Cont'l Nat. Bank of Indianapolis v. Discount & Deposit State Bank of Kentland

• Decision Date: 30 June 1927
• Docket Number: No. 25418.,25418.
• Citation: 199 Ind. 290,157 N.E. 433
• Parties: CONTINENTAL NAT. BANK OF INDIANAPOLIS v. DISCOUNT & DEPOSIT STATE BANK OF KENTLAND et al.
• Court: Indiana Supreme Court

199 Ind. 290

157 N.E. 433

CONTINENTAL NAT. BANK OF INDIANAPOLIS

v.DISCOUNT & DEPOSIT STATE BANK OF KENTLAND et al.

No. 25418.

Supreme Court of Indiana.

June 30, 1927.

Appeal from Jasper Circuit Court; George A. Williams, Judge.

Action by the Continental National Bank of Indianapolis against the Discount & Deposit State Bank of Kentland and its receiver. Judgment for defendants, and plaintiff appeals. Reversed, with instructions.

Transferred from the Appellate Court under section 1351, Burns' Ann. St. 1926.

Hanley & Hanley, of Rensselaer, H. L. Sammons, of Kentland, and John W. Holtzman and John J. Kelly, both of Indianapolis, for appellant.

Fraser & Isham, of Fowler, Stuart, Simms & Stuart, of La Fayette, and Emmett M. La Rue, of Rensselaer, for appellees.

PER CURIAM.

Appellant, Continental National Bank of Indianapolis, brought this action against appellee Discount & Deposit State Bank of Kentland, Ind., and subsequently prosecuted it against its receiver, to recover damages on account of certain alleged negligence of appellee bank. A trial before a jury resulted in a verdict for appellees and judgment thereon followed, from which appellant appealed, alleging that the court erred in overruling its motion to strike out parts of appellees' seventh paragraph of answer; in overruling its demurrer to each of five affirmative paragraphs of answer; and, in overruling its motion for a new trial, specifying therein that the verdict is not sustained by sufficient evidence and is contrary to law, and in giving and refusing to give certain instructions to the jury.

The complaint is in four paragraphs. The first and third relate to a note for $2,000, dated March 18, 1923, due 90 days after date, signed A. Messman & Co., and the second and fourth have reference to a note for $10,350, dated November 20, 1922, due six months after date, signed J. L. Williams. The drawers and indorsers of these notes severally waived presentment for payment, protest, and nonpayment, and both notes were payable and negotiable at appellee bank to the order of Warren T. McCray, who, on April 7, 1923, sold for value, and, in words, “Warren T. McCray,” indorsed these notes on the back thereof to appellant.

The allegations common to the first and second paragraphs, referring to the respective notes therein, allege that on June 7, 1923, appellantdelivered the $2,000 note, and on May 9, 1923, the $10,350 note to appellee bank for collection, with written instructions to protest the same, if not paid at maturity, and that appellee bank, for a valuable and sufficient consideration, accepted the notes for collection and promised to use due diligence in presenting and demanding payment of the same from the makers, as required by the law merchant and customs of banking, and to give due notice of nonpayment to appellant and to protect it as indorsee thereof, but that appellee bank negligently failed to present the notes to the makers of the same on their maturity dates, and failed and neglected to notify appellant of the nonpayment of the notes, and negligently failed to return the notes to appellant until September, 1923; that from the date of maturity of each of these notes the indorser, McCray, continued in business and of reputable credit, and continued to pay the demands made against him until September, 1923, when he became insolvent and made a general assignment of all his property in trust for the benefit of his creditors, and, by reason of the various negligent acts of appellee, appellant has been damaged.

The third and fourth paragraphs, respecting these notes, in addition to the foregoing facts, allege that the makers and indorser of these notes resided in Newton county, Ind., at the time the notes became due; that McCray was president of appellee bank at the time it received the notes and until August 11, 1923; that on June 14, 1923, appellant telegraphed appellee to protest the notes, if not paid, which it negligently failed to do; that McCray was, on May 9, June 7, and June 14, 1923, a patron of appellee bank and transacted a large amount of his business through it; that its officers and agents knew that on June 7, 1923, and on May 9, 1923, the makers and indorser were “pressed for money,” and that many of the obligations of McCray were being presented at the bank, and, notwithstanding such knowledge, it retained the notes in its possession until September 19, 1923. In the meantime McCray “continued to pay his obligations until August 6, 1923,” when he ceased to pay his maturing obligations and became insolvent; that, had appellee protested the notes when due and returned the same to appellant, as it was ordered to do, or had it protested the notes on June 14th and returned the same to appellant with the information it possessed concerning the financial condition of the makers and indorser of the notes, appellant would and could have collected them; that the makers of the notes are wholly insolvent; and that the property assigned by McCray in September for the benefit of his creditors is wholly insufficient to pay a nominal percentage of his indebtedness.

