Newton Nat. Bank v. Strand Baking Co.
| Decision Date | 08 February 1938 |
| Docket Number | 44077. |
| Citation | 277 N.W. 491,224 Iowa 536 |
| Parties | NEWTON NAT. BANK v. STRAND BAKING CO. |
| Court | Iowa Supreme Court |
Appeal from District Court, Marshall County; B. O. Tankersley Judge.
Action at law on a check issued by the defendant. The check was negotiated by the payee thereof to the plaintiff bank, but when the check was presented to the bank on which it was drawn, payment was refused, because this bank had been directed to stop payment on it until certain merchandise purchased by the maker of the check should be delivered. The trial court overruled a motion of the defendant for a directed verdict at the close of plaintiff's evidence and sustained a motion for a directed verdict in favor of the plaintiff at the close of defendant's evidence. Defendant appeals. The opinion states the facts.
Reversed.
E. N. Farber and R. A. Rockhill, both of Marshalltown, for appellant.
Boardman & Cartwright, of Marshalltown, and Cunningham & Brierly, of Newton, for appellee.
This is an action at law brought by the Newton National Bank, Newton, Iowa, against Strand Baking Company, of Marshalltown, Iowa, asking judgment in the sum of $1,402.50. with interest, on a check of the defendant company drawn on the Security Savings Bank, Marshalltown, Iowa, payable to the order of R. E. Hicks. The petition alleged that said Hicks, for value received, indorsed said check to plaintiff; that plaintiff indorsed said check and caused it to be presented in due course of business to Security Savings Bank at Marshalltown, Iowa, and demanded payment thereof, which was refused; that notice of the presentation of such check to said bank and its refusal to pay same was given to defendant and demand made for payment, which has not been made; that plaintiff is the owner and holder of said check, and no part thereof has been paid. The defendant filed an answer in four divisions, substantially as follows: Division 1 contained a general denial; division 2 pleaded the defense of fraud and misrepresentations on the part of Hicks, and knowledge on the part of appellee sufficient to cause it to take said check for collection only; division 3 denied that the appellee was a holder in due course; and division 4 alleged that plaintiff had sufficient knowledge of fraud perpetrated upon the defendant by Hicks, in procuring said check, to put it on inquiry, and that plaintiff had failed to make such inquiry.
The case was tried to a jury, and, at the close of the plaintiff's evidence, the defendant moved for a directed verdict in its favor. This motion was overruled, and evidence was introduced by the defendant. At the close of such evidence, plaintiff moved the court for a directed verdict in its favor. This motion was sustained, a verdict was returned in favor of the plaintiff, and judgment entered thereon. From such judgment, and from all adverse orders and rulings of the trial court, the defendant, Strand Baking Company, appeals.
The material facts out of which this case arose are substantially as follows. On August 12, 1935, one R. E. Hicks visited the plant of the defendant company at Marshalltown, Iowa, representing himself to be a salesman for Swift & Co. of Omaha, Neb., and offered to sell the baking company 100 cans of shortening. The price was satisfactory, and the baking company agreed to buy, and stated that payment would be made upon delivery to defendant company's plant. To this statement in regard to payment on delivery Hicks replied that the shortening would be trucked from Omaha to Newton, where it would arrive in a day or two; that when it arrived at Newton he would have to have a draft to give the truck driver in full payment before the shortening would be released; that he would then reship it to defendant company at Marshalltown; but that, in order to purchase a draft at Newton, with which to pay the truck driver, he must have a check for the full amount. Pursuant to this arrangement, the baking company issued a check for the full amount and delivered it to Hicks, but, before doing so, it instructed the bank upon which the check was drawn to stop payment until the shortening should have been delivered to the baking company. On the 21st day of August, 1935, the check with Hicks' name indorsed thereon was deposited by Hicks in the plaintiff bank at Newton, Iowa, and the full amount of the check was credited to Hicks in an account in his name which he had maintained in said bank for approximately a year. The check cleared through the Merchants National Bank of Cedar Rapids, Iowa, and the Commercial State Bank of Marshalltown, before reaching the Security Savings Bank of Marshalltown, upon which it was drawn. When this check reached the Security Savings