Beam v. Wright
| Decision Date | 29 November 1944 |
| Docket Number | 305 |
| Citation | 32 S.E.2d 213,224 N.C. 677 |
| Parties | BEAM v. WRIGHT et al. |
| Court | North Carolina Supreme Court |
This was an action to recover on a note in the sum of $5,976. Defendants denied liability and pleaded want of consideration.
This case was here at Fall Term, 1942, and is reported in 222 N.C. 174, 22 S.E.2d 270. That appeal involved only the pleadings. On the trial below compulsory reference was ordered and both parties excepted. The referee found the defendants liable on the note sued on in the sum of $800, and plaintiff filed exceptions to the report with demand for jury trial upon issues tendered. The issues tendered and submitted to the jury on the trial were these:
'1. Are the defendants indebted to plaintiff by virtue of their promissory note, as alleged in the complaint?
The jury answered the first issue yes, and the second issue $5,976. From judgment on the verdict defendants appealed.
A L. Hamilton, of Morehead City, C. R. Wheatley, of Beaufort and R. A. Nunn, of New Bern, for plaintiff.
R E. Whitehurst, of New Bern, and L. I. Moore, of Greenville for defendants.
The plaintiff declared upon a pastdue negotiable note, regular in form, and offered evidence of its execution by the defendants. This made out a prima facie case, and imposed upon the defendants the burden of going forward with evidence to rebut the presumption created by the statute, G.S. s 25-29, or incur the risk of an adverse verdict. Stein v. Levins, 205 N.C. 302, 171 S.E. 96; Benner v. Phipps, 214 N.C. 14, 197 S.E. 549. In accord with this rule the plaintiff, having introduced the note in evidence, rested his case.
The defendants admitted signing the note sued on, but testified they signed it at the instance of the plaintiff who was then cashier of the bank with which they had been dealing; that when they signed the note the amount was left blank; that they were induced to sign it in that form by the insistence of the plaintiff that he needed it on account of an expected bank examination, and that it would be filled in with the comparatively small amount of checks of defendants which had been paid and held out from entry by the bank. Defendants testified the plaintiff paid nothing to them or to the bank; that all of defendants' antecedent obligations to the bank had been paid.
The transactions between plaintiff and defendants and the bank are detailed in the record, but much of this is not material to the questions presented by this appeal. However, it appears that defendants were borrowers from the bank, and that the bank in addition through its cashier, the plaintiff, had indulged the practice of paying defendants' checks drawn on the bank when they had insufficient deposits or credit therein, and holding out the checks in the bank until the defendants should execute notes to the bank to cover.
The plaintiff's contention was that in August 1940 the defendants' unpaid notes given to cover held out checks, together with additional checks which had since been paid by the bank, had accumulated until they aggregated $5,976, and that at plaintiff's suggestion the defendants signed the note in suit in that sum, payable not to the bank but to him individually, to cover same. The plaintiff admits he paid nothing to the defendants or to the bank, but he contends that, having been subsequently found short in his accounts with the bank and convicted or plead guilty in the United States District Court, the surety on his fidelity bond paid to the bank the amount of his shortage which grew out of the Wright checks, and that he has agreed to reimburse the Surety Company, and is doing so by monthly payments secured by mortgage on his home. He contends that the amount for which the defendants were liable to the bank, being the same amount designated in the note, was paid by the Surety Company to the bank; that this was in discharge of the liability of the defendants, and that his, the plaintiff's, repayment to the Surety Company of this debt, which was primarily the obligation of the defendants, entitled him to be given now the status of having furnished the full consideration for the defendants' note. In other words, he contends that the consideration for the note in suit was his agreement to pay the defendants' debt to the bank; that while he did not do so at the time, he has now done so, and the full benefit agreed has inured to the defendants, and the full payment has been made by him. 10 C.J.S., Bills and Notes, s 151, p. 616; Turner v. Rogers, 121 Mass. 12; Restatement Law Contracts, sec. 75, pg. 83.
