Columbia Nat. Bank of Columbia v. People's Bank

• Court: South Carolina Supreme Court
• Writing for the Court: COSGROVE, A. A. J.
• Citation: Columbia Nat. Bank of Columbia v. People's Bank, 160 S.E. 728, 162 S.C. 324 (S.C. 1931)
• Decision Date: 17 September 1931
• Docket Number: 13245.
• Parties: COLUMBIA NAT. BANK OF COLUMBIA v. PEOPLE'S BANK et al.

160 S.E. 728

162 S.C. 324

COLUMBIA NAT. BANK OF COLUMBIA v. PEOPLE'S BANK et al.

No. 13245.

Supreme Court of South Carolina

September 17, 1931

Appeal from Common Pleas Circuit Court of Bamberg County; William H Grimball, Judge.

Action by the Columbia National Bank of Columbia against the People's Bank of Bamberg, C. E. Black, C. W. Rentz, W. P McMillian, G. E. Bamberg, as Executor of the Will of W. S Bamberg, deceased, and another. From a judgment for plaintiff, defendants Black, Rentz, McMillan, and Bamberg appeal.

Affirmed.

E. H Henderson and W. E. Free, both of Bamberg, for appellants.

J Wesley Crum, of Denmark, Elliott, McLain, Wardlaw & Elliott, of Columbia, and Harley & Blatt, of Barnwell, for respondent.

COSGROVE, A. A. J.

In November, 1921, People's Bank of Bamberg went into voluntary liquidation, with the directors in charge, and sometime subsequently, not disclosed by the record, a receiver was appointed.

At the time the Bamberg bank closed, Palmetto National Bank of Columbia, S. C., held its unindorsed note in the sum of $15,171.81, secured by certain collateral.

In February, 1923, under circumstances hereafter related, a renewal of this note was executed by the People's Bank of Bamberg for the amount above stated, which, however, was indorsed by its directors, appellants herein. This, too, was a collateral note, and was renewed from time to time, the last renewal having been made apparently on 16th December, 1923. It was signed, "Peoples Bank of Bamberg, By C. E. Black, Vice-President." On the back appear the names of appellants as indorsers, and also an indorsement in blank by the payee, Palmetto National Bank.

Claiming to be the owner and holder for value of this last renewal note the Columbia National Bank commenced this action in the court of common pleas for Bamberg county on September 10, 1926, against People's Bank of Bamberg, as maker, and appellants herein, as indorsers. The complaint alleged the sale at public auction of the collateral pledged to secure the note, due credit thereon of the proceeds of sale, and prayed judgment against defendants for the balance due, with interest and attorney's fees as therein provided.

The chief defenses set up in the answers were (1) that respondent was not a holder in due course of the note sued on; (2) that the indorsements were induced and procured by agreements and promises of Palmetto National Bank with reference to the liability of the appellants on their indorsements, and with reference to the handling of the collateral pledged to secure the note, which agreements and promises were alleged to have been made by the payee bank with the present intention of breaking them, thereby deceiving appellants and inducing them to indorse the note, but for which they would not have indorsed it; and (3) that due diligence had not been employed in the handling and collection of the collateral.

At the trial, respondent offered the note in evidence and rested. Appellants thereupon sought to introduce certain evidence which, upon objection, was excluded by the trial judge. However, in the absence of the jury, the proffered evidence was allowed by the trial judge to be taken and entered.

The testimony thus taken was offered in support of the defenses above outlined, being, in substance, that Matthews, president of the payee bank, had made certain promises and representations at the time of the execution of the original indorsements, the effect of which were that appellants would not be held liable on their indorsements, but that the payee bank would look only to the collateral for payment of the note; that they relied upon those agreements and promises, and but for them would not have indorsed the note; and further, that the agreements and promises had not been kept, because suit had been brought on the indorsements.

Upon the jury being recalled, the trial judge directed a verdict for respondent for the amount due on the note, for which judgment was duly entered.

The exceptions assign error in excluding the testimony offered as to the transactions with, and agreements and promises made by Matthews; in holding the note sued on to be a negotiable instrument; in holding that respondent is a holder in due course; and in directing a verdict for respondent, instead of submitting the case to the jury.

The parties have agreed in the transcript of record that the defense set up was "that their endorsements were obtained by the fraud of the Palmetto National Bank." That seems to us also to be the real issue in the case.

Under the view which we take of the evidence, it is unnecessary to pass upon the ofttimes troublesome question, upon which there is a substantial divergence of authority, whether the note sued on was a negotiable instrument. It is likewise unnecessary to decide the kindred issues which flow therefrom and are presented by some of the exceptions.

Appellants rely upon Palmetto Bank & Trust Co. v. Grimsley, 134 S.C. 493, 133 S.E. 437, 51 A. L. R. 42, as authority for the admissibility, despite the parol evidence rule, of the excluded evidence. The principle is recognized and followed in that case that the making of a promise (which induced the execution of a contract) by one who had no intention at the time of performing it constitutes a fraud on account of which the contract may be rescinded; and that the parol evidence rule does not inhibit the proof of such a promise, if it was made fraudulently, and by deception induced the execution of the written instrument. Compare Parham-Thomas-McSwain, Inc., v. Atlantic Life Ins. Co., 111 S.C. 37, 96 S.E. 697; Continental Jewelry Co. v. Kerhulas, 136 S.C. 496, 134 S.E. 505.

It is of course, equally well recognized and established that fraud may be shown by circumstantial, as...