Merchants' Nat. Bank v. Howard

• Citation: 125 S.E. 126,188 N.C. 543
• Decision Date: 12 November 1924
• Docket Number: 290.
• Parties: MERCHANTS' NAT. BANK v. HOWARD ET AL.
• Court: United States State Supreme Court of North Carolina

125 S.E. 126

188 N.C. 543

MERCHANTS' NAT. BANK v. HOWARD ET AL.

No. 290.

Supreme Court of North Carolina

November 12, 1924

Appeal from Superior Court, New Hanover County; Calvert, Judge.

Action by the Merchants' National Bank against James Howard and another. Judgment for defendants, and plaintiff appeals. No error.

The execution of the note set out in the complaint by defendant James Howard and the indorsement by defendant Percy W. Wells are admitted. Defendants, in their answer to the complaint allege that the execution of the original note for which the note sued on is a renewal, was procured by false and fraudulent representations, and that same was therefore without consideration, null, and void. Plaintiff replies by alleging that it was a holder of the note in due course having purchased the same for value, before maturity, and without notice of any infirmity in the instrument or defect in the title of the person from whom it purchased the note.

The note set out in the complaint and offered in evidence by plaintiff is dated December 23, 1922, is for $5,000, and is due 60 days after date. It is signed by James Howard, and is payable to his order at the Commercial National Bank Wilmington, N.C. It is indorsed by both defendants and has not been paid.

On May 27, 1922, James Howard executed his note for $5,000, due 90 days after date. This note was indorsed by Percy W. Wells and was payable either to the order of the maker or to the Commercial National Bank. The consideration for this note was 50 shares of the capital stock of the Commercial National Bank of Wilmington, N. C., sold to Howard by Thomas E. Cooper, a director of said bank, and subsequently its president. James Howard was induced to purchase the stock and to give his note for the purchase price by representations made to him by Thomas E. Cooper.

On May 31, 1922, this original note was purchased by plaintiff. It was presented to the discount committee of plaintiff by Thomas E. Cooper, at that time a member of the committee and also vice president of the bank. The note was discounted for the Commercial National Bank. Plaintiff paid face value for the note, less discount at 6 per cent. This original note was not paid at maturity, and a note executed by Howard and indorsed by Wells was taken by plaintiff in renewal. There were several renewals, the last being the note upon which this action is brought.

The issues submitted to the jury were as follows: (1) Was the original note for which the note in controversy was given as a renewal procured by fraud and misrepresentation as alleged in the answer? (2) If so, did plaintiff, Merchants' National Bank, at the time of the purchase of said note, have notice of such alleged fraud? (3) Did plaintiff, Merchants' National Bank, purchase such original note for value and before maturity? (4) If so, did defendants at time of execution of the renewal note sued on have notice of such alleged fraud? (5) What amount, if any, is plaintiff entitled to recover of the defendants?

At the conclusion of the evidence it was agreed that the court should charge the jury to answer the first and third issues "Yes," and that the answer to the fifth issue should be reserved and answered by the court. Only the second and fourth issues were therefore submitted to the jury. These were answered "Yes" and "No" respectively.

It is therefore established by the verdict that the original note was procured by false and fraudulent representations, and that the note in controversy was given in renewal of this note; that plaintiff had notice, at the time it purchased the original note, of the fraud, but that it paid value for the note and purchased it before maturity; that defendants had no notice at the time of the execution of the renewal note sued on that the representations by which the original note was procured were false and fraudulent.

Judgment was rendered that plaintiff recover nothing of defendants. To this judgment plaintiff excepted and appealed therefrom to the Supreme Court. Assignments of error are set out in the opinion.

Where plaintiff admitted that note sued on was renewal of original note which was procured by fraud, issue tendered as to whether defendants negotiated note sued on direct with plaintiff was inconsistent therewith, and its refusal was not error.

Albert L. Cox, of Raleigh, Wright & Stevens, of Wilmington, and John H. Kerr, Jr., of Warrenton, for appellant.

Bellamy & Bellamy and Rountree & Carr, all of Wilmington, for appellees.

CONNOR J.

Assignments of error based upon exceptions appearing in the case on appeal relative to the first and third issue need not be considered, as plaintiff appellant consented, at the conclusion of all the evidence, that the court should instruct the jury to answer both these issues "Yes." The controversy between the parties was thus confined to matters involved in the second and fourth issues. Appellant relies upon its exceptions to evidence and instructions applicable to these issues for a reversal of the judgment and for a new trial.

Defendants contend that the note upon which plaintiff seeks to recover in this action was the last of a series given by defendants and taken by plaintiff in renewal of the original note. The jury has found by consent that this note was procured by false and fraudulent representations made by Thomas E. Cooper to the maker, James Howard, and to the indorser, Percy W. Wells. This original note was negotiable in form, and was purchased by plaintiff before maturity and for value. If at the time it purchased this note plaintiff had no notice of the false and fraudulent representations by means of which its execution by the maker was procured, it was a holder in due course of the note, and could have enforced payment for the full amount thereof against all parties liable thereon. C. S. §§ 3033, 3038.

The note upon which this action is brought is not the note procured by false and fraudulent representations. That note was dated May 27, 1922, and was due 90 days after date. The note sued on was dated December 23, 1922, and was due 60 days after date. Both are for $5,000.

In apt time plaintiff tendered an issue as follows: "Did defendants negotiate the note sued on direct with plaintiff?" To the refusal of the court to submit this issue plaintiff excepted.

In apt time plaintiff requested the court to instruct the jury as follows: "If you find from the evidence, by its greater weight, that the note sued on was given to secure the payment of the first note and to get an extension of time, then the court charges you that defendants would be liable." To the refusal of the court to give this instruction plaintiff excepted.

By these exceptions plaintiff presents its contention that defenses available to defendants in an action upon the original note, dated May 27, 1922, and purchased by plaintiff, cannot be set up and maintained in an action upon the note dated December 23, 1922, which was executed by defendants and delivered to plaintiff.

These exceptions, however, cannot now be urged by plaintiff as grounds for a new trial. Plaintiff did not except to the first issue which was predicated upon the proposition that the note in controversy was given as a renewal of the original note which was procured by false and fraudulent representations. This issue was answered "Yes" by consent.

Plaintiff's evidence shows that the note sued on was a renewal of the original note. Col. James R. Young, vice president of plaintiff bank, testified that the first note for 90 days was discounted for the Commercial Bank on May 31, 1922; that there was a renewal in August for 60 days, and again a renewal in October for 60 days.

"This present note was received December 30, 1922. I conducted most of the correspondence. I know that after the first time we renewed it without any regard to the bank. The first note was agreed to be taken up in June, and after this we looked into the financial standing of the parties, and, while we were trying to collect it, we were forced from time to time to renew because we could not make collection. Nothing has ever been paid on the note."

These exceptions cannot be sustained. There was no error in refusing to submit the issue tendered or in...