Neal v. Wilson County Bank

• Decision Date: 27 December 1927
• Docket Number: 11971.
• Citation: 263 P. 18,83 Colo. 118
• Parties: NEAL v. WILSON COUNTY BANK.
• Court: Colorado Supreme Court

263 P. 18

83 Colo. 118

NEAL v. WILSON COUNTY BANK.

No. 11971.

Supreme Court of Colorado

December 27, 1927

Department 2.

Error to District Court, Baca County; A. F. Hollenbeck, Judge.

Action by the Wilson County Bank against J. H. Neal. Judgment for plaintiff, and defendant brings error and applies for supersedeas.

Judgment affirmed.

W. B. Gordon and A. C. Gordon, both of Lamar, and D. G. Reynolds, of Springfield, for plaintiff in error.

Todd &amp Underwook, of Lamar, for defendant in error.

ADAMS J.

Wilson County Bank of Fredonia, Kan., was plaintiff and Neal was defendant in the district court; they are so referred to hereafter.

The action was on two promissory notes and the case was tried to a jury. At the close of defendant's evidence, the court granted plaintiff's motion for a directed verdict, and judgment was so entered. Defendant brings the case here for review and asks for a supersedeas.

The main question is, Was the court right in directing a verdict? All else is subsidiary to this.

Defendant admits that he signed the notes, and does not deny that he has not paid them. His defense is that they were delivered on certain conditions to the payee, one C. E. Hayhurst, and that the conditions were violated; that they were acquired by false representations; that there was no consideration; and that plaintiff took the notes with knowledge of their infirmities. Plaintiff denied these defenses, and claimed that it acquired the notes before maturity, for value, and in due course.

Hayhurst and another man named Ball signed a negotiable promissory note for $10,000 to Wilson County Bank, and Hayhurst, or Hayhurst and Ball, pledged the Neal notes and other notes to the above bank as collateral security. The notes were thus held when the suit was brought; nothing had been paid on the Neal notes, and an amount greatly in excess of the Neal paper was then due on the $10,000 principal note. Defendant's notes were renewals of notes originally made payable to the Altoona State Bank, of Altoona, Kan., of which Hayhurst was president. Defendant was a stockholder in an oil company drilling in Kansas, which company Hayhurst was managing or looking after. Defendant claims that he signed the original or renewal notes with the understanding that they were not to be used or delivered unless the well was completed, and that it was not completed. Somewhat at variance with this is an affidavit made by defendant in a matter preliminary to the trial, wherein he declared, among other things, that his notes were delivered to Hayhurst to be used as 'accommodation paper,' to raise money to guarantee the completion of the well.

1. We have examined the entire transcript, the exhibits, and briefs, and discover no escape from the affirmance of the judgment. Defendant cannot avoid liability, even if it be conceded that there was a breach of contract between him and Hayhurst, the original holder of the notes, for plaintiff bank proved that it was a holder in due course and that it acquired the notes for value long before maturity. There was no evidence that Wilson County Bank knew of any infirmity in the notes, until after they had acquired them for value. A good deal is said about Hayhurst's knowledge being imputed to Altoona State Bank, of which he was president, but be that as it may, it does not affect plaintiff without being further connected, even if Hayhurst and the Altoona bank were one and the same.

2. Plaintiff was a holder in due course as defined in section 3869, C. L. 1921. And section 3873, C. L. 1921, provides:

'To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.'

Followed in Hukill v. McGinnis, 70...