Elk Valley Coal Co. v. Third National Bank
| Citation | 157 Ky. 617 |
| Parties | Elk Valley Coal Company, et al v. Third National Bank of Lexington, Kentucky. |
| Decision Date | 26 February 1914 |
| Court | Court of Appeals of Kentucky |
Appeal from Muhlenberg Circuit Court.
T. B. McGREGOR, ORA E. HAZELIP, M. M. LOGAN and TAYLOR & EAVES for appellants.
WILLIS & MEREDITH for appellee.
On August 30, 1909, the Elk Valley Coal Company executed and delivered to H. C. Thompson its promissory note by which it agreed to pay to his order the sum of $2,500 four months thereafter. The note was endorsed by J. M. Thompson. On October 20, 1909, the note was discounted by the Third National Bank of Lexington, Kentucky, and the proceeds paid to H. C. Thompson. When the note became due it was presented for payment, and payment being refused it was dishonored, and notices of dishonor duly mailed to the defendants.
During the year 1911, plaintiff, Third National Bank, brought this action against defendants, Elk Valley Coal Company, J. M. Thompson and H. C. Thompson, to recover on the note in question. Defendants, Elk Valley Coal Company and J. M. Thompson, pleaded by way of defense that the note was executed to H. C. Thompson by the coal company, and endorsed by J. M. Thompson, for the sole purpose of having H. C. Thompson discount the note at the First National Bank at London, Kentucky, and obtain the proceeds for the Elk Valley Coal Company, but that the Elk Valley Coal Company found that it did not need the money, and directed that the note be returned. Instead of returning it, H. C. Thompson discounted the note to plaintiff, and applied the proceeds to his individual use.
At the conclusion of the evidence the trial court peremptorily instructed the jury to find for plaintiff in the amount of the note sued on. Judgment was entered accordingly, and the coal company and J. M. Thompson appeal.
The evidence leaves no doubt that the note in question was discounted by the bank and the proceeds paid to H. C. Thompson. It also clearly appears that at the time the note was discounted the bank had no knowledge of any infirmity or defect therein, or of such facts that its action in taking the instrument amounted to bad faith. Plaintiff was, therefore, entitled to a peremptory, but in our opinion judgment was given for more than the bank itself was entitled to recover. According to the depositions given by the officers of the bank, H. C. Thompson, on June 13, 1910, executed to the bank a note for $2,674.85. The bank then attached to this note the note of the Elk Valley Coal Company for $2,500, and seven bonds for $500 each of the New Bell Jellico Coal Company. Both the bank officers say that from that time on the note sued on in this action was held merely as collateral security for the note of $2,674.85, above referred to. Afterwards six of these bonds held as collateral were released, and H. C. Thompson submitted therefor a $1,000 note executed by R. M. Jackson. The note for $2,674.85 was carried for some time, and certain payments were made thereon, amounting to $526.50. After these payments H. C. Thompson, on October 13, 1911, executed to the bank his note for $2,148.35, payable in three months. The note sued on in this action was also attached to this latter note as collateral security. The note sued on was never paid, surrendered or re-negotiated. While it is not exactly clear why the note sued on, which was originally discounted by the bank, afterwards came to be used as collateral security, we take it that this was merely the bank's method of handling H. C....
To continue reading
Request your trial