[1] Appellees answered in seven paragraphs, the first being a general denial, the sixth was withdrawn, and a demurrer for want of facts to the others was overruled. Appellant replied by a general denial, and to the fifth and seventh paragraphs by argumentative denials.

The second paragraph, in substance, averred that appellee bank never at any time agreed or undertook to protest either of the notes, but immediately upon their reception informed appellant that it would not undertake to protest the notes.

The material facts of the third and fourth paragraphs make it appear that appellant, at the request of the payee, first indorser, Warren T. McCray, expressly waived protest of both notes in consideration that McCray would make an effort to realize on his property and procure funds with which to pay the whole or a large part of these notes, which efforts appellant knew would be futile, if protest was made.

The fifth paragraph averred that appellant knew at the time it sent the notes to appellee bank for collection that its only chance of realizing anything on the notes was out of the property of the indorser McCray, to whom it extended the time of protest indefinitely in order that he might have time to convert his property into money, which finally was agreed should be done by trustees under a trust agreement between McCray and his creditors, one of which was appellant; that at the time these notes became due appellant was informed and knew that one of the notes was fictitious and both of the purported makers wholly insolvent, and nothing could be realized on either of them from the makers; that, pursuant to the trust agreement, trustees were appointed to whom, in August, 1923, McCray, his wife joining, conveyed all of his property for the benefit of his creditors, which property was administered by the trustees pursuant to the trust agreement which was made a part of this answer by exhibit.

The seventh paragraph averred that appellant, at the time it purchased the notes, relied solely on the credit of McCray, and also by its averments it appears that, before and at the time the notes came into the hands of appellee bank, the purported makers thereof were nonresidents and had no place of business, office, property, or credit in the state of Indiana, and their post office address was wholly unknown to appellee bank; that McCray “had no place of business or office at the town of Kentland, Ind.,” but was at all times sojourning at Indianapolis; that the makers and indorser were then, and continuously since that time have been, insolvent; that appellant, by its indorsement, expressly waived protest of the notes, and, on receipt of the same from appellant, appellee bank notified McCray that it was unable to locate the makers of the notes, and thereupon McCray informed appellant of the facts herein averred, and that the notes could not and would not be paid or collected from any other person than himself, “and that, if a protest was made of said notes, his credit would be so far impaired that he would be rendered notoriously insolvent, and that he expressly waived the protest” thereof, and acknowledged himself solely liable for their payment.

While each the second, third, and fourth paragraphs of answer purport to answer the entire complaint, yet the material averments of each show they were directed to that part of the complaint alleging negligent failure to protest, and, at most, only partial answers. But the fifth and seventh paragraphs clearly indicate that they were submitted and regarded as answers to the entire complaint, and were not sufficient to withstand a demurrer for want of facts.

McCray was president of appellee bank at the time the notes were received for collection, but it is not averred that he represented appellee bank in the various negotiations he had with appellant regarding the notes, nor does the fifth paragraph aver that the extension was for a consideration, or that the extension agreed upon between appellant and McCray was, by appellant, communicated to appellee bank, or that appellee bank was at any time instructed by appellant not to protest the notes, nor does it meet the allegations in the complaint of negligent failure to notify appellant of the nonpayment of the notes, or negligent failure to return the notes to appellant with a statement of the reasons why they were not collected months before the consummation of the trust agreement, nor do the averments of the seventh paragraph counteract the allegations of the complaint that McCray resided in Kentland and “continued to pay his obligations until August 6, 1923”; otherwise, the averments of this paragraph were directed to the protest allegations of the complaint, leaving the other material allegations relied on for a recovery unchallenged in any respect.

[2] Before proceeding to further...