Memphis Nat. Bank v. Sneed

• Decision Date: 29 June 1896
• Citation: 36 S.W. 716,97 Tenn. 120
• Parties: MEMPHIS NAT. BANK v. SNEED et al.
• Court: Tennessee Supreme Court

36 S.W. 716

97 Tenn. 120

MEMPHIS NAT. BANK v. SNEED et al.

Supreme Court of Tennessee.

June 29, 1896

Appeal from chancery court, Shelby county.

Suit by the Memphis National Bank against W. A. Sneed and others. From the decree for complainant, the executrix of W. M Sneed, one of the defendants, appeals. Affirmed.

Myers & Banks, for appellant.

Wm. M Randolph & Sons, for appellee.

BEARD J.

The complainant in this cause, by its bill, sought to recover on two promissory notes, one for $7,500, dated 3d of October 1892, due at 90 days, and the other for $3,000, dated 22d October, 1892, and due at four months, made by W. A Sneed, to the order of and indorsed by W. M. Sneed. At maturity the notes were presented for payment to the maker, and, this being refused, they were protested, of all which the indorsee had due and legal notice. No defense was made by the maker of this paper, but Mrs. Neely, the executrix of W. M. Sneed resisted recovery upon the grounds that her testate was non compos mentis at the time he indorsed the same. Upon the trial, the chancellor rendered a decree, not only against the maker, but also against the estate of the indorser. From this decree, the executrix alone prosecuted an appeal to this court.

The notes sued on were renewal notes, the last of two series made and indorsed by the same parties, the originals of which were discounted for the maker by the complainant bank in 1890. On all these notes W. M. Sneed was an indorser for the accommodation of W. A. Sneed, without any interest whatever in the proceeds of the discount. So far as the facts are concerned on which rests the contention of the executrix that her testate was of unsound mind when he entered into these two contracts of indorsement, it is sufficient to say that he had been for more than 20 years an active and prosperous member of the Memphis bar, and at the same time was interested in, and for a considerable period controlled, large enterprises outside of his profession. He was a man of energy, integrity, and sound business judgment, as the result of which he succeeded in acquiring a high reputation of the commercial community, and in accumulating a large fortune. Unremitting attention to his various duties, according to the testimony of experts, finally brought on an attack of paresis, a disease which is described as attacking the organic brain structure, which, though slow in its progress, culminated on or about the 15th of October, 1892, in serious mental disturbance. Up to that time we think it is clear from this record, whatever may have been the course of the disease, that he was in possession of his mental faculties, and was fully able, at the time he indorsed, to bind himself by contract on the $7,500 note, of date the 3d of October. After the 15th, up to and including the 22d, of that month, his mind was the subject of delirium; and while he continued his daily visits to his office, and his attention to his numerous business interests, yet we think the testimony in the case shows that on the 22d of October, 1892, when he indorsed the $3,000 note, he was, to a considerable degree, non compos mentis. Of this fact, however, the bank had no notice when it canceled and delivered the old note, maturing that day, to the maker, and took from him this new note in its room and stead.

Upon the finding of the facts, there is only the question left for determination whether the estate of W. M. Sneed can escape liability in the indorsement on the ground that he was insane at the time of making it. It is admitted that, as a general rule, the contract of a lunatic may be avoided. To this however, there is this well-recognized exception: That where a contract has been entered into in good faith, without fraud or imposition, for a fair consideration, without notice of the infirmity, and has been so far executed that the parties cannot be restored to their original positions, it will not be set aside by the court. 5 Laws. Rights, Rem. & Prac. § 2389; 2 Pom. Eq. Jur. § 946. It is said that such a contract is enforced against the party non compos mentis, not so much upon the idea that it possesses the legal essential of consent, but rather because, by means of an apparent contract, he has secured an advantage or benefit, which cannot be restored to the other party, and therefore it would be inequitable to permit him, or those in privity with him, to repudiate it. Lincoln v. Buckmaster, 32 Vt. 652; Matthiessen v. McMahon's Adm'r, 38 N. J. Law, 536. The reports are full of cases which seem to illustrate this exception to the general rule. A few only will be referred to. In England, Moltron v. Camroux, 2 Exch. 489, affirmed in 4 Exch. 17, is a leading case on this subject. In the opinion of the court reported in 2 Exch. 489, it is said: "We are not disposed to lay down so general a proposition as that all executed contracts, bona fide, must be taken as valid, though one of the parties be of an unsound mind. We think, however, that when a person of comparatively sound mind, and not known to be otherwise, enters into a contract for the purchase of property, which is fair and bona fide, and which is executed and completed, and the property, the subject-matter of the contract, has been paid for and fully enjoyed, and cannot be restored so as to put the parties in statu quo, such contract cannot be afterwards set aside, either by the alleged lunatic or those who represent him." This rule, or rather this exception to the general rule, is recognized and applied by chancery courts in a great variety of cases. In Wilder v. Weakley, 34 Ind. 181, an action was maintained against the estate of a lunatic on an account for whisky, etc., sold to him in good faith, and without knowledge of his lunacy. The court there said: "It is laid down by an elementary writer that 'if a party to a contract was at the time he entered into the engagement a lunatic or of unsound mind, and any imposition appears to have been practiced upon him, or any advantage taken of his infirmity, by the other contracting parties, the contract will be void, as having been procured by fraud. But if the contract is a fair and honest contract, and bears no symptoms of the infirmity of mind of the party sought to be charged thereon, the courts will enforce it like any other contract. *** An action for the price of goods sold and delivered, or of work done, or for the hire of horses, carriages, or servants, cannot be defeated by showing that the defendant had been found by inquisition to be a lunatic at the time he received the goods, or had the benefit of the work or the use of the horses, carriages, and servants."' In Beale v. See, 10 Pa. St. 56, the plaintiff, as administrator of one Dom, sought to recover the value of certain goods purchased by Dom from the defendant, on the ground that his intestate was a lunatic at the time of the purchase. The testimony showed that the goods were unsuited to the object for which they were bought; that the price agreed upon exceeded their market value; and that the plaintiff had tendered them back to the defendant. On these facts, the court found for the defendant, and, in its opinion, distinctly based its conclusions upon this exception to the general rule. Bank v. Moore, 78 Pa. St. 407, was a case where a bank in good faith, and without any knowledge of his infirmity, discounted a note for a lunatic, and paid over the awards,...