Long v. City Nat. Bank of Commerce

• Decision Date: 07 November 1923
• Docket Number: (No. 2179.)<SMALL><SUP>*</SUP></SMALL&gt
• Parties: LONG v. CITY NAT. BANK OF COMMERCE.
• Court: Texas Court of Appeals

256 S.W. 1006

LONG v. CITY NAT. BANK OF COMMERCE.

(No. 2179.)^*

Court of Civil Appeals of Texas. Amarillo.

November 7, 1923.

Rehearing Denied December 12, 1923.

Appeal from District Court, Wichita County; H. R. Wilson, Judge.

Action by the City National Bank of Commerce against Joe Long, Jr. Judgment for plaintiff, and defendant appeals. Affirmed.

Kay, Akin & Kenley, of Wichita Falls, for appellant.

Bullington, Boone, Humphrey & Hoffman, of Wichita Falls, for appellee.

BOYCE, J.

A majority of the court have concluded that appellee's motion for rehearing should be granted and that our former judgment, entered on original hearing, should be set aside and the judgment of the trial court affirmed. Accordingly the original opinion, written by Chief Justice HALL, is withdrawn, and the cause will be disposed of in accordance with the opinions this day handed down.

The City National Bank of Commerce of Wichita Falls brought this suit on two notes for $6,250 each, executed by appellant, Long, payable to "McCoy, Bonner & Nixon, trustees," and by them indorsed and delivered to the plaintiff. These notes were executed by Long in evidence of the balance of his subscription for a $25,000 interest in an association to be organized for the purpose of purchasing a one-half interest in an eleven-story building, known as the Commerce Building, in the city of Wichita Falls. Long defended on the grounds: (1) That the notes were without consideration; (2) that the notes were executed and delivered to be held in escrow pending the consummation of the organization of the association or corporation referred to in the subscription contract, and were wrongfully taken out of escrow and delivered to plaintiff; (3) that plaintiff was not a bona fide purchaser of said notes for value without notice; (4) that the principal note for which plaintiff held these notes sued on as collateral had been paid, and the bank had no further claim on these collateral notes.

Such details of the facts on which these pleas are based as are necessary to be considered in the discussion of the propositions presented will appear in the following statement, and in such further statements as may be made in a detailed discussion of the various propositions.

The subscription agreement referred to is dated April 26, 1920, and is as follows:

"The undersigned, each for himself, hereby subscribes and agrees to pay for the amount of stock or interest set opposite our respective names in a corporation, syndicate, or stock association (as may be hereafter agreed upon) the total capital of which will be $550,000, hereby organized for the purpose of acquiring and owning a one-half interest in and to lot No. 1, block 175, of the city of Wichita Falls, Texas, with the building thereon situated, now known as Commerce Building. One fourth of said amount is paid herewith in cash, and the remainder will be paid in three equal installments, to bear interest at the rate of 6 per cent. per annum and due 3, 6, and 9 months from this date. R. S. Nixon, president of the American National Bank, is hereby authorized to collect all amounts due and to become due hereunder until a permanent organization or plan of operations can be formed."

Long signed this subscription contract for $25,000, and paid $12,500 in cash. The project was being promoted principally by the officers and stockholders of the American National Bank, of which Nixon was president — it being contemplated that said bank would use a part of the building as its banking house; and there is testimony to the effect that it was understood that said bank would take any difference between the amount actually subscribed and the amount necessary to purchase the building. McCoy and Nixon were active in the promotion of the organization. The names of Ray S. Nixon and H. S. Griffin head the subscription list with a subscription of $50,000 each, and their names appear to have been scratched out. Many other names were signed who appear from the list to have paid part cash and given their notes for the balance. It appears that some of the subscribers had not paid anything on their subscription and had not executed any notes. The testimony of the defendant and other subscribers is to the effect that they signed the subscription at the instance of Nixon, relying on the fact of Nixon and Griffin's subscription, and that it had been made in good faith; also relying on representations that a corporation would be formed and a loan secured on the building for one-half the amount for which they were buying it, that the rentals from the building would take care of any further payments, and that the subscribers would thus only have to pay one-half cash and would not be called on for the remainder.

