Baach v. Bank of Pocahontas

• Decision Date: 17 September 1931
• Citation: 157 Va. 274
• Parties: LOUIS BAACH v. BANK OF POCAHONTAS.
• Court: Virginia Supreme Court

Page 274

157 Va. 274

LOUIS BAACH v. BANK OF POCAHONTAS.

Supreme Court of Virginia, Staunton.

September 17, 1931.

Present, Campbell, Epes, Hudgins, Gregory and Browning, JJ.

1. BILLS, NOTES AND CHECKS — Defenses — Absence of Consideration — Parol Evidence. — Absence or failure of consideration is a matter of defense as against any person not a holder in due course of a negotiable note, and in such cases may always be shown by parol evidence.

2. BILLS, NOTES AND CHECKS — Defenses — Absence of Consideration — Parol Evidence — Case at Bar. — The instant case was an action against the endorser of a negotiable note. Defendant stated in his grounds of defense that he signed the note on the back thereof not in his individual capacity but as an officer of a corporation, and that plaintiff bank was not a holder in due course. Defendant introduced in evidence an agreement under which the plaintiff bank held the note in question and evidence tending to show that his intention in signing his name on the note was to endorse the name of the corporation thereon by him as secretary and treasurer, and not to endorse it as an individual, together with other evidence to the same effect. The trial court struck out all of the defendant's evidence and entered judgment for plaintiff against defendant.

Held: That the court erred in so doing, as the evidence introduced was admissible to show absence or failure of consideration for defendant's endorsement.

3. BILLS, NOTES AND CHECKS — Holder in Due Course — Transfer of Note by One Bank to Another Which Had Assumed the Liabilities of the First Bank — Case at Bar. — The instant case was an action on a note against an endorser. The note in question had been transferred by a National Bank to a State Bank under an agreement whereby the National Bank finding itself embarrassed transferred all its notes and other assets to the State Bank and the State Bank agreed to assume the liabilities of the National Bank. This transfer differed materially from a contract which arises between the parties by operation of law upon the negotiation of a negotiable note. While the contract transferred title to the State Bank for value and constituted it the holder of the note, it did not constitute it a holder in due course, and the note in the hands of the State Bank was subject to the same defense to which it was subject in the hands of the National Bank.

4. BILLS, NOTES AND CHECKS — Endorsement — Whether Endorsement was a Personal Endorsement or an Endorsement as Officer of Corporation — Consideration for Individual Endorsement — Case at Bar. — The instant case was an action on a negotiable note against an endorser thereof. The defendant alleged that his endorsement was not in his individual capacity but as an officer of a corporation. Defendant was entitled to show as a defense to the action that his personal endorsation was made without consideration. Defendant's evidence showed that the intention of the bank was to accept this note with the endorsement thereon of the corporation of which defendant was an officer without the individual endorsement of defendant; that it did not ask for or require the endorsement of defendant individually, and that the bank gave no consideration for defendant's endorsement which was purely voluntary and without consideration to him.

Held: That a judgment in favor of plaintiff should be reversed and judgment entered for defendant.

Error to a judgment of the Circuit Court of Tazewell county, in a proceeding by motion for a judgment for money. Judgment for plaintiff. Defendant assigns error.

The opinion states the case.

N. Clarence Smith, for the plaintiff in error.

R. O. Crockett, for the defendant in error.

EPES, J., delivered the opinion of the court.

This is an action brought by notice of motion for judgment in the Circuit Court of Tazewell county by the Bank of Pocahontas against Sidney Bloch, Excelsior By-Products Coal Company, a corporation, and Louis Baach to recover from the defendants the amount due upon a certain negotiable note.

The note sued upon is a note dated Pocahontas, Virginia, October 19, 1926, drawn for $2,875.00, payable at First National Bank, Pocahontas, Virginia, eighty days after date, to the order of Excelsior By-Products Coal Company, and signed by Sidney Bloch. The endorsements on the back of the note, in so far as here material, read as follows:

"It is expressly agreed that we, the undersigned endorsers of this note, do each waive the benefit of our homestead exemption on this note, and we each * * * agree * * * to pay in addition to the amount due hereon, ten per cent of said amount as attorney's fee, in no case to be less than $5.00.

