Lock v. Citizens' Nat. Bank

• Decision Date: 07 March 1914
• Citation: 165 S.W. 536
• Parties: LOCK et al. v. CITIZENS' NAT. BANK.
• Court: Texas Court of Appeals

165 S.W. 536

LOCK et al. v. CITIZENS' NAT. BANK.

Court of Civil Appeals of Texas. Amarillo.

March 7, 1914.

On Motion for Rehearing, April 11, 1914.

Appeal from Hale County Court; W. B. Lewis, Judge.

Action by the Citizens' National Bank against C. E. Lock and another. Judgment for plaintiff, and defendants appeal. Affirmed.

Austin C. Hatchell, of Plainview, for appellants. Geo. L. Mayfield and L. R. Pearson, both of Plainview, for appellee.

HENDRICKS, J.

This suit was filed by the appellee, the Citizens' National Bank of Plainview, Tex., in the county court of Hale county, Tex., against C. E. Lock and F. M. Lock, the appellants, on a promissory note payable to the order of G. A. Henderson, which was negotiated by Henderson to the appellee bank. The appellants claim that the note was procured by fraud, of which appellee had full knowledge, was without consideration, and was in contravention of the antitrust laws of the state. The trial court, after the close of the evidence, instructed the jury to find for the plaintiff against the defendants Lock for the principal and interest of the note and 10 per cent. attorneys' fees.

At the time of the execution of the note, a written contract was executed by G. A. Henderson and C. E. Lock and F. M. Lock, by the terms of which the Locks were ostensibly appointed as sole and exclusive agents for the sale of a combined educational chart, drawing board, and writing desk, in Smith county, Tex., from the 14th day of December, 1911, to August 9, 1917, in consideration of the agents purchasing from Henderson 36 of said articles at $8.50 per chart, to be delivered f. o. b. Muncie, Ind., and to be shipped to Lock & Son within 30 days from the date of the contract; the said Henderson granting to the said Lock & Son an equal right with Henderson and his other agents to have all orders filled by the manufacturer at Muncie, Ind., according to the manufacturer's contract with Henderson at the wholesale price of $1.50 per chart. Besides the exclusive agency for the sale of the charts in Smith county, Lock & Son were granted another agency with equal privilege with Henderson and his other authorized agents, to sell said chart in the counties of Hale, Swisher, Floyd, and Briscoe, for the same period of time. Aside from the written contract, as abbreviated above, appellants testified, in substance, that Henderson orally represented that as to the Panhandle counties named no other person would have any right to sell the chart in that territory and that no other person would be able to purchase the same chart except from him (Henderson), the latter claiming absolute control over the sale of the same, that none of the agents were permitted to sell the charts for less than $8.50 each and stated that they were constructed out of the best oak wood; however, testifying that they read the contract and the note and signed the same. The appellants stated that the 36 charts received by them were made of inferior material, and that in attempting to sell the charts in some of the Panhandle territory it developed that they were in competition with other charts listed by a mail order house at $2.75, which, with the freight added, would have made the chart cost in that territory $3.25, and, because other firms were selling the same chart in other territory for less money, the particular contract to them was worthless. At the time the written contract and the note were executed, C. E. Lock addressed a letter at the solicitation of Henderson, to the Citizens' National Bank, the appellee, as follows: "I have this day made one note, payable to G. A. Henderson, for $306.00, due November 15, 1912. Will be agreeable with me for you to take up my note."

When Henderson negotiated the note to the bank, he presented the letter, and the bank discounted the note about 10 per cent., and we infer from the record that this transpired within a short time after the execution of the note and contract. The president of the bank testified that he had an idea that the note purchased was given for school supplies; that an agent of Henderson, selling charts for him, was staying at his house at that time; that he knew nothing of any statements made to Lock by Henderson, and, as we construe the record, this is the only knowledge of any fact in connection with the transaction possessed by any officer of the bank. Appellants contend that the discount is such, coupled with the purchase of the note in suit from a stranger, and the knowledge of the bank that C. E. Lock, the father, was solvent, was such constructive notice as to put the bank upon inquiry. The case of Oppenheimer et al. v. Farmers' & Merchants' Nat. Bank, 97 Tenn. 19, 36 S. W. 705, 33 L. R. A. 767, 56 Am. St. Rep. 778, by the Supreme Court of Tennessee, cited by appellant upon another proposition, is authority against the contention. It is true that the real amount of the consideration in some cases and under some circumstances is important in determining good faith and constructive notice in the purchase of negotiable paper. The amount paid by a purchaser of paper executed by a solvent maker may be so disproportionate to the face value of the security, and especially so if bought from a stranger, which would imply a guilty knowledge, or a willful ignorance of facts, in connection with the execution of the paper which could have been ascertained by reasonable inquiry. However, it is uniformly held that the rule does not require the full face of the paper to be paid in its purchase, and a contrary principle would not only deprive commercial paper of one of the most essential and valuable incidents of negotiability —that is, the sale of same—but necessarily affect the business and commerce of the country. King v. Doane, 139 U. S. 166, 11 Sup. Ct. 465, 35 L. Ed. 87.

The officers of the bank testified that they relied upon the letter in the purchase of the paper. It was some time after the execution of the contract and the negotiable paper in question that the Locks received the shipment of the charts purchased. If the paper had been sold to the bank prior to the delivery of the charts and the bank had inquired of the Locks, what information would they have received as to any fraud between the Locks and Henderson? The Locks had none until they received the charts and attempted to sell the same. We necessarily overrule the assignment insisting upon this contention.

Neither do we think that it is sufficiently shown that the note, as a part of the contract, is in violation of the anti-trust statute of this state. This contract has the usual earmarks of a sale of the exclusive right to vend a patented article throughout a specified district, especially as to Smith county. The Locks testified that Henderson informed them that the article was patented, and if so the evidence suggests that Henderson assumed to control it. The object of the patent law is monopoly, "and the rule is, with few exceptions, that any conditions which are not in their very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee for the right to * * * sell the article, will be upheld by the courts. The...