Callahan v. First National Bank of Wetmore

• Decision Date: 09 June 1923
• Docket Number: 24,015
• Parties: JOHN T. CALLAHAN, Appellee, v. FIRST NATIONAL BANK OF WETMORE, Appellant, (W. E. STEWART LAND COMPANY AND JOSEPH W. PFRANG, Appellees)
• Court: Kansas Supreme Court

215 P. 831

113 Kan. 577

JOHN T. CALLAHAN, Appellee, v. FIRST NATIONAL BANK OF WETMORE, Appellant,

(W. E. STEWART LAND COMPANY AND JOSEPH W. PFRANG, Appellees)

No. 24,015

Supreme Court of Kansas

June 9, 1923

Decided January, 1923.

Appeal from Nemaha district court; WILLIAM I. STUART, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. Where a bank purchases promissory notes and the purchase money is deposited in the bank and held there pending procuring security on the notes, and while the money is still on such deposit, the bank obtains knowledge of infirmities in the notes, held, the bank has not paid the amount of the purchase price of the notes, within the meaning of section 6581 of the General Statutes of 1915.

2. SAME. The evidence examined and, held to support a finding that the transferee of promissory notes had notice of the infirmities of the instruments, within the meaning of section 6583 of the General Statutes of 1915 at the time it parted with the purchase price thereof.

T. A Moxcey, of Atchison, and Edgar W. Campbell, of Topeka, for the appellant.

A. E. Crane, and R. F. Hayden, both of Topeka, for the appellee.

OPINION

HARVEY, J.:

This is a suit to rescind a contract for the purchase of real property for fraud and to cancel the contract and certain notes and other instruments given by plaintiff in connection with such purchase, two of which notes were held by the First National Bank of Wetmore. There was a trial to the court, findings and judgment for plaintiff, and the bank appeals.

John T. Callahan was a resident of Nemaha county, Kan., and had sold his farm there to one Joseph W. Pfrang. The papers for this transaction were in escrow at the First National Bank at Wetmore, where Pfrang was to make some additional payments on March 1, 1919. Callahan accompanied one of the excursions of the W. E. Stewart Land Company to western Texas and on November 4, 1918, signed a contract to purchase thirty acres of land at $ 300 per acre, paid $ 500 cash, executed two notes for $ 2,000 each, due March 1, 1919, and was to secure the balance by a vendor's lien upon the land. Thereafter, and about November 16, 1918, that contract was modified, by which Callahan took twenty acres of land at another place, but at the same price per acre. The payment made and the notes then executed were to apply upon the second contract. To secure the payment of the two $ 2,000 notes, Callahan on November 16, 1918, wrote a letter to Joseph W. Pfrang--spoken of in the case as an order, by which he authorized Pfrang to pay to the W. E. Stewart Land Company or its order, out of the moneys coming to Callahan from the sale of his farm to Pfrang, the two $ 2,000 notes above mentioned when they should become due March 1, 1919. Soon after these notes were executed, November 4, VanOver, an agent of the Stewart Land Company, went to Wetmore, in Nemaha county, the home of Callahan, and undertook to sell the two $ 2,000 notes. At one bank he offered them at a discount of $ 1,000, to be indorsed without recourse. That bank declined to buy them. He also offered them to the First National Bank at Wetmore, and was advised that the bank would not care to buy them unless they were secured by an order upon Pfrang to pay the money. After the change was made in the contract on November 16, and the letter from Callahan to Pfrang--spoken of as an order, had been secured, Rasmus, who had formerly lived at Wetmore, but then living at Atchison, and who had gone to Texas on two excursions with the Stewart Land Company, had a talk with VanOver, in which VanOver told him Callahan had made a bad trade when he switched contracts. Rasmus talked with VanOver about handling some of the lands or notes for the Stewart Land Company to make some money, and VanOver spoke of the Callahan notes as being notes which could be handled so as to make money out of them. Rasmus was well acquainted with Edgar W. Campbell, an attorney at Wetmore, and the son-in-law of the cashier and assistant cashier of the First National Bank at Wetmore. Rasmus called Campbell by long-distance telephone and located him at Atchison and talked with him about selling the Callahan notes to the appellant bank, and Campbell told him he thought they could sell them if they had this order from Pfrang. The notes were indorsed by the W. E. Stewart Land Company without recourse, and Rasmus took them to Atchison, and delivered them to Campbell. Campbell took the notes to Wetmore and on November 21, sold them to the First National Bank at Wetmore, and in payment therefor, the bank issued to Campbell a cashier's check for $ 3,940. This cashier's check was deposited by Campbell in the First National Bank at Wetmore, together with other deposits, on Nevember 23. There is evidence that Rasmus sent his check to the Stewart Land Company for the notes on November 23. The amount he remitted was $ 3,840. Campbell, however, retained the money in the First National Bank at Wetmore, or the bank had him retrain it there, until they could get Pfrang's signature of acceptance or approval upon the letter or order written by Callahan to Pfrang dated November 16. In the meantime, Callahan, who was still in Texas, wrote Pfrang on December 4, in which he advised Pfrang about the notes mentioned in this order on him and in the letter stated: "I thought I was cheated out of part of my money at first, but I am not. I got value received." This letter was shown, or the contents of it reported, to Campbell at the time Campbell got Pfrang's signature on Callahan's order, which was December 7, and on that date Campbell sent his check to Rasmus for the notes, the amount sent being $ 3,880. This check, however, was not presented to the First National Bank of Wetmore until December 11. In the meantime Callahan, who was still in Texas, had other evidence that he had been defrauded, and on December 9 he wired Pfrang: "Am leaving to-day for home. Don't sign my interest to no one. If you have done so wire me Mercedes." This telegram was received by Pfrang either the 9th or 10th of December, and he immediately took it to the First National Bank at Wetmore, and showed it to Mrs. Achten, the assistant cashier. She is the official of the bank who had handled all matters for the bank in connection with the purchase of these notes. On being shown the telegram by Pfrang, Mrs. Achten said that was why they wanted the order, because they were afraid Callahan would back out. There is evidence to the effect that Campbell, after receiving the notes from Rasmus, and either before, or after he sold them to the bank, offered them for sale to other parties at Wetmore whom he thought had money to purchase notes, and to at least one person offered to sell them at a discount of $ 400.

In this suit plaintiff's petition alleged fraud on the part of the W. E. Stewart Land Company which induced the contract for the purchase of the land and execution of the notes and order on Pfrang, and asked that the contract be set aside and the notes and order cancelled and surrendered. The land company answered by a general denial. The First National Bank of Wetmore answered by a general denial and by a cross petition in which it set up the two $ 2,000 notes and alleged that it had purchased the notes for value before due, without knowledge or notice of any infirmities, and that it...