Nat'l City Bank v. Kirk, 11062.

• Decision Date: 17 March 1922
• Docket Number: No. 11062.,11062.
• Citation: 134 N.E. 772,85 Ind.App. 120
• Parties: NATIONAL CITY BANK v. KIRK.
• Court: Indiana Appellate Court

85 Ind.App. 120

134 N.E. 772

NATIONAL CITY BANK

v.KIRK.^*

No. 11062.

Appellate Court of Indiana, Division No. 1.

March 17, 1922.

Appeal from Circuit Court, Morgan County; Alfred M. Bain, Judge.

Action by the National City Bank against Clarence L. Kirk. From judgment for defendant, plaintiff appeals. Affirmed.James W. Noel and Hubert Hickan, both of Indianapolis, for appellant.

Holtzman & Coleman, Matson, Kane & Ross, and Baker & Daniels, all of Indianapolis, for appellee.

BATMAN, P. J.

This is an action by appellant against appellee, to recover judgment on three promissory notes, executed by the latter to the American Underwriters, Inc., and by it assigned to the former; two of said notes being for $2,000 each and one for $1,000. Each is dated Indianapolis, Ind., April 18, 1917, is payable four months after date, and bears interest at the rate of 6 per cent. per annum from date until paid. Each of the paragraphs of the complaint, in addition to the usual allegations for such an action, contains the following:

“The plaintiff alleges further that before the maturity of said note, said American Underwriters, Inc., for value received, sold, assigned and transferred said promissory note to this plaintiff, and in transfer of the same executed its written indorsement on the back of said note, and that the plaintiff ever since has been and is now the owner and holder of said note; that said note is now past due and is wholly unpaid.”

When the issues were closed four paragraphs of answer remained in the record. The first is a general denial. The second pleads a want of consideration. The fourth alleges in substance that the notes in suit were renewals of original notes given for the purchase of stock in the American Underwriters, Inc., hereinafter called the American Underwriters; that the consideration therefor had failed because the stock was worthless; that the notes were procured by the payee named therein by fraudulent representations as to the value of said stock; that said payee was a foreign corporation engaged in selling its stock in Indiana on the installment plan, and had not complied with the statutes of Indiana to authorize it to make such sale; that at the time of executing said original notes it was agreed between appellee and said payee that the notes should not be negotiated, but that appellee should have the option to renew said notes from time to time upon payment of 10 per cent. of the original principal thereof; that said agreement to accept renewals was later reduced to writing in a letter from the payee to appellee-of all of which facts appellant had full knowledge before it purchased said original notes. The fifth paragraph is substantially the same as the fourth, except that it does not recite the details of the fraud, alleged to have been used by said American Underwriters to secure the execution of said notes. Appellant filed a reply in three paragraphs. The first is a general denial. The second alleges that appellant is a bona fide holder of the notes in suit; that it purchased the same before maturity for full value in due course of business, and that at the time they were assigned to it, that it had no notice of any failure of consideration therefor, or of any other defense thereto. The third paragraph alleges that appellee did not use reasonable or any diligence to discover the facts as to the various defenses set up in his answer; that he did not, within a reasonable time after discovering said facts, repudiate his stock subscription and said notes; and that before said repudiation said American Underwriters withdrew from the state of Indiana, taking therefrom valuable assets belonging to it, and has had no assets within said state since its withdrawal therefrom. Other steps were taken in the formation of the issues which are not noted here, as they are not material to a determination of the questions presented by this appeal. The cause was submitted to a jury for trial, resulting in a verdict and judgment in favor of appellee. Appellant filed a motion for a new trial, which was overruled, and this appeal followed.

