Mann v. Second Nat. Bank of Springfield

• Decision Date: 05 March 1886
• Citation: 34 Kan. 746,10 P. 150
• Parties: LAWSON MANN, et al., v. THE SECOND NATIONAL BANK OF SPRINGFIELD, OHIO
• Court: Kansas Supreme Court

10 P. 150

34 Kan. 746

LAWSON MANN, et al., v. THE SECOND NATIONAL BANK OF SPRINGFIELD, OHIO

Supreme Court of Kansas

March 5, 1886

Error from Doniphan District Court.

ACTION by The Bank against Mann and another, on a negotiable promissory note. Trial at the December Term, 1883, and verdict for plaintiff for $ 170.75. New trial denied, and judgment accordingly for plaintiff. The defendants bring the case to this court. The facts appear in Mann v. National Bank, 30 Kan. 412, et seq., and in the subjoined opinion.

Judgment affirmed.

W. D Webb, and Thomas W. Heatley, for plaintiffs in error.

S. L Ryan, for defendant in error.

VALENTINE J. All the Justices concurring.

OPINION

VALENTINE, J.:

This was an action brought originally before a justice of the peace of Doniphan county, by the Second National Bank of Springfield, Ohio, against Lawson Mann and John D. Round, on a promissory note for $ 143, executed by Mann and Round to Amos Whitely, president, and indorsed and transferred to the bank. After trial and judgment in the justice's court the case was appealed to the district court, where it was again tried and judgment rendered in favor of the plaintiff and against the defendants for the amount of the note with interest and costs; and to reverse this judgment, the defendants, as plaintiffs in error, brought the case to this court. In this court the judgment of the court below was reversed, and the cause remanded for a new trial. (Mann v. National Bank, 30 Kan. 412, 1 P. 579.) After the return of the case to the district court, it was again tried, and judgment was again rendered in favor of the plaintiff and against the defendants for the amount of the note with interest and costs, and the defendants, as plaintiffs in error, again bring the case to this court for review.

The first point now presented by the plaintiffs in error, defendants below, is, that no proof was at any time introduced showing that the plaintiff below, defendant in error, was or is a corporation. Now probably it makes no difference whether any such proof was introduced, or not, but we think there was sufficient. The plaintiff alleged in its pleadings that it was a corporation, and the defendants have never denied the same; they raised no question in the district court with regard to the necessity for proof upon this subject or the lack of proof, and have raised the question for the first time only, in the submission of their case to this court. We think the proof upon this subject was sufficient. The evidence in the court below as well as the pleadings tended to show that the plaintiff was a corporation. The evidence tended to show that the plaintiff was a national bank doing a banking business at Springfield, Ohio, with all the proper officers for that purpose, including a president, board of directors, cashier, discount committee, etc., and presumably it must be a national bank, for under the laws of congress no persons or combination of persons other than a national bank have any right to use any such name. (U. S. Rev. Stat., § 5243.)

The plaintiffs in error, defendants below, further claim that there was no such indorsement or transfer of the note as would convey any interest in the note to the defendant in error, plaintiff below; and that even if there was, still that such indorsement or transfer was so irregular and informal that it would not cut off any outstanding equities existing in favor of the defendants below and against the original holders of the note. We shall assume that there were outstanding equities existing against the note, for the evidence tended to prove the same; or, to be more explicit, we shall assume that there was a failure or partial failure of the consideration for the note; and yet we think that this claim of the defendants below is not good. The plaintiff below, in its original bill of particulars, alleged among other things that the note sued on was made payable to the order of "Amos Whitely, president," and gave the full copy of the note, and further alleged "that said Amos Whitely indorsed and transferred said note for a valuable consideration before maturity to said plaintiff." The defendants did not by their answer or otherwise, deny any of these allegations, (and in this connection, see § 84 of the Justices Code;) but, on the contrary, they admitted in their answer the execution of the note and the alleged indorsement thereof, and alleged among other things as follows:

"That the note sued on in this action was given to the said Amos Whitely as president of the Champion Machine Company of Springfield, Ohio, which said company was then and now is a corporation duly organized and doing business under and by virtue of the laws of the state of Ohio, and that it was at the time it was so given by these defendants the property of and belonged to the said Champion Machine Company, and was not the property of the said Amos Whitely, and never has been his note or property, although taken in his name and made payable to his order."

The defendants also alleged in their answer that the note "was indorsed to the plaintiff as collateral security for the said Champion Machine Company to draw against at said bank." The case was tried in the court below upon the theory that the note originally belonged to the Champion Machine Company as alleged in the defendants' answer, and it was shown by the evidence to have been indorsed and transferred to the bank by the use of the following words, to wit: "The Champion Machine Company, by Amos Whitely, president." We think this indorsement transferred the note to the bank freed from all outstanding equities against it of which the bank did not have notice. The note on its face appeared to belong to "Amos Whitely, president." It belonged in fact to the Champion Machine Company. It was indorsed by the Champion Machine Company, and was also indorsed for such company by Amos Whitely, president. This we think was a sufficient indorsement both as against the company and Whitely to convey title, and we think it conveyed title free from equities. Any other ruling would be the sacrifice of substance to form. ( Pease v. Dwight, 6 How. U.S. 190, 198, 12 L.Ed. 399.) See further upon this subject the decision in this case when it was formerly in this court. (Mann v. National Bank, 30 Kan. 412, 418, 1 P. 579.)

It is further claimed by the defendants below that the bank, at the time when the note was discounted and afterward, had constructive notice of the failure of the consideration of the note, and therefore that the bank did not obtain title to the note freed from the equities existing in favor of the makers thereof; and this is claimed for the following reasons: It is claimed that Amos Whitely had notice of such failure of consideration; that he was a director and a member of the discount committee of the bank; and therefore that the bank must also be held to have had such notice. In the argument by counsel for the defendants below no distinction seems to have been recognized with regard to the kind of notice which Whitely may have had, whether it was actual or constructive, or whether it was obtained in connection with the business of the bank or in some other manner. While it is true that Whitely was a director and a member of the discount committee of the bank, yet he had no actual notice of the failure of the consideration of the note, or of any other infirmity affecting the note; and neither had any other agent or officer of the bank any such actual notice. The facts with regard to this subject are as follows: J. P. Quigley was the agent of the Champion Machine Company at St. Joseph, Missouri, where the note was executed, and had actual notice of the consideration for the note and of the alleged failure of such consideration. He transmitted the note to Whitely, at Springfield, Ohio, who was the president and general manager of the Champion Machine Company. ...