J. C. Wilhoit (Revived In The Name of Ethel Julia Wilhoit v. Henry

• Decision Date: 12 June 1926
• Docket Number: 26,652
• Citation: 246 P. 1013,121 Kan. 239
• Parties: J. C. WILHOIT (Revived in the name of ETHEL JULIA WILHOIT, Executrix, and Sole Devisee and Legatee of the Estate of J. C. WILHOIT, Deceased), Appellant, v. C. A. SEAVALL and CHARLES HENRY, Appellees
• Court: Kansas Supreme Court

246 P. 1013

121 Kan. 239

J. C. WILHOIT (Revived in the name of ETHEL JULIA WILHOIT, Executrix, and Sole Devisee and Legatee of the Estate of J. C. WILHOIT, Deceased), Appellant, v. C. A. SEAVALL and CHARLES HENRY, Appellees

No. 26,652

Supreme Court of Kansas

June 12, 1926

Decided January, 1926.

Appeal from Riley district court; FRED R. SMITH, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. BILLS AND NOTES--Conditional Delivery--Admissibility of Parol Evidence. As between the immediate parties and as regards a remote party other than a holder in due course, the delivery (of a promissory note) may be shown to have been conditional or for a special purpose only. (R. S. 52-216.)

2. SAME--Holder in Due Course--Purchaser After Maturity--Effect of Collateral Agreement. S. & H. executed to a bank for its accommodation and without consideration a note due thirty days thereafter with the agreement that it should be returned to them at maturity. Upon request for its return, the officers of the bank stated that the note could not be found. Three months thereafter the bank failed, and a year thereafter the note was indorsed and sold to one of the bank's directors in violation of the agreement with the makers. In an action to recover thereon, held, the purchaser after maturity took the note subject to the equities between the original parties thereto.

3. SAME--Accommodation Paper--Admissibility of Evidence to Show Accommodated Party. Further, the proceedings considered and held parol evidence was admissible to show that the note was executed for the accommodation of the bank rather than the payee whose name appeared therein.

4. SAME--Accommodation Paper--Sufficiency of Evidence. Further the evidence considered and held sufficient to support the finding that the note was in fact executed for the accommodation of the bank for thirty days, and delivery of the note a year after its maturity was a violation of the agreement under which it was delivered to the bank.

5. SAME--Instructions. The instructions considered and held not to have been erroneous.

6. SAME--Generally. Various assignments of error considered and held not to require a reversal.

Alvin Springer, Walter R. Gage, both of Manhattan, A. E. Crane and B. F. Messick, both of Topeka, for the appellant.

Bennett R. Wheeler, S. M. Brewster, John L. Hunt, V. V. Scholes, all of Topeka, Hal E. Harlan and A. M. Johnston, both of Manhattan, for the appellees.

Hopkins J. Johnston, C. J., not sitting.

OPINION

HOPKINS, J.:

The action was one to recover on a promissory note. The defense was that the note was without consideration, had been executed for the accommodation of the Citizens State Bank of Manhattan, was to be returned in thirty days, and that it had been diverted from its original purpose more than a year after its maturity. J. C. Wilhoit, the original plaintiff, died while the case was pending, and the action was revived by his executrix, who was sole legatee and devisee. Trial to a jury, on controverted facts, resulted in a general verdict for defendants, with no special findings. The plaintiff appeals.

The plaintiff claimed and there was evidence tending to show that the Citizens State Bank had held a $ 7,000 note signed by A. E. Irish and C. A. Seavall; that Seavall had signed the note as an accommodation to Irish; that Irish, Henry and Seavall were in the bank at the same time, on May 7, 1920; that the $ 7,000 note was taken up and a new one was executed by them, signed by Seavall and Henry, and payable to Irish; that Irish indorsed it to the bank, that the three had a conversation with S. J. Pratt, president of the bank, at that time; and that after the note was signed it was placed with the assets of the bank.

The defendants claimed, and there was evidence tending to show, that while the note on its face was payable to Irish, that when it was executed Irish was not present and nothing was said with reference to its being for his accommodation, but that the president of the bank asked the defendants to give the note to the bank as an accommodation for thirty days; that it would be returned to them at the end of that time; that they read the note hurriedly, saw the printed words "The Citizens State Bank," and thought the note ran to the bank as payee; that after the note had matured, its return was requested, but the officers of the bank said they could not find it; that about a year after its maturity, Wilhoit, who was a director of the bank, purchased from the bank $ 38,000 of paper for $ 25,000; that sixteen months after the maturity of the note he exchanged some of the notes he had previously purchased for the one in controversy; that nothing was ever said by the officers of the bank to the defendants about the note after its execution; and that no attempt was made to collect it by the bank. There was also testimony that when Seavall signed the original $ 7,000 note with Irish, that Irish turned over to Seavall other commercial paper amounting to $ 8,700, and that four or five days before the execution of the note in controversy Seavall returned the $ 8,700 of paper which he had received from Irish, at which time the bank delivered to Seavall the $ 7,000 note.

