Bank Of Sutton v. Skidmore

• Decision Date: 01 November 1932
• Docket Number: (No. 7346)
• Citation: 113 W.Va. 25
• Court: West Virginia Supreme Court
• Parties: Bank of Sutton v. Oley Skidmore, et al.

113 W.Va. 25

Bank of Sutton

v.Oley Skidmore, et al.

(No. 7346)

Supreme Court of Appeals of West Virginia.

Submitted October 25, 1932.

Decided November 1, 1932.

1. Bills and Notes

A mere denial of the title of the holder of a negotiable note is not sufficient to overcome the statutory prescript that the holder is to be deemed prima facie "a holder in due course."

2. Bills and Notes

When a negotiable note is sent to a bank indorsed "for collection", and after maturity the bank pays the owner the amount due on the note from its own funds, the bank becomes a holder for value, under Code 1923, chapter 98A, section 26 (The Negotiable Instrument Law).

3. Estoppel

An estoppel does not arise merely because of action taken upon a misleading statement. In addition thereto it must appear that the one making the statement intended or should reasonably have expected that it would be acted upon by the other party, and that such party, without fault himself, did act upon it to his prejudice.

Appeal from Circuit Court, Braxton County. Action by the Bank of Sutton against Oley Skidmore and others. From an adverse judgment, plaintiff appeals.

Reversed and remanded.

E. G. Rider, for appellant.

John N. Charnock, for appellee B. A. Wise & Co. Eakle & Eakle, for appellee W. H. Bakle.

Hines, Hall & Hines, for appellees G. Stanley Hamric and others.

Hatcher, President:

This appeal involves the question of whether a note was discharged or purchased by the Bank of Sutton. The Bank (plaintiff below and appellant) alleged a purchase, but the circuit court held a payment, and decreed that plaintiff take nothing.

By deed of April 1, 1925, A. Hamric, G. S. Hamric and Lot Carroll conveyed to W. H. Eakle a lot in the town of Sutton. The consideration was $1,000.00 cash and six notes of $1,000.00 each, payable at the Home National Bank of Sutton, in from one to six years from date, respectively, and secured by a vendor's lien. Eakle conveyed the lot to Oley Skidmore by deed of May 14, 1925, in which the grantee assumed the payment of the six notes above referred to. Skidmore paid the first three notes. The fourth note, due April 1, 1929, was endorsed in blank and sold by the payees to B. A. Wise & Company of Charleston, before maturity. The purchaser endorsed the note on March 20, 1929, and forwarded it through its local bank stamped "for collection" to the Bank of Sutton. On April 10th. the local bank received from the Bank of Sutton its cashier's check for $1,240.00 (in full of the note), accompanied by a form letter of advice captioned "Local Collection", which after describing the note contained the imprint "Bank of Sutton. Paid April 2, 1929, Sutton, W. Va." Shortly after this transaction, Wise & Company purchased the fifth and sixth notes of the series, which its manager deposed would not have been done had the fourth note not been paid.

The bill herein (1) alleged that the Bank of Sutton purchased the fourth note, and that payments thereon have been made by Skidmore, reducing it to $700.00; (2) invoked the benefit of the vendor's lien; and (3) sought to enforce collection of the alleged balance on the note by a sale of the lot. The note was exhibited with the bill. Skidmore did not answer. Eakle. Wise & Company, and G. S. Hamric et al., answered separately, denying the above allegations. No testimony was submitted by the plaintiff, the above statement of fact being taken from written exhibits and from oral evidence introduced by the defendants.

As holder of the note plaintiff was "deemed prima facie to be holder in due course," under section 59, Negotiable Instrument Law (hereinafter, for brevity, N. I. L.), Code 1923, chapter 98A, Plaintiff was entitled to rest its case upon exhibiting the note, as the denial in the answers of its title, was not sufficient to overcome the statutory presumption of title accorded to it as holder. A plea denying the validity of the note itself will put a holder on proof, but a mere denial of the holder's title will not. Bank v. Bank, 99 W. Va. 544, 130 S. E. 142; Holdsworth v. Drug Co., 118 Va. 359, 362. 87 S. E. 565; Trust Co. v. Barry, (Mass.) 157 X. E. 530.

