Commercial Nat. Bank v. Ashley Corp.

• Decision Date: 22 December 1925
• Docket Number: 11890.
• Citation: 130 S.E. 890,133 S.C. 304
• Parties: COMMERCIAL NAT. BANK v. ASHLEY CORPORATION ET AL.
• Court: South Carolina Supreme Court

130 S.E. 890

133 S.C. 304

COMMERCIAL NAT. BANK v. ASHLEY CORPORATION ET AL.

No. 11890.

Supreme Court of South Carolina

December 22, 1925

Appeal from Common Pleas Circuit Court of Charleston County; T. J Mauldin, Judge.

Action by the Commercial National Bank against the Ashley Corporation and the Simmons-Mayrant Company. From a judgment for plaintiff, defendant last named appeals. Reversed, and new trial ordered.

Buist & Buist, of Charleston, for appellant.

Whaley Barnwell & Grimball, of Charleston, for respondent.

MARION J.

Action upon a note, brought by the plaintiff, bank, against the two defendants, Ashley Corporation and Simmons-Mayrant Company. On the trial thereof in the circuit court, the presiding judge directed a verdict for the plaintiff. From judgment thereon, the defendant Simmons-Mayrant Company appeals upon exceptions which assign error (1) in the direction of the verdict and (2) in the exclusion of certain evidence.

The pertinent allegations of the complaint are, in substance, (1) that on or about March 6, 1922, the defendant Ashley Corporation, for value received, executed and delivered to the plaintiff a certain promissory note in writing, whereby it promised to pay to plaintiff's order $2,800, 90 days after the date thereof, "and at the time of the execution and prior to the delivery of said note, the defendant Simmons-Mayrant Company, by S. Lewis Simmons secretary and treasurer, wrote its name on the back of the said note as indorser thereof, and thereby made itself liable as indorser of the said note," etc.; (2) and "that demand for the payment of the said note was duly made on the maker and indorser at the maturity thereof, and payment" refused. By its answer the defendant Simmons-Mayrant Company expressly denied "of its own knowledge" the allegations of the complaint to the effect that demand for payment had been "duly made," etc., and further denied, for lack of knowledge, etc., the allegation of nonpayment.

Upon the issues so made by the pleadings, the evidence adduced established the following facts, which are practically undisputed:

In 1918, Simmons-Mayrant Company did some paving work for Ashley Corporation, a real estate corporation, for which T. T. Hyde, doing business under the name of T. T. Hyde & Sons, was agent. There was due Simmons-Mayrant Company for the work $2,824.40, and, as Ashley Corporation did not have the money to pay the bill, it offered to give Simmons-Mayrant Company its note. In reply to this offer, Simmons-Mayrant Company wrote the following letter to T. T. Hyde, the agent of Ashley Corporation, who was also president of the Commercial National Bank, the plaintiff here:

"We beg to say that we will take the note for paving on Meeting street, but we would be very glad if you would arrange this through the Commercial Bank. We are large borrowers in the People's Bank and the notes we indorse are counted against our account as well as regular amount we borrow."

Thereafter, on March 15, 1919, Ashley Corporation executed its note, payable in 60 days to Commercial National Bank for $2,824.40, which note was indorsed by the defendant Simmons-Mayrant Company, and discounted by the Ashley Corporation with the Commercial National Bank. Ashley Corporation thereupon paid its indebtedness to Simmons-Mayrant Company. The original note was renewed from time to time. The last renewal note, which was not paid at maturity, and upon which this action was instituted, was executed by Ashley Corporation and indorsed by Simmons-Mayrant Company on March 6, 1922, being for $2,800, and due 90 days after date. On April 12, 1922, Simmons-Mayrant Company wrote T. T. Hyde, in care of T. T. Hyde & Sons, a letter, which is as follows:

"Referring to our conversation of yesterday in regard to the note of the Ashley Corporation, discounted in the Commercial National Bank and on which we are the indorsers, as we told you, while we are not directly out of the money on this, our indorsement on the note hampers our credit, and we will certainly appreciate it if you will arrange to have this fixed so our indorsement will be released by the time the note comes due again. We inferred from what you said that you will arrange it in that way and were to let us know yesterday. I suppose, however, that in the press of business you forgot to communicate with us. We are writing to remind you of it. As far as we can tell from our records, this note will be due about June 6. It was renewed, according to a memorandum we have, for 90 days from March 6. Thanking you in advance for you attention in the matter, as well as for your courtesy in the interview, we remain," etc.

The foregoing letter, offered in evidence by the defendant, Simmons-Mayrant Company, was excluded by the court on the ground that it was a self-serving declaration.

The plaintiff moved for a directed verdict upon the ground that it appeared conclusively from the evidence (1) that the defendant Simmons-Mayrant Company received the benefit of the note in suit, and that it was for the benefit of that defendant, and therefore no notice of dishonor was required; (2) that the defendant Simmons-Mayrant Company had such notice as the law requires to enable it to act promptly in the protection of its interests, and that it was therefore bound as indorser; and (3) that no other inference could be drawn from the testimony than that the said company, by its continuous course of conduct during the life of the note and renewals had waived any requirement as to the note.

The presiding judge sustained the first of the foregoing contentions and held that the undisputed facts made a case falling within the provisions of the third subdivision of section 115 of the Negotiable Instruments Act (section 3766, vol. 3, Code, 1922), which reads as follows:

"Notice of dishonor is not required to be given to an indorser in either of the following cases: * * *

(3) Where the instrument was made or accepted for his accommodation."

The appellant's exceptions (1 to 8, inclusive) challenge the correctness of the foregoing ruling.

Prior to the adoption in this state of the Uniform Negotiable Instruments Act, 1914 (28 Stat. p. 668, 678), one who placed his name on the back of a promissory note before or at the time of delivery assumed the position of a comaker and became liable in that capacity. But, as has been expressly held by this court (Norwood National Bank v. Piedmont Pub. Co., 106 S.C. 472, 91 S.E. 866; Shull v. Gladden et al., 109 S.C. 219, 95 S.E. 521) by force of said act such person so placing his name on the back of the paper by blank indorsement is an indorser. As such indorser, he is not liable to the payee in the absence of notice of dishonor (section 89 of Act; section 3740, vol. 3, Code 1922; Shull v. Gladden, supra), except in the special circumstances which are expressly set forth in section 115 of the act (section 3766, of the Code) above referred to. Where for the purpose of relieving the holder of the paper of the duty of giving the required notice of dishonor to an indorser as required by section 89 of the Negotiable Instruments Act (section 3740, Code 1922), it is sought to establish that the indorsement falls within one of the exceptions specified in section 115 (section 3766, of the Code), the burden of proving that contention rests upon the party who makes it. That parol evidence is admissible, and that its introduction is not inhibited or precluded by the Negotiable Instruments Act, upon that issue, would seem to be sufficiently obvious.

But respondent's contention, sustained by the trial judge that the parol evidence adduced in this case conclusively established that the indorsement of this note by the Simmons-Mayrant Company was made under circumstances which brought it within the exception for which subdivision 3 of this section (Code, § 3766) makes provision, is, we think, untenable. Bearing in mind the pertinent language of that section, that "notice of dishonor is not required to be given to an indorser * * * (3) where the instrument was made or accepted for his accommodation," the question here is whether this note was made by the maker, Ashley Corporation, for the "accommo...