Crum v. Emmett
| Decision Date | 05 February 1924 |
| Docket Number | 35343 |
| Parties | W. E. CRUM, JR., Receiver, Appellee, v. H. I. EMMETT, Appellant |
| Court | Iowa Supreme Court |
REHEARING DENIED MAY 10, 1924.
Appeal from Taylor District Court.--A. R. MAXWELL, Judge.
ACTION upon a promissory note. Verdict and judgment for plaintiff. Defendant appeals.
Reversed.
Jackson & Jackson and J. M. Haddock, for appellant.
Frank Wisdom, for appellee.
STEVENS J. ARTHUR, C. J., DE GRAFF and VERMILION, JJ., concur.
This is an action upon a promissory note for $ 2,000, dated February 10, 1912, due in two years, and drawing interest at the rate of 8 per cent. Plaintiff and appellee is the receiver of the Conway Savings Bank, the payee named in the note. Most of the propositions relied upon by appellant for reversal are based upon exceptions to the instructions given, and the refusal of the court to give other instructions to the jury. A somewhat extended statement of the issues is necessary to a clear understanding of the questions presented for review.
The execution of the note is admitted. The affirmative defenses pleaded by appellant are, in substance, that the note was executed and delivered to W. A. Conway, cashier of the Conway Savings Bank of Conway, Iowa, without consideration and for the accommodation of the bank; that, to induce appellant to execute said note, the said Conway represented to him that he (Conway) had purchased capital stock of the bank, to the amount of $ 2,000, that it was not permissible for an officer of the bank to borrow that amount from it, that the state bank examiner would object to the loan, and that he desired appellant's note to place in the bank as a substitute for his own; that, at the time of the execution of said note Conway agreed to deliver collateral security to appellant therefor; that all of the representations of the said Conway were false and untrue, and were made fraudulently for the purpose of inducing appellant to execute said note; that appellant believed the same, relied thereon, and was induced thereby to execute the note; that the bank paid no consideration whatever for said note; that, shortly before it became due, Conway represented and stated to appellant that he had paid for his stock, and that the note had been canceled and would be returned to him.
By way of amendment to his amended and substituted answer, appellant further alleged that the knowledge of Conway, as its agent, of the above matters was imputed to the bank; that appellant believes that all of said matters were in fact known to the president of said bank; that the said Conway was in charge of its business as cashier and manager, until its affairs were placed in the hands of a receiver.
Appellee, for reply to appellant's third amended and substituted answer and amendment thereto, after admitting certain formal matters, alleged that, in securing the said note, Conway acted in his individual capacity, as the agent of the defendant, and not as the agent of the bank; that the said Conway, so acting, entered into a fraudulent and unlawful conspiracy with appellant to defraud and deceive the officers of the bank, its depositors, and the banking department of the state of Iowa; that it was understood and agreed between them that the said note would be placed in the bank as a pretended asset thereof; that appellant never in good faith intended the same to be a valid and binding obligation, but intended that the said Conway might use and manipulate the same for the purposes stated; and that, in pursuance of said conspiracy, the note was executed and placed by Conway among the assets of the bank. Appellee further alleged that no officer or employee of said bank having authority to do so placed certain credits appearing on the back of said note, but that all of said entries were made by Conway in his individual capacity, and in furtherance of the fraud and conspiracy charged; that no payments of interest or principal were in fact ever made on said note; that, by reason of the execution of said note and the fraudulent agreement entered into by appellant with the said Conway in connection therewith, he was able to carry out the fraud and deception charged, and to unlawfully abstract from the funds of said bank more than $ 10,000, and to cover up the same and deceive its officers; and that, by reason of all of said matters, appellant is estopped to allege or prove any of the defenses pleaded to said note, or to deny liability thereon.
The defendant is a farmer, residing near Conway, and was a customer of the bank from the time of its organization. It is admitted that the bank was solvent at the time of the execution and of the maturity of the note. The note, when introduced in evidence, had certain alleged interest payments indorsed thereon. It also bore two numbers of the bank,--one in ink, which had been partially erased, and another in pencil, in the handwriting of Conway. By admitting that, but for the defenses pleaded, appellant would be liable on the note, he assumed the burden of proof. There is little conflict in the evidence. Appellant was the only witness who testified concerning the execution of the note. He testified that Conway, whom appellant well knew as the cashier of the bank, represented to him that he had purchased $ 2,000 worth of the capital stock of the bank, for which he was indebted to it, and that it was not permissible for a stockholder or officer to give his own note to the bank; and that he requested appellant to give him a note for the amount, upon the assurance that he would protect him from liability thereon, and that he would transfer to him the stock purchased, as collateral security for the note; that no demand was ever made by the bank for the payment of the note until appellee demanded payment thereof, as receiver; that the credits of interest payments on said note were made without his knowledge, and that he never paid anything on the note; that, shortly before the note matured. Conway informed him that he need give the matter no further concern, as the note had been canceled.
Upon cross-examination, appellant was interrogated as to various allegations contained in certain answers, amended and substituted answers, and amendments thereto, which had been superseded by the substituted answer and amendment upon which the case was finally tried, in which, in addition to the matters stated above, it was alleged that Conway further represented and stated to appellant that he wanted to substitute the note in suit for his own, so as to avoid the criticism of the bank examiner.
Appellant further testified that he executed the note in good faith, without consideration, believing that Conway had purchased stock of the bank, as stated, and that he desired the note only for the purposes stated and represented by him; and denied that he signed or delivered the same for any fraudulent or corrupt purpose, or that he conspired with Conway to assist or make it possible for him to give the bank a false credit or to deceive the officers or creditors of the bank or the state banking department.
Appellee who is president of the Bedford National Bank, and thoroughly familiar with the banking business and the system of bookkeeping generally used thereby, testified that, after a diligent search among the records, and after inspection of the bank books, he was unable to find the slightest evidence that the bank paid any consideration for the note, or that it ever parted with anything therefor. The first entry of the note in the books of the bank is on the journal, under date of March 9, 1914. This was after its maturity. The entry upon the journal was made by the bookkeeper from a memorandum furnished by Conway, and was intended to show the payment of the note in suit by a new note for the full amount of principal and interest then due. A new number was given the old note, and no new one was executed or placed in the assets of the bank. Appellee further expressed the opinion that Conway...
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