It is contended that the negotiability of the note became suspended when it was endorsed restrictively ("for collection*') and that it became non-negotiable (in a technical sense) when not paid at maturity (April 1st). Both contentions may be admitted without giving the defendants any coign of vantage. The law does not forbid the purchase of non-negotiable paper it simply subjects the purchase to any defenses in favor of the payee or a prior holder. 8 C. J., subject Bills and Notes, sees. 67. 71, 577 and 1096. Bigelow on Bills, Notes, etc. (3rd Ed.), Sec. 483. No equity is advanced in favor of any defendant except Wise & Company, reference to which will be made later. It cannot be contended seriously that the words "for collection", ex vi termini, impair the plaintiff's right of recovery since, under section 48 N. I. L., it could have struck out the restrictive words at any time, even during trial. Ensign v. Fogg, 177 Mich. 317, 143 N. W. 82; New Haven Mfg. Co. v. Pulp & Board Co., 76 Conn. 126, 55 Atl. 604, 606; Waldock v. Winkler, (Okla.) 152 P. 99, 100; Bank v. Ficklin, 185 Ill. App. 381; 30 A. L. R., Anno. 341, etc.; 8 C. J., supra, section 553. This was the law even prior to the statute. "The holder of a promissory note has a right to erase a prior special indorsement thereon. Nor is it incumbent on him to explain such erasure before the note is admissible in evidence." Jones v. Berry hill, (1868) 25 Iowa 289. See also Jerman v. Edwards, 29 App. D. C. 535, 537; Vanarsdale v. IIax. 107 Fed. 878. 880; Bigelow, supra, secs. 277 and 278.

In the furtherance of justice, we are warranted in regarding this transaction from the standpoint of common experience. Wood v. Trust Co., 128 IT. S. 416, 423. The money paid to Wise & Company by plaintiff, presumably represented either its own money or that of Eakle or Skidmore, who were the respective parties liable for the note. Eakle's answer makes no claim to and precludes the thought that he supplied that money or had the Bank pay it for him. Citizens Trust Co. v. Milling Go., (Mo.) 210 S. W. 774, stressed by counsel for Wise & Company, has no application here, because it was demonstrated there that a note sent by the payee to the bank for collection had been paid by the bank from the maker's funds. There is no such proof in this suit. Even if the bill should not be taken as confessed as to Skidmore (because of the denials in the answers), it is beyond belief that he would remain silent had he furnished or arranged for that payment. The defendants alleged that he had paid the note; but the plaintiff denied that allegation and no proof was taken thereon. The only reasonable inference is that the Bank paid its own money. Whether payment operates as a discharge of the instrument or as a purchase, depends on the payor's intention. Bigelow, supra, sec. 567. The payment of the Bank's own money on behalf of either Eakle or Skidmore would have been entirely gratuitious. Banks simply do not indulge intentionally in gratuities of that character. "The presumption is against the payment as a discharge and in favor of the payment as a purchase." Bank v. Neeley, 110 W. Ya. 433, 436, 158 S. E. 659, 660, (and authorities there cited). There is nothing in the record to overcome that presumption. "The possession of a note uncancelled, by a person other than the maker, is prima facie evidence that the debt evidenced thereby is unpaid." 5 Uniform Laws Annotated (Neg. Inst.) 601. Therefore we must conclude that the Bank purchased the note for its own purpose.

Many cases are cited in the briefs of the several defendants which at first glance seem relevant but are not, because they were decided either before or without taking into consideration the N. I. L. The strongest citation is Bank v. Craig, 63 Ohio St. 374, 59 N. E. 102, 81 Am. St. Rep. 639, which held that payment by a bank from its own funds of a note endorsed for collection, if without the consent of the maker, extinguished the note. That case was decided in 1900, two years before Ohio adopted the N. I. L., is not in harmony with the provisions of the N. I. L., and therefore is not pertinent. What constitutes a discharge now is stated in sections 119 and 120, N. I. L. Other methods of discharge are excluded. Whitley on Bills, p. 275. This transaction does not come within the provisions of those two sections.

Despite the initial relation of the Bank as an agent of Wise & Company, it is recognized that the Bank had the right to convert that relation into one of ownership by satisfying Wise

& Company. "If, notwithstanding a restrictive endorsement, advances are actually made...