Midwest Nat. Bank & Trust Co. v. Niles & Watters Sav. Bank
| Decision Date | 14 January 1921 |
| Docket Number | 33590 |
| Parties | MIDWEST NATIONAL BANK & TRUST COMPANY, Appellee, v. NILES & WATTERS SAVINGS BANK et al., Appellants |
| Court | Iowa Supreme Court |
Appeal from Jones District Court.--F. O. ELLISON, Judge.
ACTION at law by plaintiff, a Kansas City bank, against defendant bank, upon a check executed by W. J. Croke, August 1, 1919 in the sum of $ 1,350. The check was payable to the order of The Texas Coast Irrigated Land Co. The check was indorsed by the land company and delivered to plaintiff. The check was accepted by the defendant bank by telegram, but afterwards payment was refused, and the check protested. Plaintiff bases its right to recover upon the acceptance. Croke, intervener adopted the same defenses as those set up by the defendant bank. Defendant bank answered in general denial; admitted that plaintiff received the check signed by Croke, that it was indorsed as alleged, that the telegrams set out in plaintiff's petition were received and sent, and that the check was protested, as alleged; and set up special defenses. Plaintiff's motion to strike such special defenses from the answer, and to strike the petition of intervention, was sustained. From such rulings, the defendant and intervener appeal.
Affirmed.
Remley & Remley, for appellants.
B. E. Rhinehart, for appellee.
Plaintiff alleges as its cause of action that, on August 1, 1919, one W. J. Croke drew and delivered his check to the Texas Coast Irrigated Land Company, on the defendant bank, as follows:
Indorsed: "For deposit, Texas Coast Irrigated Land Co., by H. J. S."
On the face of the check appears the statement as to protest, August 4, 1919. It is alleged that, thereafter, the land company indorsed the check in the manner stated, and presented same to plaintiff bank for payment, and plaintiff, before paying said check or extending credit thereon to the land company, telegraphed an inquiry to defendant, asking if said defendant would pay the check, which telegram is as follows:
It is further alleged that the message was promptly delivered to the defendant, and that, on August 2d, defendant answered by telegraph, as follows:
(The Neville matter is not in controversy herein.) The petition alleges that the foregoing telegram was received by plaintiff, and, acting upon and relying upon the same, plaintiff paid the said check to the land company, in the amount of the check; that the payment and credit so made and given were upon the statement of the defendant that they would pay said check; that thereupon the plaintiff promptly forwarded said check for payment; that said check was received by defendant for payment on August 4, 1919, and it then and there refused payment, and the same was protested on the grounds of insufficient funds; that thereafter, plaintiff made further demand on defendant for payment, by wire, as follows:
It is further alleged that plaintiff is the owner and holder of said check, and that it is due and unpaid; that, by reason of said telegram, defendant agreed to the payment of said check on presentation, and thereby became liable to plaintiff for the amount thereof, with interest from the time of presentment, together with protest fees and costs.
The special defenses interposed, stated as briefly as may be, are that plaintiff was acting as the collecting agent for the land company, and paid no consideration for the check, and is not a holder for value in due course; that the land company obtained the check from Croke through fraud and misrepresentation, and without consideration; and that plaintiff has no better rights than the land company; that Croke ordered and directed defendant not to pay the check when presented; and that the same was protested, and not paid. In Division 2 of the answer, it is alleged that the check was indorsed for deposit; that the check was obtained from Croke by the land company without consideration, by fraud and misrepresentation; that the check was given to the land company for a part of the purchase price for land in Texas, pursuant to a written contract between the land company and Croke. The representations and agreements are then set out, and the falsity and reliance thereon alleged. It is further alleged that plaintiff had full knowledge that the land company was in the business of misrepresenting, and of defrauding men obtained from the north, in selling them land, and knew, or had reason to know, that the check was obtained by fraud and without consideration; that plaintiff was acting for the land company in collecting said check, and for no other purpose. In Division 3, it is alleged that plaintiff knew that the land company was engaged in selling land to foreign purchasers, and that the land company would take purchasers from Kansas City to Texas in a special car, at practically no cost; and that plaintiff knew that the land company was in the business of misrepresenting and defrauding land seekers, and obtaining their notes and checks, and was conniving and assisting said land company in placing said checks and notes in the hands of innocent purchasers, and collecting the same. Plaintiff moved to strike this from the answer, and each division, as frivolous, irrelevant, incompetent, and redundant matter, and because the matters alleged are no defenses, to wit, all the matters in Division 1, which we have before set out. The motion is to strike out all of Division 2, also the whole of Division 3, and separately to strike all of the first paragraph of Division 3. The motion is so framed as to strike out each division, and separately, the different paragraphs therein. The motion to strike the petition of intervention is on the ground that the petition, on its face, does not show that intervener has any interest in the matter in litigation between plaintiff and defendant; that plaintiff's action is based upon the contract made with the defendant, whereby defendant agreed to pay plaintiff the amount of a certain check, set out in the petition, and which defendant certified in writing, and, upon such certification, the amount of the check became a deposit in defendant's bank, subject to call of plaintiff, over which fund the intervener has no right to stop payment, or otherwise.
1. Appellants contend that, because the check was indorsed by the land company "for deposit," the delivery thereof was conditional, or for the special purpose of collection, and did not pass the property in the instrument and that it was a restrictive indorsement, and that, therefore, all subsequent indorsees acquire only the title of first indorsee, under such restrictive indorsements. They contend further that the plaintiff is not a holder in due course, and that the instrument is subject to the same defenses as if it were nonnegotiable. They cite Section 3060-a16, Code Supplement, 1913, the substance of which is that a negotiable instrument is revocable until delivery, and that, as between the parties, or a remote party other than a holder in due course, the delivery must be made by authority, and that, in such a case, the delivery may be shown to have been conditional, or for a special purpose, and not to transfer the property in the instrument, etc. Also, Section 3060-a33, which provides that an indorsement may be restrictive, etc. Also, Section 3060-a36, as to what indorsements are restrictive; that it is so when it either prohibits the further negotiation, constitutes the indorsee the agent of the indorser, or vests the title in the indorsee in trust to the use of some other person. But the mere absence of words implying power to negotiate, does not make an indorsement restrictive. Also, Section 3060-a37, as to the effect of restrictive indorsement, and as to the rights of the indorsee. This section provides that such indorsee may receive payment, bring any action that the indorser could bring, and transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so; but that all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement. Also, Section 3060-a52, which provides, in part, that a holder in due course is one who has taken the instrument in good faith and for value, if, at the time it was negotiated to him, he had no notice of any infirmity or defect in the title of the person negotiating it. Also, Section 3060-a58, which provides, in substance, that a negotiable instrument is subject to the same defenses in the hands of any holder other than one in due course, etc. It is contended by appellant, and cases are cited on these propositions, some of which will be referred to later, that the indorsement on the check "for deposit" is a...
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