Frazer v. State Bank of Decatur

• Decision Date: 27 November 1911
• Citation: 141 S.W. 941,101 Ark. 135
• Parties: FRAZER v. STATE BANK OF DECATUR
• Court: Arkansas Supreme Court

141 S.W. 941

101 Ark. 135

FRAZER v. STATE BANK OF DECATUR

Supreme Court of Arkansas

November 27, 1911

Appeal from Washington Circuit Court; Joseph S. Maples, Judge affirmed.

Judgment affirmed.

Rice & Dickson, for appellant

1. When F. A. Sanders, after the note of November 25, 1907, was signed, changed it without the knowledge and consent of appellants by writing after his name the word "Sec.," this was a material alteration to the injury of appellants, being in effect a forgery, and not binding upon them; and the court erred in ignoring this defense in its instructions. 4 P. 1022; 17 Am. Rep. 92; Joyce, Def. to Com. Paper, § 138; 2 Cyc. 151-154.

2. The transaction accepting the $ 2,400 note, cancelling, marking paid and delivering up the old notes, was an accord and satisfaction. 6 Am. & Eng. Ann. Cas., 564-565. And the circuit court had no jurisdiction to set it aside under the pleadings.

3. Appellee is estopped to say that it did not examine the character of the new note, and did not know what it was. 20 Am. & Eng. Enc. of L., (2 ed.) 831; 13 Cyc. 577; Pomeroy's Eq. Jur. vol. 2, § 843; Id., p. 809; 5 S.W. 431; 78 Ark. 177; Bigelow on Estoppel, (2 ed.) 478; 80 Ark. 407; 144 S.W. 264; 94 Ark. 130; 16 Cyc 732, 741, 709.

McGill & Lindsey, for appellee.

1. There was no consideration for the exchange of the new note for the old ones, because the payment of the interest on the old notes was but the performance of an existing obligation. When the error or fraud was discovered, no duty was imposed on the bank but to offer to return the new note, which was the only new consideration received. The appellee has the right at law to treat the transaction as void, return or offer to return the new note and recover the old notes. 147 Mass. 335, 9 Am. St. 708; 24 Am. & Eng. Enc. of L., (2 ed.) 64; 66 Mich. 568, 11 Am. St., 531; Bishop on Contracts § 313; 35 Ark. 483. This is not an action for reformation, hence it is not necessary to show a mutual mistake; but even in chancery, where there is mistake only on one side with fraud, concealment or inequitable conduct on the other, the courts frequently reform, and enforce as reformed, a contract. 77 Ark. 41; 2 Pomeroy, Eq. § 847.

2. There was no reason why the cause should have been transferred to equity, the remedy at law being full and adequate. 6 Pomeroy, Eq. § 685; Kirby's Digest § 5594-5.

3. Before the bank could be affected by any alteration in the signature of the secretary complained of by appellant, it would have to be an alteration that was material and ordinarily observable. 48 Ark. 426.

OPINION

MCCULLOCH, C. J.

The plaintiff, State Bank of Decatur (a domestic corporation engaged in the banking business), instituted this action in the circuit court of Benton County against the Sanders Fruit & Manufacturing Company (another domestic corporation) and certain of its directors, to recover the amount of two promissory notes, each for $ 1,000, with interest, executed by said defendants to plaintiff, which said notes are alleged to have been surrendered to defendants by plaintiff through mistake. It appears from the record that separate actions were first instituted, but during the pendency of the cases the pleadings were lost, and a complaint was substituted covering both actions and treating them as consolidated. No question, however, is made upon this point. A trial before a jury resulted in a verdict in favor of plaintiff against the defendants who were found to have signed the notes, and the latter have appealed to this court.

It appears from the evidence that in September, 1907, defendant Sanders Fruit & Manufacturing Company borrowed the sum of $ 1,000 from plaintiff bank and executed its note therefor. Payments have been made from time to time, which reduced the amount due on the note to the sum of $ 400. On November 25, 1907, the Sanders Company borrowed from the bank $ 1,000, and executed its note therefor with certain of its directors, who are defendants in this action, as joint makers or endorsers, and on January 3, 1908, the Sanders Company borrowed the further sum of $ 1,000 from the bank and executed its note with defendant Frazier, who was one of the directors, as joint maker or indorser. About June 1, 1910, after these notes became due and were unpaid negotiations began between the parties for a renewal thereof, and the evidence tends to show that the cashier of the bank proposed to the defendants, by written correspondence and verbally, that a renewal would be accepted in the form of a new note signed by the Sanders Company and indorsed by the directors, or some of them, for the full amount of the three notes, the accrued interest to be paid at the time of the renewal. The cashier of the bank sent to the defendants by mail a form of note to be executed reading, "We, or either of us, promise to pay," etc. The directors of the Sanders Company, pursuant to the negotiations, held a meeting and, after erasing the words, "or either of us," and inserting in lieu thereof, "as directors," executed the note for the Saunders Company and signed it in their official capacities as directors so as to make only the corporation liable on the note. One of these directors, the defendant Frazier, carried the note to the bank, together with a check for the accrued interest, and delivered the same to the cashier, saying, as the testimony tends to show, "Here is the note," and asked for the old notes, which were then surrendered to him by the cashier. The cashier testified that the transaction was very hurriedly done on account of Frazier having to leave in a few minutes to catch a train, and that he (witness) did not take time to examine the note carefully, but glanced at it, and saw that the names of the directors were signed, and, believing that the names were signed so as to bind them as endorsers or joint makers, he accepted the new note, and surrendered the old ones, and did not discover the mistake until some time thereafter. This occurred on June 17, 1910, and the alleged mistake was discovered by the cashier on July 8, 1910, when he wrote to the Sanders Company and each of the directors calling their attention to the fact that the renewal note as signed did not make them liable, and that a new note must be executed. The evidence adduced on the part of the defendant tended to show that they did not, in signing any of the notes really intend to make themselves liable individually, but there is no testimony tending to show that their intention was ever communicated to the bank. The court, over the objection of the defendants, gave the following instruction:

"No. 3. The court charges you that if you find from the evidence that plaintiff held the notes sued on and offered to defendants to surrender the same for a new note to be signed by the defendant company and its directors, or some of them, and sent the defendants a note filled out to be executed and returned, and that defendants so changed the note and executed in form so that it was only the note of the defendant company, and presented the same to the plaintiff, without calling plaintiff's attention to the changes, and that plaintiff, without observing or knowing that the note was signed only as the note of the company, surrendered the old notes, then such surrender of the old notes and acceptance of the new would not bind the plaintiff, and the title in the old notes and the right to recover thereon would remain in the plaintiff, and the new note would be void. If you find the foregoing facts by a preponderance of the evidence, you will find for the plaintiff."

The point of the objection to this instruction is that it declares as a matter of law that Frazier's...