Little v. Arkansas National Bank

• Decision Date: 04 May 1914
• Docket Number: 305
• Citation: 167 S.W. 75,113 Ark. 72
• Parties: LITTLE v. ARKANSAS NATIONAL BANK
• Court: Arkansas Supreme Court

167 S.W. 75

113 Ark. 72

LITTLE v. ARKANSAS NATIONAL BANK

No. 305

Supreme Court of Arkansas

May 4, 1914

Appeal from Benton Circuit Court; J. S. Maples, Judge; affirmed.

Judgment affirmed.

Dick Rice and Jeff R. Rice, for appellants.

1. This case was here on former appeal. 152 S.W. 281. The bank was not an innocent purchaser for value. 103 S.W. 232; 1 P. 579; 108 S.W. 1068; 64 Am. St. 327. The burden was on the bank to show it was a purchaser for value without notice. The notes were mere wagering contracts. 8 Cyc. 236; 3 S.W. 805; 1 Daniel, Neg. Inst. (2 ed.), § 198; 126 S.W. 114; 111 Id. 888.

2. The evidence fails to show that plaintiff was a bona fide purchaser without notice. 130 S.W. 162; 95 Id. 145; 12 A. 223; 25 N.E. 281; 36 Id. 551.

3. The notes are void under our statute, and the court erred in its charge to the jury. Kirby's Dig., § 3690; 152 S.W 281; 1 Daniel, Neg., Inst., 170; 6 Wend. 615; 97 S.W. 353; 55 P. 306; 21 Ga. 195.

B. R Davidson, for appellee.

1. There is no error in the court's charge, and the evidence shows the bank was an innocent purchaser. Berman, Neg. Inst. p. 62, § 56.

2. The bank had no notice of any infirmity or defect. 7 Cyc. 943-4-5; 35 Ark. 146; 42 Id. 22; 61 Id. 81; 65 Id. 543; 69 Id. 140; 71 F. 489; 78 Id. 69; 81 F. 47.

3. On the former appeal it was held the notes were not void in the hands of an innocent purchaser. 105 Ark. 281; 52 Id. 473; 81 Id. 440; 77 Ark. 103.

OPINION

SMITH, J.

Upon the former appeal of this case, the appellant here being the appellant then, the following statement of facts was made, in the opinion then delivered:

"Appellants executed to one J. O. Gunter two negotiable promissory notes, each for the sum of $ 837.10, due and payable three and six months, respectively, after date, and Gunter assigned the notes to appellee, a banking corporation doing business in the city of Fayetteville, Arkansas. Appellee instituted this action to recover of appellants the amount of the two notes with interest. Appellants, for defense to the action, pleaded want of valid consideration for the execution of the notes sued on, alleging that Gunter was the soliciting agent for a certain life insurance company; that the notes were executed to him for the first annual premium on life insurance policies issued by said company on the lives of eighteen young men, the amount of the several policies of insurance to be payable on the death of the young men to Special School District of Rogers, Benton County, Arkansas; that neither the school district, nor any of these appellants, had an insurable interest in the lives of the men mentioned in the policies, and that said insurance contracts were void, and, consequently, the said notes given for premiums were without legal consideration. It is further alleged that appellee had full notice of the above stated facts when it purchased the notes from Gunter, and was therefore not an innocent purchaser for value."

The court below, on the former trial, struck out the allegations of the answer concerning the consideration for the notes, leaving in the answer only the allegations of payment of the notes by the school district, and, on that issue a verdict was returned in favor of the bank. Upon the appeal from the judgment rendered upon that verdict it was held that the notes given for the insurance premium were invalid because the policies were wagering contracts, and as such against public policy.

Upon the remand of this case it was shown without dispute that the notes were executed for the consideration recited in the answer. The evidence upon the part of the bank, however, was to the effect that the notes were discounted at the rate of 8 per cent per annum, and the proceeds of the notes thus discounted were placed to the credit of the account of Gunter with the bank, and that Gunter at the time drew a small check against this deposit, and very soon afterward drew a check in favor of the insurance company for its portion of the premium, which was about 70 per cent of the face of the notes. Gunter testified that he advised the president of the bank whet the consideration was, and that the bank had full knowledge of the transaction before the notes were purchased; but that statement was flatly contradicted, and the jury has seen fit to accept the statement of the president of the bank.

Appellants insist that a verdict should have been directed in their favor, and in support of this position they cite cases holding that when a bank simply discounts a note and credits the amount thereof to the endorser's account without paying to him any value for it, the transaction does not constitute the bank a purchaser for value of the note. This appears to be a correct statement of the law, but this issue does not appear to have been raised in the court below and no specific instruction to that effect was asked. Moreover, it appears to us it would have been abstract had it been given. There is a very close question of fact as to whether or not the officers of the bank knew what the consideration of the notes was before purchasing them; but there appears to be no real question that the bank paid full value for the notes and that within a short time, and before the maturity of the notes, or either of them, Gunter drew checks against this deposit for the larger part of it, and all of it may have been so withdrawn so far as the proof shows to the contrary. But, of course, the fact that it paid value for the notes would not entitle the bank to collect them from the maker, if it was not an innocent purchaser for value, before maturity. That question appears to have been fairly submitted to the jury, although an instruction numbered 5, asked by appellants, which might well have been given to the jury, was amended by striking out the latter part of it. Appellants strongly complain that the action of the court in not giving the fifth instruction as requested was error which calls for reversal of the case. The portion of the instruction stricken out was to the effect that the bank must have purchased the notes without notice or knowledge of their infirmity or of circumstances which would have put it upon inquiry, and which, if followed up, would have led to the knowledge of the facts. But the court gave the following instruction: "The court instructs the jury that before one can become a bona fide...