People's Sav. Bank v. Raines

• Decision Date: 23 January 1928
• Docket Number: (No. 138.)
• Citation: 2 S.W.2d 20
• Parties: PEOPLE'S SAV. BANK v. RAINES.
• Court: Arkansas Supreme Court

Page 20

2 S.W.2d 20

PEOPLE'S SAV. BANK v. RAINES.

(No. 138.)

Supreme Court of Arkansas.

January 23, 1928.

Rehearing Denied February 20, 1928.

Appeal from Circuit Court, Pulaski County; Marvin Harris, Judge.

Suit by the People's Savings Bank against John R. Raines. From a judgment for defendant, plaintiff appeals. Reversed and rendered.

The bank brought this suit upon a promissory note for $189.50, alleged to have been executed by appellee, John R. Raines, on January 12, 1926, to one E. W. Tillman, and by him sold and transferred to the bank on January 14, 1926, in due course of business, and for a valuable consideration and without any notice of any defects in or defenses thereto.

An affidavit of merit was made to the complaint in accordance with section 1233, C. & M. Digest of the Statutes.

The appellee answered, denying the material allegations of the complaint and any liability on the note alleging that it was given for a premium on an insurance policy; that it was only pledged as collateral by the payee, Tillman, to the appellant bank to secure his own note given for the loan before the insurance policy for which it was given was issued and delivered to appellee; that the note at the time was nonnegotiable and void; that the insurance policy for which it was given was not issued as applied for, and never accepted by appellee, and was canceled by the insurance company.

No affidavit of merits, as prescribed by section 1233, C. & M. Digest, was made to the answer.

Appellant filed a reply denying that the note sued on was nonnegotiable and void at the time of its transfer to it, and that any policy of insurance for which it might have been given as a premium thereon was not issued as applied for nor accepted by appellee.

The testimony shows that the note was purchased in due course of business for value before maturity by appellant bank from Tillman, the payee, without notice of any defects therein or defenses thereto, and is in form an ordinary negotiable promissory note for $189.50, dated January 12, 1926, payable June 15, 1926, to the order of E. W. Tillman, and duly indorsed by him.

The note was given for the premium on an insurance policy, and executed at the time the application for the policy was made on January 12, 1926.

The bank had no notice that the note had been given for an insurance premium until they notified appellee in May, before it became due in June, that the bank was the holder of the note, and would expect payment when it became due.

Appellee admitted the execution of the note, and stated it was given for a premium on an insurance policy at the time the application for the policy was made. That the policy was delivered to him about the 1st of February thereafter, but was not issued in the form applied for, and that some time in April thereafter Tillman, the payee of the note, who had solicited the insurance, came over and took the policy up, stating at the time that he had quit the insurance company, and wanted to make a settlement with them, and would return appellee's note in a few days. He gave him a receipt for the policy as follows:

"Received from John R. Raines policy No. 168488, for which policy is this day canceled, on Jan. 12, 1926, a note for $189.50, payable June 15, 1926, was given for the above numbered policy, for which said note is null and void and to be returned to John R. Raines. [Signed] E. W. Tillman, Agent American Nat. Ins. Co., Galveston, Texas."

Appellee said:

"I asked him for the note. He told me that the insurance company had the note, and that he would deliver it to me in a couple of days. After the policy was delivered to Mr. Tillman, and he failed to deliver my note, he (Tillman) executed his note to me to indemnify me. That note is in my possession. I kept pressing him for my note, and I thought I had better take that or take nothing."

Tillman did not tell me that he had sold the note to the bank until after I got a notice from the company some time in the latter part of May; said he had paid nothing to the People's Bank on the note, and did not know where Tillman was; claimed the policy was not issued as applied for, because Tillman represented that under the policy in case of permanent disability $20 per month would be paid, and the policy did not call for that.

The court refused to give plaintiff's requested instruction for a directed verdict, and also its requested instruction No. 2. It also refused appellee's request for a directed verdict, and gave over appellant's objection his requested instruction No. 4.

The jury returned a verdict in appellee's favor, and from the judgment thereon this appeal is prosecuted.

Raymond Jones, of Little Rock, for appellant.

Tom F. Digby, of North Little Rock, for appellee.

KIRBY, J. (after stating the facts as above).

Appellant insists that the court erred in refusing to direct a verdict in its favor.

This appeal involves the construction of section 7960, C. & M. Digest, which provides:

"Section 7960. Form of Note for Insurance Premiums.

"No note hereafter given for premiums on insurance in this state shall be negotiable until the policy for which said note was given as payment for premium thereon shall have been issued and delivered to the maker of said note, and all notes so given shall state for what...