Bank, the bank called the defendant baking company and, on being told that the shortening had not been delivered, payment was refused, the words " Stop Payment" were written across the face of the check in red ink, and the check with these words thereon was returned to the Commercial State Bank. According to the evidence of appellant, the check was presented to the Security Savings Bank on the afternoon of August 22, 1935, by Commercial State Bank, and was returned to the latter bank later in the afternoon of the same day. The record is very indefinite as to just what was done with this check after it was returned to the Commercial State Bank, although there is sufficient in the record to suggest, at least, if not to support the inference, that it returned to plaintiff by the reverse of the route it had traveled, going from the Commercial State Bank in Marshalltown to the Merchants National Bank in Cedar Rapids, and from the latter bank to the plaintiff bank in Newton. The record is also very unsatisfactory as to what, if any, notice was given to the plaintiff bank in regard to the condition attached to the negotiation of the check in Newton and the stop payment order given the Security Savings Bank by the baking company at the time it was issued. There is evidence in the record indicating that a wire was received by the plaintiff bank from the Merchants National Bank of Cedar Rapids in regard to this check, but neither this wire nor the contents thereof were introduced in evidence, and there is nothing to show just what information it conveyed to the plaintiff bank, or when, with reference to the withdrawal of the funds in the Hicks account, it was received by the plaintiff bank. On the 23d day of August, 1935, however, which was before the check was returned to the plaintiff bank, Hicks withdrew from his account in the bank all except a few dollars standing to his credit therein, and the check remained unpaid.
On the trial of the case the plaintiff introduced the check itself and the testimony of Mr. Lane, the president of the Security Savings Bank, on which the check was drawn. The check, as introduced, had written across the face thereof the words " Stop Payment," but the evidence given by the witness showed that these words were not on the check at the time it was issued to Hicks or when deposited by Hicks in plaintiff bank, but were written thereon by the Security Savings Bank when the check reached this bank for payment. After plaintiff had introduced this evidence and rested, the defendant moved for a directed verdict in its favor, on the ground that the evidence introduced by plaintiff failed to make a prima facie case. This motion was overruled, and the defendant then proceeded to introduce its evidence. After the defendant had introduced its evidence and rested, the plaintiff moved for a directed verdict in its favor on eight separate grounds, and this motion was sustained. Appellant has alleged nine separate grounds of error upon which it relies for reversal. The first of these grounds goes to the alleged error of the trial court in overruling the appellant's motion for a directed verdict, and the remaining eight grounds are directed, respectively, to the errors alleged to have been committed by the trial court in sustaining the appellee's motion for a directed verdict as to each of the grounds set out therein. As the errors relied upon by appellant, both in overruling its motion for a directed verdict and in sustaining the appellee's motion for a directed verdict, as well as the arguments in support of such alleged errors and in resistance thereto, are to a considerable extent interwoven, we shall not attempt to consider these alleged errors separately and in detail.
Ordinarily, in a case such as this, the most important question to be determined would be: What, if any, notice or knowledge did the plaintiff bank have of the circumstances and conditions under which the check was issued and delivered to Hicks, at the time the funds representing the check were withdrawn from Hicks' account in this bank? In the trial of this case, however, the plaintiff apparently avoided introducing any evidence on this phase of the case, and the evidence introduced by the defendant is far from convincing. The attitude of the parties is explained, perhaps, by their divergent theories as to which of them had the burden of proof in regard to such notice or knowledge. The appellee contends that the burden was on the appellant to show that appellee had such notice or knowledge, and the appellant contends that the burden was on the appellee to show that it did not have such notice or knowledge. The correctness of the court's rulings on both the plaintiff's motion for a directed verdict and ...
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