On May 1, 1920, the National Bank of Commerce, the owner of the half interest in the building which the Syndicate proposed to purchase, conveyed such interest to McCoy, Nixon, and Bonner, for the consideration of about $485,000, who paid about $135,000 cash, being out of the money paid by the subscribers to the contract above set out, and gave their notes for the balance, about $350,000. This deed was recorded on May 8, 1920. No trust is recited in this deed or in these notes, though it was understood that such parties were taking title to the property for the benefit of the syndicate subscribers. These subscribers knew that the property had been bought. Long testified that he did not know in whose name the title was taken, but supposed he could have found out if he had inquired. It is in evidence that he discussed the matter of his interest in the building at various times, and expressed a desire to get the association incorporated so that his interest would appear in his own name. The American National Bank moved into the building and occupied a part of it as had been contemplated, and it is in evidence that Nixon, Bonner, and McCoy, or some one acting for them and for the Syndicate, collected the rents and handled the business incident to the ownership of the building until it was sold at trustee's sale more than a year later. We are inclined to think that all parties interested in this joint enterprise at the time these notes were given and negotiated should be held to be partners. The association, or whatever it was (the parties themselves called it "the syndicate"), did business for more than a year. Nixon, Bonner, and McCoy (by reason of the fact that the title to the property purchased for the Syndicate was taken in their names, the execution of notes for deferred payments in their names, and the delivery of notes for unpaid subscriptions payable to them as trustees) were put forward by, or assumed to act with the apparent approval of the subscribers to the enterprise as their representatives.

On July 15, 1920, Long executed the two notes sued on. They were payable to the order of "McCoy, Bonner and Nixon, trustees," in three and six months after date. He testified that these notes were presented to him for signature by H. M. Frank, cashier of the American National Bank, who represented to him that —

"We are paying some interest on it (evidently on the Nixon, Bonner and McCoy purchase-money notes), and will hold the notes for you in order to put the business in a businesslike shape. These notes will be held in the bank and not transferred to anybody."

Frank, in securing the notes, was acting for the trustees, Nixon, McCoy, and Bonner, and turned the notes into the files of the Syndicate. Frank testified that the signers of the notes knew that he was acting for the trustees and that he told Long and others who signed similar notes:

"That the notes were to be taken to get all the papers completed and for a stock company which Judge Bonner was supposed to be drawing the papers on at that time, and told him the notes were going to be held to clear up the whole affair and get the stock company organized; that we did not expect to use the notes inasmuch as we were figuring on a loan at that time and thought we had a loan placed. * * * I told Joe Long that if we got a loan it would take care of the deferred payments. I told all of them that; I did not tell him what would happen if we did not get the loan. What I told them I told them as Mr. McCoy had instructed me — that we just wanted to get the notes and get the papers complete and form the company. We got the notes so we could get the contract these parties signed evidenced by the notes. We took the notes for the same purpose we took the money."

He testified in another place that he told Long that —

"The notes were to be given just to complete the organization of this company and until the papers could be drawn, and the notes themselves were not to be used except for building up the organization of this stock company. We had no intention of putting the notes in the bank; I mean by putting them in the bank, trading them to the bank."

Another signer of a similar note testified that Frank told him on presentation of the note for signature, that —

"The notes were going to be held until the loan was negotiated, and the notes were going to be held contingent on the negotiations of the loan. That was the way they told me — if the loan was negotiated they would return the notes to us. I never thought of what would be done if the loan was not negotiated."

The National Bank of Commerce was consolidated with the City National Bank of Commerce, and the plaintiff thus acquired the notes of McCoy, Bonner, and Nixon. In order to secure "an extension of time and forbearance from suit" on such notes of McCoy, Nixon, and Bonner, Nixon, with the consent of the other two trustees, delivered the notes of Long sued on herein, to the plaintiff bank, to be held as collateral to the said notes of McCoy, Nixon, and Bonner, signing the indorsement of the notes thus: "McCoy, Bonner & Nixon, Trustees, by R. S. Nixon." It was agreed that the plaintiff so acquired said notes before their maturity and...