux 'might have made against Jordan & Sons; or in other words, whether Robinson & Thompson were bona fide purchasers of said papers, against whom such defenses can not be set up. The chancellor very properly held, that as against Jordan & Sons, Robinson & Thompson ;were bona fide purchasers of said papers. There is no evidence t-o show that they knew or had any notice, at the time they acquired the papers as collateral, that there was any usury in or other defenses to the account, which said collaterals were transferred to Jordan & Sons to secure;' but, it does show, that they had. no such knowledge or notice. The chancellor also held that as to the complainants they were not bona fide purchasers.
Thompsonin his answer to the bill states, that “Jordan [477]*477& Sons were to keep their account good by the deposit of collaterals from time to time as demanded by Robinson & Thompson that they were already largely indebted to defendants, requested further advances, and desired them to hold for them and not sell about 1,300 bales of cotton, on which they, Robinson & Thompson, had already made large advances, and that they, Robinson & Thompson, agreed to hold said cotton and extend further accommodations to said Jordan & Sons, in payment of their orders and other liabilities, but required said note and mortgage in further security, before complying with said request.
If the deposit of said collaterals was made to secure past indebtedness, according to the terms of a previous arrangement and agreement between the parties, at or before the indebtedness was contracted and as a condition of its being contracted, that such deposit of collaterals should be made to secure the payment of the account, then, under the rulings of this court, Robinson & Thompson, in whosé dealings with Jordan & Sons, as the evidence shows, there was no usury, would be entitled to protection against equities and defects of which they had no notice:—Miller v. Boykin, 70 Ala. 469, supra ; Boykin v. Bank of Mobile, 72 Ala. 763, supra; Smith v. Lehman, 85 Ala. 394.
Examined as a witness in the cause, Thompson stated, that “about the 15th January, 1892, W. J. Jordan, of Jordan &' Sons, in response to my request to further se.~ cure the account, according to our previous agreement, came to Montgomery, and brought with him this note and mortgage of Thos. J. Maddux. At that time, I held about 1,300 bales of cotton'for Jordan & Sons, against which they had already drawn nearly its full value, and cotton was steadily declining. Jordan & Sons wanted me to hold this cotton, stating that they believed the price of cotton would go up. They also wished some further advances. I was unwilling to hold the cotton, and make further advances, without additional security, but agreed to do so, if this note and mortgage for $3,000. were assigned to me as collateral- to protect me against any loss that might be thus incurred.”
It is evident, therefore, according to Thompson’s admissions and evidence, that said note and mortgage were taken as collateral' and additional security for past in[478]*478debtedness, according to previous agreement between the parties, entered* into between them 'at or before the indebtedness was created, and for further advances to be made to them thereafter. The burden of making proof of this defense, which was disputed, rested, however, on Thompson. The burden of proof of a fact, rests upon him who sets it up. —3 Brick. Dig. 433, § 388; Barton v. Barton, 75 Ala. 402 ; Craft v. Russell, 67 Ala. 9.
Jordan, in his examination for complainant, stated that “the Maddux note and mortgage were never transferred to Thompson at any time. They -were simply placed in his hands to indemnify him in holding cotton until the 15th April, 1892. These papers were not placed in his hands to get money on, or to secure him for money already got from him, but was solely, as stated, to get and secure him in holding our cotton until the 15th April, 1892, and longer if necessary, which he had agreed to do in consideration of these papers and othei’s being placed ixx his hands.” Again he says, “our cotton was placed to- secure all our indebtedness to them, and was not intended to secure oxxe item more than another.” According to Jordan’s eviderxce, in denial of Thoxnpson’s defense, the xxote axxd mortgage were only collateral, additional to' the cotton, to secure them against loss in holdxxxg the cotton. It is also manifest froxn Jordan’s statement, that these collaterals were good'in'Thoxnpson’s hands for axxy past indebtedness, that the cotton was pledged for, — a fact distinctly admitted by Jordaxi & Sons in their answer. It should be stated, that it does not appear that .Thoxnpson lost anything, axxd if so, how much, in holding the cotton until he sold it oxx the 4th March, 1892, or what Jordan & Sons lost, if anything, by his sellixig it before 15th April of that year.