The only assignment of error on which appellant relies for reversal is based on the action of the court in overruling its motion for a new trial. Under this alleged error it is contended, among other things, that the verdict is not sustained by sufficient evidence, and is contrary to law. This contention is based on a claim that the notes in suit are negotiable instruments, purchased by appellant before maturity for full value, in due course of business, without notice of any defense thereto, and therefore, in its hands, they are not subject to the defenses which appellee seeks to assert against them. Appellee does not contend that said notes, if they stood alone, would not be negotiable instruments. His contention is that they must be read and considered in connection with a certain letter, received by him from the payee named in said notes, which renders the same nonnegotiable. Said letter, omitting the date, address, and signature, is as follows:

“In connection with certain notes executed by you in favor of the American Underwriters, Inc., in the sum of $2,000.00, $2,000.00, $1,400.00, it is hereby agreed that these notes may be renewed from time to time on a minimum payment of ten (10) per cent. of the original amount of the note, together with current interest at the rate of six (6) per cent. It is understood, however, that interest on said notes shall not be chargeable until first renewal.”

The evidence tends to establish the following facts with reference to said notes and letter: The notes in suit are the second renewals of three other notes, which together with a check for $600 were executed by appellee in consideration of 100 shares of stock in the corporation named as the payee therein. Said stock was purchased by appellee through a Mr. Hegepeth, who at the time was its president. Prior to the execution of said notes, Mr. Hegepeth called on appellee, and it was there agreed that the latter should purchase 50 shares of said stock at $60 per share; that 10 per cent. of the purchase price should be paid in cash; and that time would be given for the payment of the remainder thereof. Later, when Mr. Hegepeth returned to close the matter, he brought with him a subscription blank for appellee to sign, filled out for 100 shares, being double the amount appellee had agreed to purchase. When Mr. Hegepeth's attention was called to this fact, he stated that he had been talking with some of appellee's friends, and found that they were very anxious for him to get a larger amount of the stock while it could be had at $60 per share. Appellee answered that he did not want to obligate himself for so large an amount, and Mr. Hegepeth then said:

“You sign the subscription blank and these notes, give me your check for $600, and I will take the subscription blank and place it in my safe, *** and there is where it will remain, which notes will not be put in any bank, and if at any time you don't want to take the additional 50 shares all you have to do is to let our office know, and the company will take the additional 50 shares back, and whatever you paid will be applied on the first 50 shares.”

With that understanding appellee signed the subscription for 100 shares, gave Mr. Hegepeth a check for $600, and executed said original notes, aggregating $5,400. At the time this was done, Mr. Hegepeth promised that when he returned to his office he would write appellee a letter, confirming their agreement with reference to the time he was to have in which to pay for said stock. About eight days thereafter appellee received the letter set out above, which was signed by the payee named in said notes, and its president, who negotiated the sale of said stock. Some time during the day after appellee had received said letter, the payee named in said notes sold and transferred the same to appellant. This sale and transfer was made after said payee had solicited appellant to purchase a line of its notes. In the negotiations following such solicitation and preceding said sale and transfer, appellant was informed that the notes which it offered were received from the sale of stock in the American Underwriters; that in some cases it was sold for cash, but in the majority of cases it is sold for part cash, with the right given the customer to reduce his notes at each due date. During the course of such negotiations, it was agreed that, when any of the notes purchased by appellant pursuant to their agreement fell due, it should not notify the payors, but should notify the American Underwriters instead, and that it would “collect from the customer the amount due on the note and get the renewal note, and turn over to the bank the amount paid and the renewal note.”

[1][2] It is well settled that a note and a contemporaneous written instrument intended to control it, made between the same parties, should be read and considered together as if one in form, where a controversy arises between the original parties, or those standing in their place or chargeable with notice of such contemporaneous agreement. Crouch v. Parker (1919) 188 Ind. 660, 125 N. E. 453, 7 A. L. R. 1598;Myrick v. Purcell, 95 Minn. 133, 103 N. W. 902, 5 Ann. Cas. 148. It is obvious that the same rule is applicable where a note is supplemented by a contemporaneous oral agreement, subsequently reduced to writing in pursuance thereof, while said note is subsisting, as the writing relates back to the time of the execution of the note and is supported by the same consideration. This is in accord with the general rule that an agreement that is nonenforceable because it rests in parol may be rendered effective by reducing the same to writing. Action Rock Co. v. Lone Pine, etc., Co. (Cal. App.) 186 Pac. 809;In re Balfour, 14 Cal. App. 261, 111 Pac. 615;Campbell v. Preece, 133 Ky. 572, 118 S. W. 373;Gate City Nat. Bank v. Elliott (M...