Goodwin v. Abilene State Bank

• Decision Date: 08 April 1927
• Docket Number: (No. 42.)
• Parties: GOODWIN v. ABILENE STATE BANK.
• Court: Texas Court of Appeals

294 S.W. 883

GOODWIN v. ABILENE STATE BANK.

(No. 42.)

Court of Civil Appeals of Texas. Eastland.

April 8, 1927.

Appellee's Motion for Rehearing May 20, 1927.

Appeal from District Court, Taylor County; W. R. Ely, Judge.

Action by the Abilene State Bank against W. C. Goodwin and another. Judgment for plaintiff, and defendant named appeals. Reversed and remanded.

See, also, 287 S. W. 1111.

Stinson, Coombes & Brooks, of Abilene, for appellant.

Wagstaff, Harwell & Wagstaff, of Abilene, for appellee.

HICKMAN, J.

The views entertained by the majority of this court, as now constituted, on the different questions presented by this appeal, are such as to require that we write upon it as upon an original hearing. Suit was upon a promissory note executed by D. E. Cozart and W. C. Goodwin to the Abilene State Bank for the principal sum of $7,000. The note declared upon was the eighth renewal of an original note executed to the Guaranty State Bank. Goodwin alone has appealed from the judgment of the trial court. As a defense to the note, appellant, Goodwin, pleaded his suretyship and fraud on the part of the bank in procuring his signature as surety to the note. The pleading will not be set out here, because we shall find it necessary to detail a summary of the testimony offered by him, and there is no question raised as to the sufficiency of the pleading to support the proof. Upon the conclusion of the testimony, the court instructed the jury peremptorily to return a verdict against the defendants, and upon this verdict a judgment was entered against the appellant and Cozart, jointly and severally, for the amount of the note, including interest, attorney's fees and costs of suit. The question presented for our decision is whether or not the facts proved raised questions of fact which should have been submitted to the jury for determination. We are not called upon to determine any other question.

In determining whether the issues of fact raised by the testimony should have been submitted to the jury, we shall consider only the evidence favorable to appellant's contention.

As stated in the case of Stewart v. Miller (Tex. Civ. App.) 271 S. W. 311, no question of preponderance of evidence is involved. If the evidence of the appellant bearing upon the issues, taken in its most favorable light, was sufficient to raise a question of fact for the determination of the jury, then it was error for the court to withdraw the case from the jury and determine the facts himself. Progressive Lumber Co. v. Ry. Co., 106 Tex. 12, 155 S. W. 175; Charles v. El Paso Electric Ry. Co. (Tex. Com. App.) 254 S. W. 1094.

Applying this rule to the issues in this case, it becomes necessary for us to examine the statement of facts, and determine what pertinent testimony is disclosed therein favorable to the contention of appellant.

F. V. Matthews was engaged in the business of buying and selling at wholesale and retail, flour, meal, molasses, and other products in the city of Abilene, Tex. D. E. Cozart entered into negotiations with him with reference to becoming a partner with him in the business. Appellant, Goodwin, is the father-in-law of Cozart. Cozart had not sufficient credit rating with the bank upon which to procure capital for the operation of the business, and spoke to his father-in-law, appellant, with reference to his becoming surety for him at the bank, in order to borrow the necessary money for operating capital. Cozart also talked at different times with A. E. Poole, president of the then Guaranty State Bank, and was informed by Poole that Goodwin would be acceptable to the bank as a surety for a loan. While Goodwin was in the bank after his son-in-law had talked to him regarding this matter, Poole approached him and stated to him, in substance, that Cozart had told him he was thinking of going in business with Matthews. Goodwin replied that he had been informed of the same facts, and inquired of Poole what he thought about Matthews' business. Poole told Goodwin that he thought it was one of the best businesses in Abilene and he would like to have it himself; that Goodwin could not go wrong by helping his son-in-law in this business. Goodwin informed Poole that he was a "straight cowpuncher" and had been all of his life; that he knew nothing about books and figures, but wanted to help Cozart, if it was a good business that he was buying into. Poole told him that he himself had formerly been in that kind of business, that it was a good business, and that Matthews' business, if properly run, would be a paying business. Goodwin hesitated about signing the note, and had two or three different conversations with Poole about the matter before he finally agreed to sign. At and prior to the time of the execution of the note by Goodwin, the matter of the use to which the proceeds of the note were to be applied was discussed between Poole and Goodwin, and it was Goodwin's understanding that all of the proceeds were to constitute an operating capital from that day in the business of Matthews & Cozart. Prior to that time, according to Poole's testimony, he had told Cozart that $7,000 would not run the business, but that it would take more money if he did the business that Matthews had been doing, because Matthews had used as high as $16,000 or $17,000. Cozart's reply to Poole was that he did not want to "hit Mr. Goodwin up too hard," but that "we will take care of that as it comes." When the amount of the loan was discussed between Poole and Goodwin, Poole at first told Goodwin that $6,000 would be sufficient, but later suggested that perhaps the amount had better be made $7,000. Poole did not tell Goodwin that he thought more than $7,000 would be required to operate his business.

