Mcnary v. Farmers' Nat. Bank

• Decision Date: 14 May 1912
• Docket Number: Case Number: 900
• Citation: 124 P. 286,33 Okla. 1,1912 OK 387
• Parties: McNARY et al. v. FARMERS' NAT. BANK.
• Court: Oklahoma Supreme Court

1912 OK 387

124 P. 286

33 Okla. 1

McNARY et al. v. FARMERS' NAT. BANK.

Case Number: 900

Supreme Court of Oklahoma

Decided: May 14, 1912

Syllabus

¶0 1. BILLS AND NOTES--Indorsement--Sufficiency. An indorsement on the back of a nonnegotiable promissory note, which reads: "For value received I hereby guarantee the payment of the within note at maturity, or at any time thereafter, with interest at the rate of per cent. per annum until paid. Waiving demand, notice of nonpayment and protest, as collateral"--signed by the payee, is sufficient to pass the title to the paper.

2. PLEDGES-- Assignment of Note as Collateral--Action by Pledgee. Where the payee of a nonnegotiable promissory note assigns it to a third party as security for a loan, and pays the loan pending suit on the collateral, the holder may nevertheless recover on the collateral note from the maker, unless the latter is thereby deprived of some equity which he may have had against the payee.

T. G. Cutlip and McLain Taylor, for plaintiffs in error.

Blakeney & Maxey, for defendant in error.

TURNER, C. J.

¶1 This is an action originally brought by the Farmers' National Bank of Tecumseh, defendant in error, against W. H. McNary and T. J. Folwell, plaintiffs in error, in the probate court of Pottawatomie county, on two certain promissory notes of $ 150 each, dated March 15, 1905, and made exhibits to the petition. Both were signed by defendants and made payable to M. H. Tennison, or order, on July 1, and August 1, 1905, who indorsed them to plaintiff thus:

"For value received I hereby guarantee the payment of the within note at maturity, or at any time thereafter, with interest at the rate of per cent. per annum until paid. Waiving demand, notice of nonpayment and protest, as collateral. [Signed] M. H. Tennison."

¶2 For answer Folwell, after general denial, admitted the execution of the notes and that they were indorsed as stated, but denied plaintiff to be the owner thereof. For answer McNary pleaded, among other things, a general denial. After reply filed, there was a trial to a jury and judgment for plaintiff in said court, and also, on trial anew, in the district court, to which the cause was appealed, and defendants bring the case here. To maintain the issues on its part, plaintiff proved by Tennison, the payee in the notes, that, before maturity and to secure present indebtedness and future advances, he had pledged said notes, then signed only by McNary, to the bank as collateral after indorsing them, presumably as stated in the petition, after which, for value, Folwell assumed their payment and signed them as principal, making McNary surety; and that the same were due and unpaid. On cross-examination he testified that at the time this suit was brought the bank had possession of the notes, but that at the time the witness was testifying the bank was not the owner or holder therefor, for the reason that pending the suit he (Tennison) had paid off his indebtedness to the bank for which the notes were pledged, whereupon they were delivered to him by the bank, and "that they were lost, I suppose in the court here; I don't know where they are"--and rested, whereupon defendants demurred to the evidence, which was overruled, after which both sides introduced other and additional evidence. When this is the state of the record, if, considering all the evidence, insufficient evidence was introduced to make out a case for plaintiff, the court erred in overruling said demurrer; otherwise not. Meyer et al. v. White, 27 Okla. 400, 112 P. 1005. Relying on Doughty v. Funk, 24 Okla. 312, 103 P. 634, where we said, in effect, that a failure by plaintiff to produce and introduce in evidence the notes sued on was fatal to a recovery, we are urged by defendants to sustain their demurrer because, they say, the notes sued on were not introduced in evidence, and hence there was not sufficient legal evidence upon which to predicate the judgment complained of. But after careful inspection of the record, we cannot say the notes were not in evidence. This for the reason that on page 100 and 101 of the record counsel for defendants offered copies thereof found among the files, whereupon the court said: "That is all part of the files in the case. Is there anything further, gentlemen?" Whereupon counsel for plaintiff said: "Yes, sir; I want to offer again the petition" (attached to which were copies of the notes and indorsements thereon). Whereupon the court said: "Well, they were offered, and they were all admitted in evidence." Showing that after being offered by both sides the cause was tried upon the theory that they were in, and as the court considered them in evidence when he passed upon this demurrer, we will do likewise. Further in support of their demurrer, defendants contend that the bank is not the owner of the notes, and therefore not the real party in interest, because, they say, the indorsement on the notes was legally insufficient to carry the title thereto from Tennison to the bank. Not so. Precisely this contention was raised in Robinson v. Lair, 31 Iowa 9. The court said:

"It is insisted that the writing on the back of the note, as follows: 'For value received, we guarantee the payment of the within note, and hereby waive demand, and notice of nonpayment'--does not amount to an indorsement of the note, and does not express an intention to convey the title from payees to plaintiff. We confess ourselves unable to give effect to the contract of guaranty of payment, and waiver of demand and notice, if the payees still intend to retain the title. The writing simply constitutes an indorsement, with an enlarged liability."

¶3 In Kellogg v. Douglas Co. Bank, 58 Kan. 43, 48 P. 587, 62 Am. St. Rep. 596, the indorsement read:

"For value received we hereby guarantee payment of within note at maturity, waiving demand, protest, and notice of protest. [Signed] M.D. Ewing, Cashier." The court said:

"The indorsement to the Chemical National Bank was sufficient, it was placed on the back of the note, and, while it was a guaranty of payment, it was also an indorsement of the note. The guaranty itself would be senseless and wholly inoperative, unless the note was transferred by the payee to a third party. Such indorsements are not at all uncommon. * * * This was both a guaranty and an indorsement, which passed a full title to the note. 2 Daniel on Negotiable Instruments (4th Ed.) 1781; Robinson v. Lair, 31 Iowa 9; Heard v. Dubuque County Bank, 8 Neb. 10 . " See, also, Judson v. Gookwin, 37 Ill. 286; Russell & Co. v. Klink, 53 Mich. 161, 18 N.W. 627; National Bank v. Haylen et al., 14 Neb. 480, 16 N.W. 754; Mullen v. Jones, 102 Minn. 72, 112 N.W. 1048; German American Savings Bank v. Hanna, Ex., et al., 124 Iowa 374, 100 N.W. 57; Dunham v. Peterson et al., 5 N.D. 414, 67 N.W. 293, 36 L.R.A. 232, 57 Am. St. Rep. 556; Elgin City, etc., v. Zelch, 57 Minn. 487, 59 N.W. 544; Childs, Junior, v. Davidson, 38 Ill. 437; South Bend Iron Works v. Paddock, 37 Kan. 510, 15 P. 574; Pattee Plow Co. v. Beard, 27 Okla. 239, 110 P. 752, 4 Am. & Eng. Enc. Law, p. 256; Comp. Laws 1909, sec. 5559.

¶4 The notes were originally given by McNary to Tennison in payment for some ice which was sold, after the pledge of the notes to the bank, by McNary to Folwell, who assumed the debt as stated. Recognizing the doctrine that these notes were pledged by Tennison to the bank as collateral to a debt due the latter and were nonnegotiable and subject to the equities existing between the original parties, the court permitted defendants to plead and...