Mercantile Bank of Memphis v. Busby

• Decision Date: 30 September 1908
• Citation: 113 S.W. 390,120 Tenn. 652
• Parties: MERCANTILE BANK OF MEMPHIS v. BUSBY et al.
• Court: Tennessee Supreme Court

113 S.W. 390

120 Tenn. 652

MERCANTILE BANK OF MEMPHIS v. BUSBY et al.

Supreme Court of Tennessee.

September 30, 1908

Appeal from Chancery Court, Shelby County; F. H. Heiskell Chancellor.

Bill by the Mercantile Bank of Memphis against B. I. Busby, C. B Blackburn, and others. Decree for complainant, and defendant Blackburn appeals. Affirmed.

Turley & Turley, for complainant.

Caruthers Ewing, C.J. McSpadden, Cary & Rogers, and Lehman, Gates & Lehman, for defendants.

McALISTER J.

The original bill herein was filed on the 23d of May, 1906 against B. I. Busby, C. D. Williford, C. B. Blackburn, and H L. Williford, on the following note:

"$9,000. Memphis, Tenn. Sep. 2, 1905.

"Six months after date I promise to pay to the order of myself Nine Thousand Dollars at Mercantile Bank, value received.

"B. I. Busby."

The note had the following names indorsed on the back thereof in the following order, viz.:

"B. I. Busby.

"B. I. Busby Co., by B. I. Busby, Pres.

"C. B. Blackburn, Laconia, Ark.

"H. L. Williford.

"Pay American Exchange National Bank, New York, N.Y. or order.

"Mercantile Bank of Memphis, Tenn., W. A. Smith, Cashier, C. H. Raine, Pres."

There was a credit of $1,000 on this note dated April 5, 1905, and this suit was brought to recover the balance due, with interest.

The bill showed that the note was presented for payment at the Mercantile Bank, where it was payable on March 2, 1906, and payment refused, whereupon notice of nonpayment was given to the various parties. The notice to C. B. Blackburn was deposited in the post office at Memphis, Tenn., on March 2, 1906, addressed to E. B. Blackburn, Laconia, Ark. On June 26, 1906, the defendant C. B. Blackburn filed an answer denying his liability as indorser on said note for the reason that notice was not given him of the protest of said note for nonpayment, and also setting up other defenses in his answer, which it is unnecessary to mention. It was averred in his answer that the protest was invalid, and that due notice had not been given him. Defendant Blackburn insisted that he had not resided at Laconia, Ark., for five or six years, but that he had been a resident of Doran, Phillips county, Ark. The answer averred that the notice of protest was addressed to him at Laconia, Ark., and that the first notice he had thereof was "some weeks thereafter when the same was found by respondent at the house where respondent's wife lives in the city of Memphis, and where respondent stays when in said city." The answer further avers that said notice was mailed "to respondent from Laconia on March 2, 1906, by a relative living at Laconia." The answer denied that complainant was the legal holder of the note or was entitled to maintain an action thereon. On the 12th of July, 1906, by permission of the court an amended bill was filed, wherein it was alleged that:

"The B. I. Busby Co. was a Tennessee corporation, in which B. I. Busby, C. D. Williford, C. B. Blackburn, and H. L. Williford were all largely interested. That such parties desired to raise money for it and for their own benefit. With this in view the note in question was made in the form in which it appears. All of the indorsements thereof were made before the note was attempted to be used, and, after being so completely executed, the same was discounted by complainants. The money so borrowed went into the business of B. I. Busby Co., in which the various parties were interested."

The theory of the amended bill is that each and all of the parties to said note are equally bound thereof, and that no protest was necessary and no notice of nonpayment had to be given. On August 27, 1906, C. B. Blackburn filed an answer to the amended bill wherein he admitted that he had been a stockholder in the B. I. Busby Company, but claimed that he was not otherwise interested therein, and insisted he was an accommodation indorser on said note. The answer denied that C. B. Blackburn had ever waived protest and notice, or admitted liability on the note after it fell due.

The Willifords also filed their answers to the bill in which they claimed to be accommodation indorsers on said note. Proof was taken, and on the hearing the chancellor decreed:

"That the $9,000 note is unpaid, except that $1,000 was paid thereon on April 5, 1906, and that another payment of $2,301.16 was made thereon September 5, 1907, which payments are admitted by complainant. This last payment was a collection made of the Columbia Star Milling Co. v. B. I. Busby, before mentioned. Thereupon it is held and decreed as follows:

"(1) That the $9,000 note before mentioned was given for a debt or obligation and for the benefit of the B. I. Busby Co., a corporation in which the said B. I. Busby, C. D. Williford, C. B. Blackburn, and H. L. Williford were stockholders.