It also appeared in evidence that while the transactions about the notes and held out checks were being carried on between the defendants and the bank, the plaintiff Beam was manipulating certain deposit accounts in the bank in order to cover the shortages occasioned by holding out Wright's checks; that he unlawfully took funds from the accounts of other depositors to make good these shortages, and falsified and concealed entries on the books of the bank in violation of law.
It will be noted that whatever debt defendants owed at the time was to the bank and not to the plaintiff, and that, for some reason, he had the note executed in his own name, with the agreement, as he contends, as consideration therefor that he would pay to the bank the amount designated in the note in settlement of defendants' debts to the bank.
Considering the evidence in the light of the plaintiff's contentions, the rather unusual situation shown by the record may be diagrammed like this: A being indebted to B, executes note to C upon the latter's promise to pay B. C does not himself pay the debt, but wrongfully takes money from D and pays B. Upon discovery, B returns the money to D, and thereupon E, the surety on C's bond, reimburses B, and C agrees to reimburse E. Whereupon C sues A on the note, on the ground that consideration is now shown.
The defendants, on the other hand, offered evidence tending to show that all their notes and obligations to the bank had been paid prior to the execution of this note, and that it was only in consequence of the representations of plaintiff Beam that there were some additional checks held out, amounting to $700 or $800, and that he wished them to sign a note in order to tide him over a bank examination, that they were induced to sign the note in blank.
The defendants contend that they owe Beam nothing and never have; that Beam never paid anything to them or to the bank; that they had no transactions with Beam personally, only with the bank through him, and that the note sued on was entirely without consideration; that plaintiff's misapplication of the bank's funds began prior to the defendants' dealings with the bank, and were not connected with defendants' checks. Defendants further assert they had no knowledge that Beam was taking funds from other depositors to cover his shortages. They contend that the note being without consideration at the time of its execution, plaintiff should not now, out of circumstances showing the wrongful taking of the property of others to cover his own defalcations, be permitted to invoke an equity which would inure to his own benefit, and by this circuitous method give life to a note void for lack of consideration. The defendants also call attention to evidence that after the discovery of plaintiff's defalcation and his prosecution he offered the note now in suit to the bank and also to the Surety Company, but neither would accept it. Neither claimed any interest in it.
The defendants noted exception to the court's instruction to the jury that 'under all this evidence' they should answer the first issue yes, and that they should not concern themselves with any investigation as to whether the defendants were indebted, but should consider only the second issue as to the amount.
The question in the first issue was whether the defendants were 'indebted to the plaintiff by virtue of the promissory note sued on. ' The defendants did not deny that there were at the time of the execution of the note to plaintiff in the bank some 'held out' checks which would have constituted an overdraft, but we do not understand the defendants admitted the validity of the note sued on, or their indebtedness to the plaintiff Beam thereon. This being so, their defenses that they had paid their notes and obligations to the bank, that they owed Beam nothing, that the note was without consideration and obtained for an illegal purpose (7 Am.Jur. 965), were disregarded, as was also their contention that the circumstances negatived the application of the equitable principle of subrogation in aid of a wrongdoer, and failed to afford ground for the maintenance of a suit on this note against these defendants.
We think this assignment of error well grounded, and that the instruction to which exception was noted must be held for error. At the time it was given the note was nudum pactum. There was then no legal obligation on the defendants to pay Beam. The circumstances relied upon by the plaintiff to show he had eventually paid, through the Surety Company, a debt which was primarily the obligation of the defendants, are not admitted. The defendants' view is that the note was procured by the plaintiff to aid him in perpetrating a fraud on his employer and to cover up his violations of law, and that these fraudulent transactions were in no way related to the defendants' overdrafts, either in time or amount. From the defendants' standpoint and in accord with their testimony, the plaintiff's wrongful conduct was such as to deprive him of the benefit of his re-payment to the Surety Company, under the principle of subrogation, for the purpose of supplying evidence of consideration for...
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