Holmes v. First Nat. Bank of Lincoln

• Decision Date: 21 November 1893
• Parties: HOLMES v. FIRST NAT. BANK OF LINCOLN.
• Court: Nebraska Supreme Court

38 Neb. 326

56 N.W. 1011

HOLMES

v.FIRST NAT. BANK OF LINCOLN.

Supreme Court of Nebraska.

Nov. 21, 1893.

Syllabus by the Court.

1. A blank indorsement of a negotiable instrument before due, where the transfer is to a bona fide holder in the due course of business, establishes a liability which cannot be varied by parol evidence. But between the original parties a blank indorsement may be modified by parol. The entire transaction may be shown by reason of which the indorsement was made, and parol evidence is admissible for the purpose of proving the same.

2. Held, that the court erred in directing a verdict.

Error to district court, Lancaster county; Hall, Judge.

Action on a promissory note by the First National Bank of Lincoln against Leonidas K. Holmes as indorser. There was judgment for plaintiff, and defendant brings error. Reversed.Webster, Rose & Fisherdick, for plaintiff in error.

A. G. Greenlee and Marquett, Deweese & Hall, for defendant in error.

MAXWELL, C. J.

On the 22d day of January, 1890, J. G. Hutchins and C. H. Hutchins made and delivered to the plaintiff, Holmes, a promissory note for the sum of $3,400, due in 90 days from date, with 10 per cent. interest. Afterwards, but at what time does not clearly appear, Holmes indorsed said note in blank, and waived demand and notice, and delivered the note to the defendant, and this action is upon the indorsement. Holmes, in his answer, alleges: “(1) That the note was given by the makers for building material furnished by him for the erection of certain buildings in the city of Lincoln, on which he had taken a mechanic's lien, which had been assigned to sureties on the note. (2) That the sureties would not consent to a renewal of the note unless he would proceed to foreclose his lien; that thereupon John R. Clark, the president of the bank, proposed to take the note in question and an assignment of the lien, and permit the makers of the note to pay from $200 to $400 per month thereon, and that the bank would carry said indebtedness, and exhaust the property to which the lien attached before bringing an action against Holmes, and he was required to refrain from prosecuting an action on the lien. (3) That Holmes did refrain from prosecuting said lien, and accepted the note in question, and indorsed the same to the bank, it being expressly agreed between Holmes and the bank that it should first exhaust its said security before resorting to an action on the indorsement. (4) That before plaintiff herein brought this action and refusing to foreclose said lien, though then holder thereof, this defendant, for his own protection, and for use of said bank, instituted an action thereon in the name of himself and of said plaintiff in this court against said Hutchins and Hutchins and others, and therein expressly alleged that said plaintiff was entitled to receive all the proceeds of said lien to be applied on said note; and said plaintiff in said action fully affirmed and ratified the same, and claimed the benefit of said lien under the assignment thereof, and in the trial of said action said plaintiff, by its cashier, produced in this court the said note, and its cashier was sworn and testified on behalf of the said plaintiff, and this defendant and plaintiff in said action recovered a judgment of foreclosure of said mechanic's lien against each of said pieces of real estate and improvements; but said judgment has in part been appealed from, and is in consequence thereof not yet realized or collected, but said judgment is yet unreversed, and is in full force and effect, and said action was pending when this suit was commenced, and then undetermined.” The reply is a general denial. On the trial of the cause the court directed the jury to return a verdict for the bank, which was done. The proof tends to show the following facts: The note sued on was a renewal of a former note. The indorsers of the original note were J. H. McClay and J. R. Webster. A mechanic's lien was filed and assigned to Webster and McClay, as indemnity against their indorsement. When the note became due, foreclosure was commenced by Holmes. Then Hutchins proposed to Holmes to borrow at the bank for Holmes. Clark, the president of the bank, sent for Holmes, and said, in substance, that he was willing to let Hutchins have the money if Holmes would assign the lien to the bank, and he would release McClay and Webster as sureties. Holmes' counsel advised him not to risk any further delay in collecting from Hutchins; but, through the importuning of Hutchins and Clark, the suit was stopped, and Holmes made a transfer of his mechanic's lien to the bank, and delivered the security to Mr. Clark. Hutchins had agreed to pay from $200 to $400 a month until the note was paid, and Clark agreed to take this mechanic's lien as security for the note until such time as it was paid. Clark thought Hutchins would pay the note, and it would get Hutchins out of his embarrassment until he could dispose of his property. There was this agreement that, in indorsing that note, Clark took the lien as security, and if there should ever be any trouble, there would be nothing done until that lien was exhausted. After the note became due, the bank, when about to institute foreclosure suit,...