}"P.O.

}"Excelsior By-Products Coal Co.

}"P.O. Louis Baach

}"P.O. FIRST NATIONAL BANK

"Pocahontas, Virginia

}"W. R. Graham, Pres."

The note has on its face an unsigned memorandum as follows:

}"Credit the maker.

}"When due, April 17, 1927."

We are here concerned with the case only in so far as judgment was entered against Louis Baach. He plead the general issue and filed his grounds of defense which read:

"The defendant, Louis Baach, for his grounds of defense states that he intends to prove the following:

"(1) That Louis Baach signed said note on the back thereof not in his individual capacity but as an officer of Excelsior By-Products Coal Company, a corporation:

"(2) That the Bank of Pocahontas is not a holder in due course of said note."

By agreement the case was tried by the court without a jury; and the plaintiff introduced the note sued on and rested.

The defendant introduced an agreement between the First National Bank of Pocahontas, hereinafter called the National Bank, and the Bank of Pocahontas, hereinafter called the State Bank, which with some immaterial omissions reads as follows:

"This contract made * * * this the 4th day of November 1926, * * * between First National Bank of Pocahontas * * * party of the first part, and Bank of Pocahontas, * * * party of the second part: Witnesseth

"Whereas, the party of the first part finds itself embarrassed in meeting its current demands and obligations and is desirous of effecting an agreement by which its depositors may be paid without delay and without the cost and inconvenience of a receivership; and,

"Whereas, the party of the second part, in order to avoid the financial distress and inconvenience to the said depositors in the said First National Bank of Pocahontas and to promote the business interests of the entire community, has agreed, provided it is fully indemnified, and upon certain stipulations hereinafter specified, to assume all liabilities as shown by the books as of this date, except those to shareholders, and pay off the depositors of the party of the first part as hereinafter shown.

"Now, therefore, it is agreed between the parties as follows:

"I. That for and in consideration of the premises, and of the sum of $5.00, paid, * * * the party of the first part hereby sells, transfers, assigns and delivers unto the party of the second part all of its assets of every kind and description consisting of * * * all the notes * * * (and) all other assets of whatever character and description and wherever situated and belonging to the party of the first part.

"II. The party of the first part binds itself, whenever requested, hereafter, to execute or cause to be executed, any and all writings which may be deemed necessary and expedient to vest in the said party of the second part title to and possession of any and all property, real and personal, hereby sold and assigned and which would expedite or facilitate the collection of any notes, discounts, bills receivable or overdrafts hereinbefore mentioned, and that it will, wherever requested, make such additional assignments, writings, etc.

"III. In addition to the assets hereinbefore mentioned turned over to the party of the second part by the party of the first part, the party of the first part agrees and binds itself to deliver to the party of the second part contemporaneously with the signing of this contract and agreement, to further indemnify it, the said party of the second part, from any loss or damage by reason of the liabilities it assumes under this contract, a bond executed to the party of the second part by W. R. Graham, H. P. Brittain, H. W. Hicks, R. C. Harrison and L. E. Ward for the sum of fifty thousand dollars ($50,000.00).

"It is expressly agreed and understood that in the event the assets herein transferred are ascertained, as hereinafter set out, as not sufficient to pay off and discharge all of the liabilities assumed hereunder by the said party of the second part, that the said bond of $50,000.00 shall at once become due and collectible, and so much of the proceeds thereof as may be necessary to cover any loss sustained by the party of the second part by reason of its undertakings hereunder shall be applied to that purpose.

"IV. The party of the second part for the consideration hereinbefore stated agrees and binds itself to pay (a) all debts due the United States government by the party of the first part, and all taxes for which the party of the first part is legally liable; (b) all necessary and proper expenses, incident to transferring of the business, including the preparation of papers, contracts, minutes and cost of stationery, clerk hire, if any, etc., incident to transfer, etc.; (c) amount due depositors of the party of the first part when and as called for, in accordance with the conditions of deposit; all expenses, including...