Farmers' Bank & Trust Co. v. Dent

• Decision Date: 19 December 1924
• Citation: 267 S.W. 202,206 Ky. 405
• Parties: FARMERS' BANK & TRUST CO. v. DENT ET AL.
• Court: Kentucky Court of Appeals

267 S.W. 202

206 Ky. 405

FARMERS' BANK & TRUST CO. v. DENT ET AL.

Court of Appeals of Kentucky.

December 19, 1924

Appeal from Circuit Court, Breckinridge County

Action by the Farmers' Bank & Trust Company against W. V. Dent and J. L. Gray. From a judgment for the defendant last named plaintiff appeals. Affirmed.

Allen R. Kincheloe, of Hardinsburg, and W. S. Ball, of Louisville for appellant.

Moorman & Walls, of Hardinsburg, and Moorman & Woodward and Ernest Woodward, all of Louisville, for appellees.

CLAY J.

On January 30, 1920, J. L. Gray sold and conveyed to W. V. Dent a 320-acre farm situated in Breckinridge county. As part payment therefor Dent executed and delivered to Gray three promissory notes, one for $2,000, payable on or before January 30, 1921, another for $5,900, payable on or before January 30, 1922, and a third for $5,900, payable on or before January 30, 1923. On the day of the sale Gray indorsed and discounted the notes at the Farmers' Bank & Trust Company The deed and each of the notes contained a provision to the effect that, if any one of the notes was not paid at maturity, then all the notes were to become due and collectable at the option of the holder. The first note, due on January 30, 1921, was not paid at maturity, and on February 1st the Farmers' Bank & Trust Company brought this suit against Dent and Gray to recover on the notes and enforce its lien on the farm. Dent made no defense, and judgment went against him for the amount of the notes and for the sale of the farm. Gray resisted a recovery on the ground that it was agreed between him and the trust company that the notes were to be signed and indorsed "without recourse," and that the cashier agreed and fraudulently represented that he would write the words "without recourse" before the indorsement on each note, and that Gray would not have indorsed said notes had it not been for such false and fraudulent representation. Another defense was plaintiff's failure to give notice of dishonor. Plaintiff denied the fraud, and pleaded waiver of notice. On final hearing, judgment was rendered in favor of Gray, and plaintiff has appealed.

Section 3720b63, Kentucky Statutes, is as follows:

"A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an endorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity."

The purpose of the statute is to exclude parol evidence, and make the written instrument control the rights of the parties. First National Bank v. Bickel, 143 Ky. 754, 137 S.W. 790. Even if it be conceded for the purpose of this case that a different rule applies between the immediate parties to the transaction where there is a plea of fraud, we have reached the conclusion that the evidence in support of the plea should meet the standard required for the reformation of a written instrument, and should therefore be clear and convincing, and such as to establish the fraud beyond all reasonable controversy. Johnson et al. v. Elkhorn Gas Coal Mining Co., 193 Ky. 585, 236 S.W. 1041. What took place between Gray and others who had no authority to represent the bank is without probative effect, and the question of fraud turns on what occurred between Gray and the cashier when the notes were discounted. Gray's evidence is to the effect that he went into the bank and said to the cashier, "You understand that these notes are to be signed over without recourse," and the cashier said that he understood it. When he went to sign the notes he again said to the cashier, "You understand writing, and are a better scribe than I, so I will sign these notes far enough down to give you room, and you put the 'no recourse' indorsement on them." The reason he did this was that he did not understand what words were necessary in law to constitute an indorsement without recourse. The cashier said that he would do so, and Gray then signed the notes about one-third of the way down and handed them to the cashier. Gray further claimed that about two months later he went into the bank and asked the cashier if he put that indorsement on the Dent notes, and he replied that he did. Later on he claims that he saw the cashier, who said that it was not his understanding that the words "without recourse" should be on the notes. He then asked the cashier if he had not told him so. The cashier replied, "Yes, I remember me telling you that I did, but I just wasn't noticing what I was saying." On the last-mentioned occasion Gray took his partner, C. L. Trent, to hear what Mr. Hendrick, the cashier, had to say. His account is that Gray said, "Didn't you tell me that you would assign those notes?" and Hendrick said, "Yes sir." Gray then said, "What is the trouble about them?" Hendrick said, "I reckon I just never noticed anything about what I was saying when I told you." On cross-examination Trent said that Hendrick denied that he agreed to "indorse the notes," and that the principal part of the discussion was a dispute between Mr. Gray and Mr. Hendrick as to whether Hendrick agreed to "indorse the notes."

On the other hand, Mr. Hendrick, the cashier, says that Gray bought the notes from the bank and asked the bank to buy them without recourse. He told Gray that he could not handle them that way; that the finance committee would not allow him to buy any notes without recourse. There was never an agreement between him and Gray that the notes were to be indorsed without recourse, nor did he represent to Gray that he would write the words "without recourse" before his indorsement. He also denied telling Gray that he had placed the indorsement "without recourse" on the note. He further denied making the statement attributed to him by Gray and Trent.

Conside...