"(2) That B. I. Busby, C. D. Williford, C. B. Blackburn, and H. L. Williford were all in law joint makers of said $9,000 note and all liable therefor, and no protest of same was necessary.

"(3) That the negotiable instruments law of Tennessee did not change or affect the liability of the parties to the $9,000 note, but all the parties are liable thereunder as above stated."

It was therefore held and decreed that the Mercantile Bank of Memphis have and recover of B. I. Busby, B. I. Busby & Co., C. B. Blackburn, and H. L. Williford the sum of $6,359.75, said amount being the principal and interest now due on the $9,000 note as aforesaid. The judgment was against all of said parties jointly and against each of them severally. It should have been stated that no decree was pronounced against C. D. Williford for the reason he had been adjudged a bankrupt in the District Court of the United States for the Southern District of New York, and discharged from all debts due by him on April 26, 1907, and that thereby he was discharged from all liability on the $9,000 note in suit.

The defendant Blackburn appealed from the decree of the chancellor, and has assigned numerous errors, most of which are based on the action of the chancellor in sustaining the exception of the complainant to certain questions and answers in the deposition of C. B. Blackburn. The main assignment of error, however, is that the chancellor erred in rendering a decree for complainants against the defendant Blackburn and in refusing to dismiss the bill as to him.

The main inquiry presented on the record is whether or not the defendant Blackburn was a joint maker of the note in question, or whether he was an accommodation indorser in the sense of the law merchant. A history of the note in suit will throw much light on this question. The record discloses that the predecessor of the B. I. Busby corporation was the B. I. Busby Company. This company was a firm composed of C. D. Williford and B. I. Busby. As already stated, it was succeeded by the B. I. Busby Company, corporation, chartered in February, 1904. The stockholders and their holdings were as follows:

C. B. Blackburn .. $5,000 00

B. I. Busby ....... 2,500 00

C. D. Williford ... 2,500 00

H. L. Williford ... 9,100 00

It appears that the B. I. Busby Company as a firm owed a $12,000 note to the Mercantile Bank which was indorsed by the Agar Packing Company. The corporation B. I. Busby Company took the stock of goods that Busby and Williford had. drays, mules accounts, etc., and assumed this indebtedness of the firm. It appears that, when the corporation took over the assets and assumed the debts of the firm, the indebtedness was explained to the stockholders of the corporation. It appears that the note in question was gradually reduced by payments made by the corporation and renewals to $9,000. It appears that at a directors' meeting of the B. I. Busby corporation, November 12, 1904, B. I. Busby, C. B. Blackburn, H. L. Williford, C. D. Williford, and J. S. Hampton were present. The president explained the note of $12,000 indorsed by the Agar packing Company, stating that it was simply the renewal of one he had formerly carried with the same indorsement, and that it was for borrowed money from the Mercantile Bank He stated that it could not be expected that the Agar Packing Company, would again indorse this paper. It thus appears that C. B. Blackburn, the defendant, was present at the directors' meeting when the nature of this obligation was explained. It appears that another directors' meeting was held January 14, 1905, at which meeting C. B. Blackburn was present. The president stated that he did not want to again ask the Agar Packing Company to indorse this paper. Blackburn in his testimony does not deny that he was present and knew of this announcement. We think from Mr. Blackburn's cross-examination it is evident that he understood that all the notes which had been given in renewal from time to time of the original Agar Packing Company notes, and which were indorsed by the various stockholders of the B. I. Busby Company, corporation, bound all the indorsing stockholders equally. This is our conclusion of the nature of this transaction from an examination of the record. Under the authorities in this state prior to the passage of the negotiable instruments law in 1899, the parties being liable on said note as joint makers were, of course, not entitled to notice of protest and nonpayment. Bank v. Jefferson, 92 Tenn. 537, 22 S.W. 211, 36 Am. St. Rep. 100; Assurance Society v. Edmonds, 95 Tenn. 53, 31 S.W. 168; Logan v. Ogden, 101 Tenn. 392, 47 S.W. 489; Bank v. Lumber Co., 100 Tenn. 479, 47 S.W. 85. In this view of the case, it is an immaterial consideration that the notice of protest was sent to C. B. Blackburn at Laconia, Ark. It is insisted, however, on behalf of the defendant, that this rule has been changed by our negotiable instruments...