Defenses and Equities – Incapacity 5. The chancellor ruled IFO Murray and allowed him to recover.
136 Tenn. 118 – Murray v. Thompson 6. The Court of Civil Appeals reversed. He could have recovered prior
Williams, J.
A minor got a check for payment of damages due to the injuries he
suffered while working. The check was payable on the day he would
reach age of majority. Prior to said date, the minor’s father sold and
indorsed the check with the consent and knowledge of his son to
another. The proceeds of the sale were deposited in the minor’s bank
account and was invested in a saloon business, which tanked. Now, the
minor is suing the indorsee to recover the note and avoid his
indorsement.
DOCTRINE
The purchaser and indorsee of a negotiable instrument indorsed by a
minor is not a holder in due course as against the minor and that the
latter may disaffirm and recover the note from the possession of the
former, who takes with constructive notice of the incapacity.
FACTS
1. Murray, a minor1, got injured while he was working for a brick
company2, so the latter paid a check worth US$1,750 for damages.
a. It was payable on June 1, 1915, the day when Murray
reaches the age of majority.
2. On October 16, 1914, W.A. Murray, the father of the minor, sold
the note to Thompson with the son’s knowledge and consent.
a. W.A. indorsed the check in his son’s name, but did not tell
Thompson that he was not the payee.
b. It was noted that there was no actual fraud on the part of
the son.
3. The proceeds from the sale were deposited in the son’s bank
account and was invested in the father and son’s saloon business,
but tanked.
4. The son filed a complaint to nullify the indorsement to Thompson
and to recover the note from the latter.
1 3
Case did not mention what the age of majority was
2
Case did not mention the name of the brick company
to the passage of the Negotiable Instruments Law (NIL), but
because of Section 223 of NIL, which provided that when a minor
indorses an instrument, the property passes to the indorsee, he
could not.
a. Implied from the case: Thompson was arguing that since he
did not know that the son was still a minor when the check
was indorsed to him, the latter could not recover the note
from the former (Basically, holder in due course yung
argument niya).
ISSUE with HOLDING
1. WON an indorsement of a negotiable instrument by a minor is void
or voidable – VOIDABLE.
a. NIL was passed to codify the principal rules and to finally
settle the conflicting decisions in jurisprudence.
b. In stipulating that the indorsement of a minor “passes
property therein” under Sec. 22 shows that it is not void.
i. Its effect is to allow the indorsee to effect payment
from all parties prior to the minor indorser [if not
repudiated by the minor].
ii. The incapacity of a minor cannot be availed of by
prior parties because this is a personal defense only
available to the minor himself.
iii. Sec. 22 was not intended to provide that the
indorsee should become the owner of the instrument
by title indefeasible as against the minor, or to make
the act of indorsement an irrevocable one.
1. To interpret said provision by giving the
indorsee an indefeasible right would be
inequitable in a case where a minor indorsed
the instrument to an indorsee, who knew of
the indorser’s incapacity.
2. The indorsement by a minor has no effect to
the right of the minor to disaffirm.
The indorsement or assignment of the instrument by a corporation or by an infant passes the
property therein, notwithstanding that from want of capacity the corporation or infant may incur
no liability thereon.
1
 c. The common-law rule is that the purchaser and indorsee of
a negotiable instrument indorsed by a minor is not a holder
in due course as against the minor and that the latter may
disaffirm and recover the note from the possession of the
former, who takes with constructive notice of the incapacity.
i. [I think Thompson is not a holder in due course
because he should have inquired as to how W.A.
came into possession of the check since the latter
was not the payee].

DISPOSITIVE PORTION
Reversed Court of Civil Appeals; affirmed Chancellor.

OTHER NOTES

DIGESTER: Lulu Querido.