Holland Banking Company v. Booth

• Court: Arkansas Supreme Court
• Writing for the Court: WOOD, J.
• Citation: Holland Banking Company v. Booth, 180 S.W. 978, 121 Ark. 171 (Ark. 1915)
• Decision Date: 22 November 1915
• Docket Number: 5
• Parties: HOLLAND BANKING COMPANY v. BOOTH

180 S.W. 978

121 Ark. 171

HOLLAND BANKING COMPANY v. BOOTH

No. 5

Supreme Court of Arkansas

November 22, 1915

[Copyrighted Material Omitted]

Appeal from Sebastian Circuit Court, Greenwood District; Daniel Hon Judge; affirmed.

STATEMENT BY THE COURT.

These suits were instituted by the appellant, a Missouri corporation, to recover upon certain promissory notes. The complaints in each case were substantially the same, the only difference being as to the amounts, dates and time of maturity of the notes, and the notes were executed by different sets of makers, who are the appellees herein. The notes were the same in form and it will be sufficient to give substantially the provisions of one of them. In the notes the makers jointly and severally promise to pay, for value received, to the order of the Holland Stock Farm, a certain sum at the Bank of Midland, Arkansas, with interest at 6 per cent per annum from date until paid. Certain payments had been made on each of the notes and the suit was for the balance of the principal and accrued interest.

The appellant alleged that it was an innocent purchaser, for value, of the notes sued on. The appellees set up that their signatures were obtained by fraud, in that the agent of the Holland Stock Farm, who made the sale of the horse for the purchase price of which the notes were executed, procured the signatures of the appellees by representing that neither he nor the Holland Stock Farm had sold a similar stallion, or stallion of any kind, within a radius of twenty-five miles of the town of Bonanza, and also that they would not sell a stallion within that radius; that he further represented that the stallion would foal at least 75 per cent. of the mares to which he was let; that these representations constituted a part of the consideration which induced the appellees to sign the notes; that these representations were false; that the stallion was unsound and wholly unfit for the purpose for which he was purchased, which appellees did not know and could not know, but which the agent of the Holland Stock Farm who conducted the negotiations did know at the time; that the appellees relied wholly upon these statements and representations of the agent of the Holland Stock Farm; and that they had already paid much more than the fair market value of the stallion; that he was not worth more than $ 600.

The suits being instituted by the same plaintiff and the issues being identical, were, by consent of the parties consolidated for trial.

W. B Sanford, the president of the Holland Banking Company, testified that at the time the bank acquired the notes in controversy he was the cashier; that these notes were purchased from Charles Holland, who was the proprietor of the Holland Stock Farm; that they were all purchased before maturity and for value. His testimony shows that the corporators of the Holland Banking Company, hereafter called the bank, were C. B. Holland, his son T. B. Holland, W. B. Sanford, Mrs. B. A. Holland, wife of T. B. Holland, and C. E. Sanford, wife of W. B. Sanford; that the Hollands and the Sanfords owned all the stock, that Sanford was a brother-in-law of Holland. At the time of acquiring the notes in controversy they also acquired other notes from Charles Holland, amounting in the aggregate to $ 15,900. The notes were all indorsed "without recourse." On some of them the indorsement was with a rubber stamp. At the time of the negotiations Charles Holland brought in papers concerning the solvency of the makers of the notes. Witness thinks that these papers were attached to the notes. He did not buy any notes that they did not have information on. He got the information from Charles Holland or from other parties. He did not remember whether Holland furnished it or whether witness obtained it from others as to the notes in controversy. He did not remember to whom he wrote but he received favorable replies or would not have bought them. He did not know where the replies were. They took the notes without recourse because Holland would not sell them any other way. Witness was not personally acquainted with the makers of the notes. They took such notes before with recourse and without recourse. It was the custom of the bank to take paper maturing in one, two or three years signed by strangers without rating at a discount on the note, if it had proper evidence that the notes were good. Witness could not tell what other banks in Missouri did, but they all did it more or less. Witness knew at the time he purchased the notes that they were given for the purchase price of horses purchased from Charles Holland. Witness guessed that they had purchased such notes from Holland to an amount somewhere from twenty-five to fifty thousand dollars. They had taken them all without recourse, and had never had any trouble with the exception of the notes in controversy and one other.

