Lawson v. First Nat. Bank

• Decision Date: 21 May 1907
• Citation: 102 S.W. 324
• Parties: LAWSON ET AL. v. FIRST NAT. BANK OF FULTON.
• Court: Kentucky Court of Appeals

102 S.W. 324

LAWSON ET AL. v. FIRST NAT. BANK OF FULTON.

Court of Appeals of Kentucky.

May 21, 1907

Appeal from Circuit Court, Fulton County.

"Not to be officially reported."

Action by the First National Bank against J. C. Lawson and others. Judgment for plaintiff. Defendants appeal. Reversed and remanded.

W. J Webb and Ed. Thomas, for appellants.

Robbins Thomas & Tyler, for appellee.

O'REAR C.J.

Appellants executed two notes to Wm. L. Albright to evidence a payment to be made for the sale to them of a territory in which to sell certain patented articles. A number of papers were executed simultaneously with the execution of the notes. All of them should be read together in getting to an understanding of the real transaction. When done, it is apparent, we think, that the only thing sold to appellants was patent right territory. Making them "sole agents," and restricting them as to prices of selling etc., do not change the real transaction. The other party was a manufacturer of a kitchen cabinet, a patented combination tinware receptacle for use in kitchens. Appellants were to have the exclusive right to sell this article in Ballard county, Ky. for a specified period. They were to be furnished the articles at $7 each, and were to receive for them when sold at wholesale $11 each; or, if sold at retail, $16.50 each. Reading all the papers together, we cannot escape the conclusion that the true transaction was that appellants were sold a territory in which to sell this patented article, and agreed to pay $400 for it, evidenced by the notes in suit. Before the maturity of the notes they were sold to appellee bank, who brings this suit upon them. The defense is that the notes were not indorsed "Peddler's note," as required by statute. Section 4223, Ky. St. 1903. This statute made notes of the kind in suit when so indorsed, subject to defense in the hands of any subsequent holder, just as they would have been in the hands of the original holder. If they were not so indorsed, the statute makes the notes void. Rumbley v. Hall, 107 Ky. 349, 54 S.W. 4; Nunn v. Citizens' Bank, 107 Ky. 262, 53 S.W. 665; Burns v. Sparks, 82 S.W. 425, 26 Ky. Law Rep. 688. The statute does not affect the original contract between the parties to the transaction. That is left to abide its merits. But the note is outlawed unless indorsed as stated. Burns v. Sparks, supra.

It is contended, however, in this case that the negotiable instruments statute (Acts 1904, p. 213, c. 102) protects appellee as purchaser of the notes. But under that statute only innocent holders or holders in due course are protected as against original defenses against the note. In this case the cashier of appellee bank who bought the notes read the contract between the parties when they made the purchase, and therefore knew their consideration. The bank is not an innocent purchaser, or holder in due course. Furthermore, the statute makes such notes void. It is of a police nature intended to...