First State Bank of Windom v. McElwrath

• Court: Texas Court of Appeals
• Writing for the Court: Levy
• Citation: First State Bank of Windom v. McElwrath, 266 S.W. 837 (Tex. App. 1924)
• Decision Date: 05 December 1924
• Docket Number: (No. 2983.)
• Parties: FIRST STATE BANK OF WINDOM et al. v. McELWRATH et al.

Page 837

266 S.W. 837

FIRST STATE BANK OF WINDOM et al. v. McELWRATH et al.

(No. 2983.)

Court of Civil Appeals of Texas. Texarkana.

December 5, 1924.

Rehearing Denied December 11, 1924.

Appeal from District Court, Fannin County; Ben H. Denton, Judge.

Action between Mrs. A. H. McElwrath and others and the First State Bank of Windom and others. Judgment for the former, and the latter appeal. Affirmed.

The question on appeal involves the priority of a lien. J. B. Lyon and wife conveyed to J. E. Gee on November 24, 1919, a tract of land. The consideration of the sale was $2,700, evidenced by three notes signed by J. E. Gee and payable to the order of J. B. Lyon, in the sum of $900 each, due on the 1st day of December, 1920, 1921, and 1922, respectively. The vendor's lien was expressly retained in the deed and notes. The First State Bank of Windom purchased the three notes before maturity from J. B. Lyon, who indorsed them on the back at the time of delivery as follows: "J. B. Lyon." In January, 1920, the bank sold the note due December 1, 1922, to A. H. McElwrath, appellee, and transferred the same to her by delivery only. It was not indorsed by the bank. The bank kept the other two notes, and they now belong in the assets of the bank, the doors of the bank being closed November 14, 1921, by the state commissioner of banking. Nothing has been paid on any of the notes except the year's interest.

A. H. McElwrath, the appellee, claims that at the time the bank transferred and delivered her the note it orally guaranteed the payment, and in consequence she was entitled to priority of lien over the existing lien for the payment of the two notes retained by the bank. The appellant commissioner denies any indorsement or guaranty of the note by the bank, and contends that all three notes should share equally in the proceeds of sale of the land under the decree of foreclosure of the vendor's lien. The trial court submitted to the jury the issue of whether or not the bank, at the time of the sale and transfer of the note, guaranteed its payment. The jury answered the question in the affirmative, and the court entered judgment accordingly in favor of appellee McElwrath for the amount of the note against the maker, and Lyon on his indorsement, with foreclosure of the lien on the land in priority to the lien of the bank.

It appears from the evidence that Mrs. A. H. McElwrath, the appellee, had $1,300 on deposit in the bank, and wished to invest it in vendor's lien notes, and to that end went to the bank and made known her purpose to the cashier. The bank had some land notes on hand, acquired in due course of business, and offered to sell the notes desired by her. She bought two notes, one for $300 signed, it appears, by Tom Ramsey, and the one in suit signed by J. E. Gee. A check on her deposit was given by Mrs. McElwrath to the bank for the sum of $1,200, the purchase price of the two notes. The bank transferred the notes to her by delivery only. The Tom Ramsey note is not in the suit nor involved in the litigation. Mrs. McElwrath testified about the purchase of the note in suit, as pertinent to the issue involved, as follows:

"I had $1,300 in the bank and I wanted to place it where it would bring in something, and I went to get land notes. He (the cashier) told me that they had one $300 note and a $900 note and that would take $1,200. He picked up the $300 note, and said, `This is a good fellow, Tom Ramsey, and we will indorse this note.' I said, `How about the other note, is the land not worth the money?' He said, `Certainly, we are behind it,' I said, `You mean the bank.' He said, `Certainly.' That made me feel perfectly safe. I thought the Windom bank was safe and I thought he was a reliable man and I signed the check there for $1,200 and bought the two notes. He said, when folding up the notes, `We appreciate your business and will treat you right.' I felt perfectly satisfied when he said the bank was behind the notes. The notes were left with him. I did not take them out. Mr. Gee paid the interest on the note one year, and that is the only interest I ever got. I did not know until about the time the suit was filed that the bank had not indorsed the note on the back of it. I just supposed that they had done so — and, of course, it was just like myself, I did not know any better, just felt sure that if the Windom bank was behind it that I was safe. * * * He told me the bank was behind the notes, otherwise I would not have taken them. Of course, he said that they would indorse the notes, but I didn't think it was necessary, to ask him to indorse it, just for the want of sense I reckon. I didn't have him to do it."

The cashier testified:

"I sold Mrs. McElwrath one of the three notes executed by J. E. Gee. The bank owned them. I had no particular agreement with regard to the note. I did not transfer it to her by written guarantee or other guarantee. None whatever. I considered the notes good at the time, and Mr. Lyons had also indorsed them. Both of them generally had money with us and generally met their obligations at the time. I did not insist on her taking the note, just left it to her option to take it or not. I have no recollection of making her a guaranty about the payment of the note, I think not. I gave her no written guarantee and none was asked. * * * When I bought the notes in the first instance I took into consideration Mr. Lyons, the indorser. I thought he was solvent and able to meet it. I did not consider the value of the land altogether. I had no purpose in the world to sell Mrs. McElwrath a bad note. I thought they were good at the time. I had bought them, took them and paid full value and thought they were all right. I suppose I would have written out and have given her a written transfer or written guaranty if she had asked me...