Farmers' & Mechanics' Bank of Florence v. Whitehead

• Decision Date: 10 August 1916
• Docket Number: 9492.
• Parties: FARMERS' & MECHANICS' BANK OF FLORENCE v. WHITEHEAD ET AL.
• Court: South Carolina Supreme Court

89 S.E. 657

105 S.C. 100

FARMERS' & MECHANICS' BANK OF FLORENCE v. WHITEHEAD ET AL.

No. 9492.

Supreme Court of South Carolina

August 10, 1916

Appeal from Common Pleas Circuit Court of Florence County; Geo. E Prince, Judge.

Action by the Farmers' & Mechanics' Bank of Florence, S. C against J. D. Whitehead and W. L. Whitehead, as copartners, and others. Judgment for plaintiff and defendants appeal. Affirmed.

The note sued upon is in the words and figures following:

Lake City, S. C., Jan. 21, 1908. $1,000.00.

January 21, 1911, for value received, we jointly and severally promise to pay to Bauhard Bros., of Martinsville, Ind., or order, the sum of one thousand dollars at the Farmers' & Merchants' Bank, Lake City, S. C., with interest at six per cent. (6%) per annum, payable annually; and also, if not paid when due, ten per cent. (10%) additional for attorneys' fees.

J. M Truluck. J. M. Eaddy.

A. M Parker, Jr. J. C. Young.

P. D. Cockfield. his

W. B. King. A. B. X Young.

E. M. Lowman. mark

J. L. Stuckey. S. T. Godwin,

R. B. Fitch. F. W. Truluck.

S. B. Poston. W. D. Daniel.

J. D. & W. L. Whitehead.

Willcox & Willcox, of Florence, and W. L. Bass, of Lake City, for appellants.

R. E. Whiting, of Florence, for respondent.

GAGE J.

The plaintiff sued the defendants upon a note for $1,000 which the defendants had executed to Bauhard Bros. of Indiana, and which the plaintiff claimed to be the purchasers bona fide in due course of business, before maturity and for value. The defendants alleged that the plaintiff did not buy the note in good faith, in due course, before maturity and for value; that the plaintiff did not have legal title to the note; that the plaintiff took the note with notice of defenses to it; that the note was made to the payees upon representations which proved to be false; that one of the makers, Daniel by name, had a secret agreement with the payees, but for which he would not have signed, and that such agreement was concealed from the other makers, and they were thereby induced to sign. One witness was sworn for each side, and the court directed a verdict for the plaintiff, but limited the interest to 6 per cent. from the date of the note to the date of the recovery, and left it to the jury to say how much the attorney's fees should be. On these last two directions the plaintiff has appealed, while from the general directions for the plaintiff the defendants have appealed.

The defendants have made 19 exceptions. They occupy more space than the testimony; they are verbose and tautological to a hurtful degree. We shall not consider the exceptions by name, or in order, but we shall compass the real issues made by the appeal.

Each of the counsel for the appellants has argued but three questions, and they are the same questions. They are these: (1) Was the bank bound to prove the genuineness of the payee's signature on the back of the note; (2) were the defendants entitled to prove fraud in the inception of the note, and would the proof of fraud invalidate the note in the hands of a bona fide purchaser; (3) if Ragsdale, president of the bank, had notice of a defect in the note, is such notice chargeable to the bank?

1. The note is negotiable in form, and they who signed it and started it in the currents of trade thereby notified the trade that it was what it purported to be. The payment indorsed on the back of the note was made the same day it was executed. When the note came to the plaintiff the name of the payee was written on the back of it, "Bauhard Brothers without recourse on us." When a negotiable note comes to a bank's counter in the course of business, and the bank finds the payee's name written on the back of it, the bank does not have to communicate with the payee and ascertain if the indorsement is genuine. That would put so great a burden on banks and on its patrons, the public, as to clog the arteries of business. If the bank should have to do that, then it would have to make a like enquiry about every one of half a dozen indorsers, and about the maker too. Such a course of business would render a negotiable note as uncertain as a land title, and would unduly harrass and delay the public in the transaction of its business. When a negotiable paper, in the course of business, and before its maturity, is brought by a holder to a bank's counter, the bank is warranted to assume that the signature of the maker and that of the indorsers are what they appear to be. It is true subsequent events may show that such is not the case; and the bank and the public dealing with it run that risk. But in the instant case there was no suggestion at the trial that the indorsement of Bauhard Bros.' signature was fabricated; they do not say so, and if they do not say so, what matters it to the defendants? All the makers are interested in is that they shall pay to the right person. The testimony of one of the defendants is that he made a payment on the note, the day it was executed, to one Ward. If Ward had the note the same day it was made, and took a payment on it, the presumption of fact is he had a right to sign the payee's name on the back. Surely if Ward was Bauhard Bros.' agent to take payment from Truluck, then Truluck may not say Ward had no authority to indorse the name of Bauhard Bros. The indorsement itself shows, by its very words, that it was made to transfer title. All Truluck, the defendant and witness, said is that the indorsement of the payment and the indorsement of the name of the payees was made at the same time by Ward. Truluck does not modify the meaning of "Bauhard Bros. without recourse on us." We are therefore of the opinion that the bank proved the indorsement, and thereby proved a legal title to the paper.

2. The defendants alleged fraud in the inception of the paper, and stated to the court they were prepared to offer proof of it. The court said:

"It is useless to offer any testimony as to fraud as to that note. The only thing you can offer testimony at this time is that it was not acquired bona fide before maturity by the holder."

The...