Witness was asked, over the objection of appellant, how many of these notes purchased of Charles Holland the bank had had suits on, and answered, "Three," to which appellant duly excepted. He was asked if he had had trouble with a note in Yell County, and answered, over the objection of appellant, and further stated that they got judgment on that note, which was affirmed by the Supreme Court. He stated that he did not remember whether at the time the notes were purchased Charles Holland was indebted to the bank or not, and stated that if he was it was good; that the bank either paid him cash or gave him credit for the notes. Witness thought that Charles Holland had an account at the bank. Witness knew that he was a director when he sold the bank the notes, but he was not active in the management of the bank's business. His father assigned to him the stock that he owned for the purpose of the organization. Witness did not think that he ever attended a director's meeting, but, as far as the records were concerned, he was a director. Witness' testimony further showed that Charles Holland was engaged in the stock business on a large scale, raising, buying and selling livestock.

G. S. Mitchell, a witness on behalf of the appellants, testified that he was assistant cashier of the Holland Banking Company at the time of the negotiations between the bank and Charles Holland for the notes in controversy. He stated that it was not the custom of the bank to require the date of the transfer to be made on the note itself; that the bank did not buy past due notes. At different times Charles Holland owed the bank different amounts. Witness could not state how much he owed the bank at the time of these negotiations. The notes were indorsed "without recourse," but the bank had a written guaranty from T. B. Holland, the father of Charles Holland, to protect the bank in case of any loss on those notes. It covered all the notes that the bank purchased from Charles Holland without recourse. Witness did not know whether Charles Holland knew of that arrangement between the bank and his father or not. Witness was asked if it was the custom of the bank, or the banks in Missouri, to require customers to give written guaranty before taking a note without recourse, or whether the case of Charles Holland was an exceptional one, and he answered that in some ways his case was an exceptional one; that the bank generally risked its judgment; that in the case of the notes in controversy there were some papers and letters attached to them showing the financial standing of the makers of the notes. Witness was asked what was the usual bank discount in discounting notes in Missouri, and answered, "On notes of that size we don't figure on getting over 6, 7 or 8 per cent., depending generally upon the customer." The guaranty of T. B. Holland, the father of Charles Holland, was a guaranty as to his indebtedness to the bank. Witness did not think that any particular notes were mentioned. The guaranty arose out of a private transaction between some of the stockholders and the officers of the bank, rather than between the bank and Mr. Sanford and the bank and Mr. Holland. To the deposition of this witness letters were exhibited from banks, addressed to the Holland Stock Farm, stating that in the opinion of the writers, who were cashiers of the respective Arkansas banks, the notes in controversy were considered good.

Witness McDaniel testified that he had been cashier of a bank in Missouri since 1891; that he was familiar with the rules and custom of the banking business in the State of Missouri, and especially in the city of Springfield. He was then asked, "Is it the custom of banks in the city of Springfield to take any notes and pay the face value of the note in money, just discount it whatever the rate of interest is?" and he answered, "I don't know whether we have such a custom. It would depend on who the people were; generally speaking, we would not unless it took a good rate of interest." The question and answer were objected to, and upon the objection being overruled the appellant excepted.

The witness was then asked, "Suppose the note was for $ 2,800 and took 6 per cent. interest, and was due in one, two and three years in equal payments, then would you take it and give the face value of the note for it where you did not know the people?" and answered, "Where it is done, it is the exception, and not the rule." An objection to the question and answer was overruled and appellant duly excepted.

Witness then testified, on cross-examination, without objection, that 8 per cent. was the customary rate of interest; that on large loans it might be somewhat less, depending on how money is who the people were, and what kind of security; that a customer who had been with the bank all the time would be entitled to get more liberal treatment than a stranger. ...