National City Bank v. Taylor

• Decision Date: 24 March 1927
• Docket Number: (No. 3313.)
• Citation: 293 S.W. 613
• Parties: NATIONAL CITY BANK OF ST. LOUIS, MO., v. TAYLOR et al.
• Court: Texas Court of Appeals

293 S.W. 613

NATIONAL CITY BANK OF ST. LOUIS, MO., v. TAYLOR et al.

(No. 3313.)

Court of Civil Appeals of Texas. Texarkana.

March 24, 1927.

Rehearing Denied March 31, 1927.

Appeal from District Court, Bowie County; R. J. Williams, Judge.

Action by the National City Bank of St. Louis, Mo., against Roy Taylor and others. From a judgment on an instructed verdict for plaintiff against defendant named and others, and in favor of certain other defendants, plaintiff appeals. Reversed and remanded.

The National City Bank of St. Louis, Mo., brought the suit, seeking, as holder and owner of a certain promissory note to recover judgment upon the note according to its terms against Roy Taylor, Bessie D. Taylor, and E. D. Triggs, as makers, and also seeking, separately and apart from the action on the note, to recover against the other appellees, as guarantors, upon their alleged written guaranty of the prompt payment of the note when discounted for the payee by the plaintiff. As a defense, in avoidance of any liability, the guarantors specially pleaded to the effect that the note was a transaction, in origin and afterwards, wholly without the authority or consent of the board of directors, and was never in fact executed or delivered to the Guaranty State Bank, and never became its property or asset; that the board of directors and the guarantors were ignorant of the entire transaction until after the transfer of the note, and then the directors refused to ratify or consent thereto; that, if the execution of the note in the name of the bank as payee constituted it in effect a bank note, then the purported transfer of the note by the cashier to the plaintiff was void and of no effect, as an act in positive violation of the statute, being the individual act of an officer of the bank entirely without authority of the board of directors. By supplemental petition the plaintiff set up estoppel in reply to the defendants' answer. After all the evidence had been heard, the court peremptorily instructed the jury to return a verdict in favor of the plaintiff against the makers of the note for the amount sued for, and in favor of the defendants sued as guarantors thereof. A judgment was finally entered in keeping with the verdict. The plaintiff has appealed from the judgment as pertains to the alleged guarantors.

The written guaranty sued on, and which was admitted to have been executed and delivered by the appellees, except Taylor and wife, on March 31, 1922, is in the following words:

"Whereas the Guaranty State Bank, Texarkana, Tex., hereinafter called debtor, has applied to the National City Bank of St. Louis, Mo., for discounts, loans or credits:

"Now, for value received, and in consideration of $1 to each of the undersigned in hand paid, the receipt of which they hereby acknowledge, and other value considerations to them moving, the undersigned jointly and severally for themselves, their executors and administrators, hereby guarantee to said National City Bank of St. Louis, its successors and assigns, the prompt payment as they severally mature, of all loans heretofore made or which may be made to said the Guaranty State Bank, Texarkana, Tex., by said bank, and of all notes, acceptances, and other paper, which have been or may be discounted for the said debtor by said bank, whether the same be made, drawn, accepted, or indorsed by said debtor as well as any renewals thereof. This instrument is intended to be and is a continuing guaranty, and shall apply to and cover all loans and discounts and renewals so made by said bank prior to notice in writing given to the cashier of said bank at the office of said bank by one of the undersigned that he will not be liable upon any such loans or discounts made by said bank after the receipt of such written notice.

"Should any such loans, notes, acceptances, or other paper, or any renewals thereof, be not paid when due, the undersigned will, on demand and without notice of dishonor or protest, and without any notice having been given them previous to such demand of the acceptance by such bank of this guaranty and without any notice having been given to the undersigned guarantors, previous to such demand, of the making or renewing of any such loans or discounts, pay the amount due thereon to said bank, its successors and assigns, and it shall not be necessary for said bank, in order to enforce such payment, to first institute suit or exhaust its remedies against said debtor or other parties liable on such notes or other paper; and notice to the undersigned of the acceptance of this guaranty and of the making or renewing of such loans or paper, or any of them, is hereby expressly waived by the undersigned.

