Middle Georgia Livestock Sales v. Commercial Bank &Amp; Trust Company., 123 Ga. App. 733, 182 S.E.2d 533 (1971)

Summary

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Judgment reversed. Bell, C. J., concurs. Pannell, J., concurs specially.

Summary

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Judgment reversed. Bell, C. J., concurs. Pannell, J., concurs specially.

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Beck, Goddard, Owen, Squires & Murray, Samuel A. Murray, for appellee.G. Hughel Harrison, James W. Garner, for appellant.

The holder in due course of a negotiable instrument is not protected by that fact against the defense, if established, that the transaction out of which it came into existence was illegal so as to render the obligation of the party a nullity. A sale of stolen property being a crime under our statute law, and any transaction in regard to it being absolutely void, a note given as consideration for such property is unenforceable even in the hands of a bona fide purchaser for value.

The appellant Middle Georgia Livestock Sales purchased some cattle at an auction, paying for them by check. Within a day or so it discovered that the cattle it had attempted to buy were stolen, and it immediately gave the drawee bank notice and a stop payment order on the checks, The plaintiff, Commercial Bank, however, cashed the checks without knowledge of this fact, and when the drawee refused payment filed this action against the maker.

The sole question in this case is whether a holder in due course for value of a check given by an innocent maker for the purchase of cattle which tuned out to have been stolen may recover the value of such check from the maker. This in turn involves a construction of the controlling section of the Uniform Commercial Code, 3-305 (2) (b) providing that a holder in due course takes the instrument free from defenses of any party thereto with whom it has not dealt except "such other incapacity, or duress, or illegality of the transaction as renders the obligation of the party a nullity." In its reference to illegal transactions, this appears to be, if anything, a bit narrower in context than former Code 14-510 which was a part of our law from the original Code of 1863 until its repeal by Ga. L. 1967, p. 562 (see Newcomb v. Niskey's Lake, 115 Ga. App. 121 (1) (153 SE2d 590); Gordon v. Gulf American Fire &c. Co., 113 Ga. App. 755, 759 (149 SE2d 725). Knowingly disposing of stolen property is, like the actual asportation, a type of theft and a statutory offense. Code Ann. 26-1806. Being prohibited by statute, it is an illegal transaction within the meaning of Code Ann. 109A-3--305 (2) (b) supra, which under the Uniform Commercial Code leaves the determination of what transactions are illegal to be decided under the statute law of the forum. This accords with prior decisions of our courts. In Smith v. Wood, 117 Ga. App. 331, 333 (160 SE2d 672); Sanfrantello v. Sears, Roebuck & Co., 118 Ga. App. 205, 206 (163 SE2d 256); International Brotherhood v. Newman, 116 Ga. App. 590, 592 (158 SE2d 298); Werbin & Tenenbaum v. Heard, 121 Ga. App. 147 (2) (173 SE2d 114); Central of Ga. R. Co. v. Woolfolk Chemical Works, 122 Ga. App. 789, 795 (178 SE2d 710). While the defendant upon the trial of the case, would have the burden of affirmatively proving his defense, he has no such burden here on motion for summary judgment by the plaintiff. There is not one shred of evidence disproving the defendant's affirmative defense.

1971

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