It appears without dispute that tbe appellants, tbe Scotts, acquired a perfect title to tbe note in controversy by special indorsement of tbe payee plainly written on tbe instrument. Tbe only question presented for review is tbe decision of the trial court on tbe evidence, adjudging that the title of tbe Scotts, as indorsers, was defeated by tbe act of their agent, Kelley, in selling and indorsing tbe note to tbe appellee, tbe Traders’ Investment Company.
In support of tbe judgment, appellee urges four propositions: (1) That Kelley had written authority from tbe Scotts to dispose of the note as be saw fit, including tbe power to sell it even at a substantial discount.
(2) That, in any event, Kelley bad verbal authority from tbe Scotts to do so.
(3) That even though Kelley bad no such authority, appellee’s title to tbe note should nevertheless be protected against tbe claim of tbe Scotts, because they were at fault in arming Kelley with an indicium of ownership —possession of tbe note — by means of which be was able to deceive appellee as to bis right to sell it.
(4) That appellee was a purchaser for value in due course of a negotiable instrument.
1. An examination of tbe terms of tbe written authority given to Kelley to collect tbe note shows clearly that be bad no authority beyond tbe mere collection of tbe notes. Tbe stipulation that tbe notes were “to be used by W. E. Kelley in collecting these notes as be desires, by foreclosure or as he sees fit to do,” armed him with a discretion only as to bis mode of procedure in effecting tbe intended collection, but certainly not with any power of disposition other than tbe cancellation and surrender of tbe notes when paid.
2. Tbe verbal authority, claimed by Kelley to sell tbe notes to raise money for bis own use, rests upon tbe unsupported testimony of Kelley himself. Apart from its intrinsic improbability, it is specifically denied by tbe Scotts. Moreover, our reading of tbe record, and especially of Kelley’s own testimony, utterly discredits bis veracity and renders it unacceptable as a basis for any conclusion of fact. Our conclusion is that Kelley was without authority, verbal or written, to sell tbe notes.
3. To render available tbe maxim that, where one of two innocent parties must suffer loss from the act of a third party, he must bear tbe loss whose conduct has primarily caused it, the party invoking tbe principle must show that tbe other party has done or omitted some act in tbe nature of negligence which prompted and rendered feasible tbe deception practiced upon himself. Citizens’ Bank v. Commercial Bank, 209 Ala. 280, 96 So. 324.
That maxim can bave no application to a case like this. Here tbe Scotts did no more *237than intrust the possession of the note to' Kelley, with authority to collect it and with implied authority, of course, to cancel and surrender it when paid. It carried on its face the plain evidence of its ownership; viz., the •special indorsement of the payee to the Scotts. Except by a fraudulent alteration, sweeping and apparent, the agent could not use the notes as the property of any one but the in-dorsees ; and the act of the indorsees in giving the mere possession of the notes to Kelley was in no sense negligent or culpable, nor was it promotive of Kelley’s fraudulent deception of the appellee in any legal sense.
4. The purchaser of negotiable paper in due course is a favorite of the law, but he is nevertheless chargeable with notice of every fact shown upon the face or the back of the instrument. The note here in question showed that it had been indorsed by the payee to the Scotts. It was not in the custody of the payee. It was offered to appellee at a discount of about 12 per cent, of its face value, although it was known to be far less than one-third of the purchase money for the land and was secured by. a mortgage on the land itself. Appellee’s officers, who were representing it in this transaction, made no inquiry whatever as to the presence of the indorsement on the note — why it was placed there, why it was canceled by crosslines and by whom, or who and where the indorsees were. Presumably, the payee and indorser, Ida Kelley, would have given information warning appellee of the true ownership of the note had it been asked for in connection with the power of attorney required of her. Our clear conviction is that appellee was guilty of flagrant negligence, which compels the conclusion of bad faith, in the purchase of the note. We do not mean to hold that the mere fact of "buying the note at a substantial discount would alone be sufficient to show bad faith, but, in connection with the other circumstances of the ease, it is a factor to be considered in aggravation of that conclusion. Spires v. Jones, 212 Ala. 117, 119, 101 So. 753.
The fraudulent act of appellants’ .agent, Kelley — in legal effect, a forgery— •could not destroy their title; and his transfer of the note to appellee, acting as agent for the payee, who was not the owner, could not pass the title, in the absence of negligence on the part of appellants or of some conduct resulting in their equitable estoppel to assert their title as against appellee. Nothing of that nature appearing, we are constrained to hold that appellants are the owners of the note and are entitled to its proceeds.
The decree of the trial court will be reversed, and a decree will be here rendered to that effect, ordering the register of the circuit court to pay to appellants the sum of -$825, being all of the fund paid into court by the original complainant in satisfaction of the note in suit.
It is further ordered and decreed that the original complainant is entitled to the relief prayed; and that the respondent, the Traders’ Investment Company, shall deliver up to the register the Wilkinson mortgage transferred to it by Kelley, to be indorsed “satisfied” by the register and delivered by him to said complainant; and, further, that the register shall appropriately indorse upon the margin of the record of said mortgage the fact of its payment and satisfaction.
Reversed and rendered.
ANDERSON, C. J., and THOMAS and BOULDIN, JJ., concur.