Campbell v. Fourth Nat. Bank

• Decision Date: 09 March 1910
• Citation: 126 S.W. 114,137 Ky. 555
• Parties: CAMPBELL v. FOURTH NAT. BANK OF CINCINNATI, OHIO.
• Court: Kentucky Court of Appeals

126 S.W. 114

137 Ky. 555

CAMPBELL v. FOURTH NAT. BANK OF CINCINNATI, OHIO.

Court of Appeals of Kentucky.

March 9, 1910

Appeal from Circuit Court, Pike County.

"To be officially reported."

Action by the Fourth National Bank of Cincinnati, Ohio, against A W. Campbell. Judgment for plaintiff, and defendant appeals. Affirmed.

Ernest Cassatt and Butler & Moore, for appellant.

York &amp Johnson and C. B. Wiely, for appellee.

HOBSON J.

A. W Campbell executed to the Boice & Grogan Lumber Company three notes aggregating $2,601.90. The payees of the notes indorsed them in blank to the Fourth National Bank of Cincinnati, Ohio, and, the notes not being paid at maturity, the bank brought this suit against Campbell on them. He defended on the ground that the notes were obtained from him by fraud. At the conclusion of the evidence on the trial of the case, the court instructed the jury peremptorily to find for the plaintiff, and, a judgment having been entered against Campbell, he appeals.

The evidence introduced on the trial to show that the notes were obtained from Campbell by fraud was sufficient to take the case to the jury, unless the bank was a bona fide purchaser for value and without notice of the fraud. There was no evidence tending to show notice to the bank of the fraud, and so the question was narrowed to this: Was the bank a holder for value? The only evidence on the subject was given by H. P. Cook, the vice president of the bank, who testified on the trial, in substance, to these facts: The bank had dealings with the Cypress Lumber Company, and had discounted for it a note made by Woodward and Grogan for $2,822.34, on April 10, 1907. The note was due August 3, 1907. Woodward came to the bank asking more time on the debt, which the bank agreed to give if he had some good paper. He then produced the three Campbell notes. The bank discounted the notes $54.42, leaving the net value of the notes on that date $2,547.48, which was credited on the note of Woodward and Grogan, leaving due on that note $274.88. The bank paid no money to the Boice & Grogan Lumber Company. It simply gave them a credit on the note it held for $2,822.34, and a few days afterwards Woodward came in and paid the bank the balance, $274.88. The bank still continued to hold that note, as Cook testified on the trial, under the following circumstances: "After Mr. Woodward had paid this $274.88, which was the balance due on the note, and it became his property, we three men, Mr. Woodward, Mr. Wilson, and myself, were standing there together. Mr. Wilson asked him if he had no objection to our keeping this note, and he said, 'No.' And under those circumstances we retained and still retain that note in our possession, after the transaction was completed on the part of Mr. Woodward." Cook had, however, before the trial given a deposition in which he made this statement as to the transaction: "And in order to retire this original note these three notes of Mr. Campbell furnished the amount as stated, $2,547.48. That, however, was not an absolute payment. It was based on the ability and the payment of these notes by Mr. Campbell and nothing else. If it had been cash, then there would have been no such conditions arising here, and this note would have been in the hands of Mr. Woodward, but until Mr. Campbell meets his obligation that note is in our hands, and from the book entries this appears. It is an entirely different transaction than if it had been a cash payment. In other words, the Campbell note was looked upon by us as much better than the Boice and Grogan note. We took Mr. Campbell's paper believing it to be good, and, when he met that obligation, this indorsement went into force, and not at any other time. It was not an absolute surrender of anything." In Cook's statement on the trial he says, in effect, that, after Woodward paid the $274.88 on the old note, it became his property and was simply retained by the bank for him. In his testimony given in his deposition before the trial, he states, in substance, that the Campbell notes were simply taken as collateral security for the payment of the old note for $2,822.34, which they held. The jury might have credited his statement in the deposition and disregarded his testimony on the trial, and so the question arises: Was the bank a bona fide holder in either view of the case as stated by him?

Section 52 of the negotiable instrument act provides: "A holder in due course is a holder who has taken the instrument under the following conditions: (1) That the instrument is complete and regular upon its...