Farmers' & Merchants' Bank v. Parker

• Decision Date: 20 June 1924
• Citation: 263 S.W. 84,150 Tenn. 184
• Parties: FARMERS' & MERCHANTS' BANK v. PARKER ET AL.
• Court: Tennessee Supreme Court

263 S.W. 84

150 Tenn. 184

FARMERS' & MERCHANTS' BANK v. PARKER ET AL.

Supreme Court of Tennessee.

June 20, 1924

Appeal from Chancery Court, Hickman County; J. C. Hobbs, Chancellor.

Suit by the Farmers' & Merchants' Bank, for use and benefit of Ed Russell, etc., against C. B. Parker and another. Decree for plaintiff, and defendants appeal. Affirmed.

CHAMBLISS J.

Defendants C. B. Parker and his father, J. A. Parker, have appealed from a decree for $2,800, interest, and attorney's fees evidenced by a note executed by defendants. The defense pleaded was, in substance, that defendants did not owe the debt and that the original note, of which the note sued on was a renewal, had been issued without actual consideration and as the result of some form of fraudulent imposition. Along with this defense to the real merits of the controversy, defendants sought to rely upon an alleged alteration in the original note, charging that when signed it was payable to complainant bank and that the name of Ed Russell, the cashier of the bank, was afterwards substituted as payee without the consent of the maker. And, second, it was insisted that the renewal note sued on was altered by the addition of the name of J. A. Parker to that of the sole original maker, C. B. Parker, subsequent to its delivery without the knowledge or consent of the original maker.

Issues were submitted by defendants, and trial was had before a jury, and on the verdict of the jury the chancellor rendered his decree.

In this court it is insisted by errors assigned, following an overruled motion for a new trial, that the court erroneously took from the jury the consideration of certain issues, and also failed to give to findings on other issues proper consideration. In view of the finding of the jury under the first two general issues submitted, it must be conceded that what might be termed the underlying questions involved, that is, whether or not defendants are indebted to complainants in the sum claimed, and whether or not the note sued on was procured by fraud, imposition, deception, or misrepresentation, have been conclusively disposed of in favor of complainants. The contentions here for consideration involve only the right of recovery upon the evidence of indebtedness sued on, based upon the effect of the alleged alterations hereinbefore set forth. There was a controversy of fact as to the alleged alteration in the original note, of which it appears that the note sued on was executed as a second renewal. It is insisted for appellants that complainants are bound to an admission of this alteration by allegations in the bill, and also that the proof sustained this claim, and that the court erroneously took from the jury the consideration of this question, submitted under issues 7 and 9, holding that they were immaterial issues of fact. If it be conceded either that the complainants have admitted the alleged alteration to have been made in the original note, or that there was evidence sufficient to call for consideration by the jury of such an alteration, a question of law is presented as to the effect in this action brought on a renewal note of the alteration alleged.

Defendant C. B. Parker testified that when he signed the original note dated April 8, 1920, he signed on a printed form reciting the name of the bank as payee, and this original note when now produced shows the name of the bank stricken and the name of Ed Russell, at the time cashier of the bank, substituted as payee. Russell testifies, and he is otherwise supported, that this change was made before, or contemporaneously with, the signing by Parker. A controversy of fact is thus presented. However, this note was payable on demand, and on July 1st, following, a new note was executed in like amount payable to the bank 90 days after date and the original note surrendered. Upon the maturity of this note a third note was executed, dated October 1st, in like amount, payable December 15th, and it is upon this last note that this suit is brought. Both of the renewal notes bear the signatures of both C. B. Parker and J. A. Parker as makers, and no question is made as to the validity of these signatures. If this suit was on the original note alleged to have been so altered as to the payee, there can be no question under the authorities that the alleged alteration was material and destructive of the instrument, and the issues of fact withdrawn by the court would have been material.

It is insisted for appellants that this defense is equally available against a renewal of a note originally altered. As between the original parties, in the absence of ratification, and against transferees not bona fide purchasers for value, the rule stated generally is that a renewal note is open to those defenses which might have been made against the original note; but so far as we are advised this rule has been applied only in cases in which the defenses sought to be interposed to the renewal note were such as raised questions of failure of consideration, in whole or in part, fraud, gambling debts, or other matters going to the validity of the indebtedness, rather than to the validity of the instrument only by which the indebtedness had been originally evidenced. For instance, counsel quote from 8 Corpus Juris, 444:

"As between the original parties, and as against transferees who are not bona fide purchasers for value, a renewal note is open to all defenses which might have been made against the original note."

But in the text the sentence quoted is followed by a comma, and the paragraph proceeds:

"At least in so far as they relate to consideration, such as want or failure of consideration, fraud," etc.

An examination of the notes in this authority and the cases cited are consistent with and in some instances sustain the distinction above suggested, in so far, at least, as the original maker of such a paper is concerned. For example, where a note executed by a coropration for a valid consideration is invalid by reason of a defect in its execution, or for want of authority of the officer executing it, such invalidity does not attach to regularly executed notes given in renewal thereof. Smith v. New Hartford Water Co., 73 Conn 626, 48 A. 754.

Examples of cases in which the rule invoked by appellants has been applied are where the original note was for intoxicating liquors sold in violation of law, or for confederate money or where the original note was a forgery and the renewal was executed without knowledge...