We must hold, upoxi this state of px’oof, that Thompson’s defexxse that the note and mortgage were placed in his hands and held by him, in accordaxxce with an agreement by Jordan & Sons that they would deposit them, at the time they contracted said indebtedness, as collateral security for the -debt, fails for the want of proof, and that they were not bona fide purchasers as to the complainant, Maddux.
3. Thoxnpson testified, that after the failure of Jordan & Sons, he visited them, and they agreed, that he [479]*479might take the collaterals transferred to him, in pay-may of his antecedent debt against them, and they were accordingly credited with them on account. For this reason he claims to hold the collaterals as a bona fide purchaser for value. Jordan denies this transaction ; and even if such an agreement as that set up as having been made and executed, would have had the effect to change the character of Thompson’s holding of the collaterals, from that of a mere holder of them as security for a past indebtedness, to that of a purchaser of them for value, — which it is unnecessary for us to decide, — yet, Thompson’s contention as to this matter, which, in any event, he was bound to prove, has not been established by evidence, and would fail on that account.
4. 'The court made an interlocutory decree of reference to the register to ascertain and report on the items deemed proper for a final decree. In this decree, the register was permitted to refer to and use the evidence talcen in the cause, on which it had been submitted for decree, and was instructed to take additional evidence, if found necessary. The parties appeared, and the reg-. ister, in execution of the decree examined. them and such witnesses as they offered, which evidence was reduced to writing, and with the report, was noted and submitted to the court, under the agreement of the parties for decree thereon.
The defendant, Thompson, by his solicitor, excepted to the .findings of the register, which exceptions were severally overruled by the court.
There was no error in overruling exception No. 1. The ground of objections was, that there was no evidence to sustain it, whereas there was evidence to that effect, and it has not been made to appear that the finding was erroneous.
The second exception pertains to the allowance of the credit to Maddux for 144 .instead of. 114 bales of cotton delivered by him to Jordan & Sons. The several exceptions to the allowance of this item are not made in accordance with rule 93 of chancery practice, and it was not error, therefore, to refuse to sustain the exceptions, although they may have been well taken.—Mooney v. Walter, 69 Ala. 75 ; The State v. McBride, 76 Ala. 52 ; Warren v. Lawson, ante p. 339. For like reasons, and Others, there was no error in overruling exceptions 3 [480]*480and 4. Nor do we find error in overruling exceptions' 5 and 6. All the evidence in the cause, that taken before submission, and by the register on the reference, was before the court.
The decree, on the appeal of Thompson, must be affirmed.'
The cross-bill filed by Jordan & Sons, — for the dismissal of which on final decree rendered on pleadings and proofs, they prosecute an appeal and assign errors on the record, — was intended to reach and eliminate from Robinson & Thompson’s account against them, items for advances by them for Jordan & Sons as margins for. the purchase of cotton futures. The proof is abundant to show, that these dealings were conducted.by Robinson & Thompson at the instance and request, and for the accommodation of Jordan & Sons, and in the name of the latter firm, with parties in New York with whom they made deals in futures through Thompson. It was all done in that State, in the name of Jordan & Sons, and the account was so kept by the parties, there, to-the contracts. Thompson had no interest in the matter, except to oblige a customer, and made no charge for conducting the business. There was nothing in the transactions of a gambling nature, as charged, to avoid the liability of the Jordans to Robinson & Thompson for money paid for them on that account. We discover no other necessity for the cross-bill, and there was no error in dismissing it, on final decree.—Peet v. Hatcher, 112 Ala. 514; Hawley v. Bibb, 69 Ala. 52.
Affirmed.