Loyd v. Bank

• Decision Date: 20 March 1890
• Citation: Loyd v. Bank, 11 S.E. 104, 86 Va. 690 (1890)
• Parties: Loyd. v. Lynchburg Nat. Bank.
• Court: Virginia Supreme Court

11 S.E. 104

86 Va. 690

Loyd.

v.Lynchburg Nat. Bank.

Supreme Court of Appeals of Virginia.

March 20, 1890.

Pledge—Rights of Pledgee.

A note executed by a firm to a bank recited that the firm had deposited as collateral security a $5,000 note, indorsed by the father of one of the partners, and that it would give additional security if demanded, the same to be subject to sale or exchange; and "if we [the firm] shall come under any other liability, or enter into any other engagement with said bank while it is the holder of this obligation, the net proceeds of the sale of the above securities may be applied either on this note, or on any of our liabilities or engagements held by said bank." The cashier testified that the bank was accustomed to discount the firm's notes and drafts on customers, some of which were indorsed by the father of one of the partners to aid his son in business; and that at the suggestion of the cashier, and for the sake of convenience, it was agreed that the $5,000 note indorsed by him should be deposited with the bank to secure credit for the firm, no other purpose being mentioned. Held, that it was given solely to obtain credit for the firm, and could not be held as security for a draft which it accepted in favor of another, and which was discounted by the bank on the latter's credit

Appeal from circuit court of city of Lynchburg.

Kirkpatrick & Blackford, for appellant.

B. G. H. Ke&n, for appellee.

Hinton, J. This case involves the right of the Lynchburg National Bank to enforce the security of a note for $5,000, made by A. D. Barnes & Co., on the 20th April, 1885, payable four months after date, and indorsed by William H. Loyd, for the payment of a draft for $435.15, drawn by one G. W. Smith upon and accepted by the aforesaid firm. And this right is claimed to arise by virtue of the terms and effect of a certain collateral note executed by the said firm of A. D. Barnes & Co. on the 22d June, 1885, which, it is supposed, makes the note for $5,000 a valid security for the draft. This collateral note is in the words and figures following: "Lynchburg, Va., June 22, 1885. $3,700. Thirty days after date, for value received, we promise to pay to the Lynchburg National Bank, of Lynchburg, Va., or order, at said bank, thirty-seven hundred dollars, homestead and 8.11 other exemptions waived, having deposited with said bank, as collateral security for the payment of this note, our note for five thousand dollars, ($5,000,) indorsed by W. H. Loyd, dated April 20th, 1885, and payable four months after that date; and we hereby promise to give at any time, on demand, such additional collaterals as may from time to time be required by its president or cashier. If these additional collaterals be not given when demanded, then this note to be due, and rebate of interest taken shall be allowed on payment prior to maturity; and we hereby give to said bank, its president or cashier, full power and authority to sell and assign and deliver the whole or any part of said collaterals, or any substitutes therefor, or any additions thereto, at public or private sale, at the option of the bank, or its president or its cashier, or either of them, on the non-performance of the above premises, or any of them, or at any time thereafter, and without advertising or giving to us any notice or making any demand of payment. It is also agreed that said collaterals may from time to time, by mutual consent, be exchanged for others, which shall also be held by said bank on the terms above set forth; and that if we shall come under any other liability, or enter into any other engagement, with said bank while it is the holder of this obligation, the net proceeds of the sale of the above securities may be applied either on this note or on any of our liabilities or engagements held by said bank, as its president or cashier may elect. A. D. Barnes & Co. "

At the trial the defendant, William H. Loyd, asked the court to give the following instruction: " If the jury believe from the evidence that the $5,000 note of A. D. Barnes & Co. was indorsed by Wm. H. Loyd for the purpose, and only for the purpose, of enabling A. D. Barnes & Co., of which firm his son...