The original note was executed for the principal sum of $7,000. At the time Goodwin executed the note, Matthews was insolvent, and was indebted to the Guaranty State Bank on a bill of exchange account in the amount of $5,999.64. When Goodwin executed the note, the account of Matthews & Cozart was credited with $7,000, and, within 15 minutes after Goodwin left the bank, Poole charged this account with $5,999.64 to cover the pre-existing debt of Matthews to the bank. Goodwin never knew that this sum had been applied to the payment of Matthews' debt until after he executed the last renewal note sued upon, and, as soon as he learned thereof, he went at once to the bank and demanded of Poole that he replace the amount of this debit to the funds for which it was borrowed. This Poole refused to do, and this suit followed.

Appellee seeks to sustain its judgment and justify the action of the trial court in peremptorily instructing the jury to find in its favor, upon three main grounds, as follows:

First. That, since the evidence shows that the money for which the note was executed was placed to the credit of Matthews & Cozart, the persons for whom it was borrowed, if any conversion of this fund was made by the bank after it was placed to the credit of said firm, then the cause of action, if any, for such conversion, was in the firm, but such conversion would not have the effect of tainting the original note.

Second. The evidence disclosing that the original note was given to the Guaranty State Bank of Abilene, and that the note sued upon was executed to the Abilene State Bank, and that the Abilene State Bank had nothing to do with the original transaction, but such transaction was with the other bank, the appellee bank would not be liable for such fraud, if any, and proof of fraud on the part of the Guaranty State Bank would not correspond to the pleading alleging fraud on the part of the Abilene State Bank.

Third. That the evidence showing that Cozart was the son-in-law of Goodwin, and that the application of the proceeds of the loan was known to Cozart shortly after it was made, and could have been known to the appellant by the slightest degree of diligence, and, the note having been renewed from time to time for several times, and the appellant having applied for and procured additional credit for Cozart in the meantime, in which application he acknowledged the existence of the indebtedness upon which this suit was based, such facts, circumstances, surroundings and conditions show, as a matter of law, that the appellant was in possession of such facts as that he was required to make inquiry regarding the disposition of this fund, which inquiry, it is claimed, would have led him to discover the real facts prior to the last renewal.

These grounds will be discussed in their order.

In considering whether or not the alleged fraud of the appellee tainted the original note, it is necessary to inquire as to the relationship created between a creditor and a prospective surety, where such prospective surety applies to the creditor for information concerning the risk and concerning the business which is the basis of the credit. The contention of appellee in this regard is that it is no concern of the surety as to the disposition made of the funds loaned on the faith of his credit, and that no fraud could be predicated upon the failure of the creditor to disclose all the facts within his knowledge concerning the matter about which inquiry is made.

Let us examine the authorities and determine whether or not they support this contention. In the case of Gano v. Farmers' Bank, 103 Ky. 508, 45 S. W. 519, 82 Am. St. Rep. 596, the appellant and nine others executed to the bank an obligation for $10,000, that one P. T. Pullen might obtain that sum with which to run a milling business. The bank, on the strength of the obligation furnished $5,000 with which to pay off a debt then owing to it by Pullen, and $5,000 which was used in the business. In a suit by the bank against Gano upon the contract of suretyship, it was held that he was discharged by the facts. In discussing the reason for the holding, the opinion quotes with approval the rule as thus stated by Mr. Story in...