"Failure to demand payment, to give notice of nonpayment, to protest or give notice of protest to any one charged with the payment of any of said notes, acceptances, or other paper, is hereby waived by the undersigned.

"All paper discounted for all loans made to said debtor when paid shall be deemed to have been paid by said debtor, unless express notice in writing is given to said bank at the time, by said guarantors, that it has been paid by them.

"Executed this March 31, 1922."

The guaranty was not withdrawn or revoked at any time subsequent to its execution and delivery.

The National City Bank of St. Louis is a bank corporation with place of business in St. Louis, Mo. Mr. B. F. Edwards was its president and chief managing officer. The Guaranty State Bank of Texarkana was a state bank under the laws of Texas, with place of business in Texarkana, Tex. The appellees, except Taylor and wife constituted five of the seven authorized directors. This bank went into liquidation, being taken over by the state bank commissioner for insolvency in February, 1924. The present suit was filed June 3, 1925. As appears in the early part of 1922 there was commenced a special course of dealing between the two banks, which can be described by the following:

"The plaintiff bank had business transactions with the Guaranty State Bank of Texarkana, which business relations commenced about April of 1922. The relations were in the nature of city correspondent for the Guaranty State Bank of Texarkana and the Guaranty State Bank carrying balances with the National City Bank of St. Louis, and from time to time asking for accommodations in the way of loans and discounts from the National City Bank. Applications for loans and rediscounts, such as the Guaranty State Bank saw fit to make to the National City Bank, where brought before, and passed upon by, the discount committee, which met daily except Saturdays. There the bank borrowed on its own note, it put up bills receivable as collateral, and an individual guaranty of the directors was received, covering any paper handled for the bank. At various times we had bills receivable as collateral to the bank's notes, and had the individual guaranty of the directors covering all the bank's transactions."

On October 27, 1923, Roy Taylor, Bessie D. Taylor, and E. D. Trigg executed a note in the sum of $10,000 due six months after date, and payable to the order of the Guaranty State Bank of Texarkana, Tex., at the office of the Guaranty State Bank of Texarkana, Tex., with interest at the rate of 10 per cent. per annum from date until paid. E. D. Trigg was cashier and a director of the Guaranty State Bank. He was also one of the guarantors. The following indorsement appears on the note: "Without recourse. Guaranty State Bank of Texarkana, Texas, by E. D. Trigg, Cashier." This note from and since November 5, 1923, has been exclusively held and owned by the National City Bank of St. Louis, and is the one in suit. On November 5, 1923, the plaintiff bank placed in a special account in the name of the Guaranty State Bank of Texarkana the amount of the proceeds of the note less discount. Later, on November 24, 1923, the fund was transferred from the special account to the regular account of the Guaranty State Bank on the books of plaintiff bank. The execution and delivery of the note is admitted, as is also the fact that no part of the amount has been paid. The evidence is plain that the makers signed the note with the general intention to procure it to be discounted and money advanced on it in the form arranged, and the purpose was accomplished. An issue of fact, however, appears to arise as to whether by intention of all the parties, the note was taken by and in the name of the Guaranty State Bank as lender of the money, or was taken by and made payable to the National City Bank as lender in the name of the Guaranty State Bank as a mere formality. According to the testimony of the president of the plaintiff bank:

"The note in question was sent in by the Guaranty State Bank of Texarkana, Tex. Financial statement of Roy Taylor was furnished to the National City Bank of St. Louis. The proceeds of the loan amounting to $9,699 were placed to the credit of the Guaranty State Bank of Texarkana. The proceeds of this note, together with other funds to the credit of the bank, were checked on by them from time to time. The guaranty was relied upon by the National City Bank as additional security on all paper handled for the Guaranty State Bank. The information received by the National City Bank was to the effect that the Guaranty State Bank had loaned to the borrower more than its legal limit and desired temporarily to relieve itself of the excess loan, with the understanding that it would be taken up when the payer had reduced the amount which the bank still held. It was anticipated that out of his crops for that year he would be able to pay about $10,000 of his indebtedness. If the Guaranty State Bank had not indorsed the note without recourse, it would have been held as an excess loan in violation of the statute. The rote was taken in the regular course of business transactions between the two banks, but with the understanding previously stated. * * * It was not...