The plaintiff contends that the court erred in admitting evidence of the oral agreement between the defendants and the president of the bank and in instructing the jury that such agreement was a defense; that there was no fraud in the execution of the note, and that the plaintiff was entitled to a directed verdict. She also argues that the maker of a note cannot defend an action thereon by showing an oral agreement made at the time of its execution to the effect that he should not be held liable, for the reason that to allow him to do so would be to violate the rule forbidding the introduction of evidence to vary the terms of a written instrument.

The plaintiff cites, among other cases, Naef v. Potter, 226 Ill. 628, 80 N.E. 1084, a case involving an accommodation note given to the payee for use as collateral to a note held by the bank. The court said that the transferee, after maturity of an accommodation note, takes it stripped of all defenses which may have existed against it. It is said, in Brannan's Negotiable Instruments Law (3d ed., p. 126), that this was "a case upon an instrument made before the adoption of the negotiable instruments law." The court, without citing any cases on the point, held that the transferee after maturity, with knowledge of the fact of accommodation, but without knowledge of the agreement not to negotiate the instrument after maturity, could nevertheless recover against the accommodating party. It would now be otherwise in Illinois, since section 29 (Neg. Inst. Law), as adopted in Illinois, has an additional clause which restricts the transfer after maturity to cases where there is proof that "a transfer after maturity was intended by the accommodation party." (See, also, Corrigan v. Harris, 207 Ill.App. 291. Also note in 11 L.R.A. N.S. 1037, where a digest of cases may be found.)

Plaintiff cites various authorities to sustain her general contention ( Van Fossan v. Gibbs, 91 Kan. 866, 139 P. 174; Stevens v. Inch, 98 Kan. 306, 158 P. 43; Bank v. Paper Co., 98 Kan. 350, 158 P. 44; Investment Co. v. Gamble, 102 Kan. 791, 171 P. 1152; Trust Co. v. Danforth, 103 Kan. 860, 177 P. 357; Underwood v. Viles, 106 Kan. 287, 187 P. 881; Bank v. Pirotte, 107 Kan. 573, 193 P. 327; Bank v. Coerber, 113 Kan. 498, 215, 215 P. 285 P. 285), which are not applicable to the facts here. For instance, she relies on the case of Bank v. Watson, 99 Kan. 686, 163 P. 637. The question there was whether the bank or one Blitz was the accommodated party. It was determined that Blitz was the accommodated party rather than the bank. It was there said:

"The note was not executed to enable the bank to obtain money from some one else, but to enable Blitz to obtain more money from the bank. The defendant's credit was not lent to the bank, but to Blitz, the effect of the transaction being to enable him to borrow upon the credit of the defendant after the credit which the bank under the law could extend to him had been exhausted. The circumstance that the bank was desirous of doing the business, and that the defendant was moved by friendship for the bank rather than for Blitz--by a desire to help the lender to earn interest rather than by a wish to aid the borrower in obtaining a loan--does not affect the legal relation of the parties. The situation is entirely different from that presented in Means v. Bank, 97 Kan. 748, 156 P. 701, where it was held that a bank was bound to protect the maker of a note executed to it, for its accommodation, the proceeds of which it received and retained. Here the money was lent to Blitz upon the strength of the note signed by the defendant, without which the loan could not have been made. The circumstance that the president of the bank told him that the loan was otherwise secured, and that he would not have to pay it, does not alter the fact that it furnished a consideration for the note." (p. 689.)

"The accommodated party is he to whom the credit of the accommodation party is loaned, and is not necessarily the payee, since the inquiry always is as to whom did the maker of the paper loan his credit as a matter of fact." (8 C. J. 254.)

In the instant case there was ample evidence to sustain the general finding of the jury that the bank and not Irish was the accommodated party. The general verdict necessarily included a finding that the note was executed for the accommodation of the bank without consideration, and with the agreement it should be returned to the makers at the end of thirty days.

The plaintiff cites Evans v. Speer Hardware...