Second National Bank v. Scanlon

• Decision Date: 14 December 1923
• Docket Number: 35522
• Citation: 196 N.W. 65,196 Iowa 1305
• Parties: SECOND NATIONAL BANK OF NEW HAMPTON, Appellant, v. JOHN SCANLON et al., Appellees
• Court: Iowa Supreme Court

196 N.W. 65

196 Iowa 1305

SECOND NATIONAL BANK OF NEW HAMPTON, Appellant, v. JOHN SCANLON et al., Appellees

No. 35522

Supreme Court of Iowa, Des Moines

December 14, 1923

Appeal from Shelby District Court.--O. D. WHEELER, Judge.

SUIT on a promissory note given by the defendants to the Missouri Valley Cattle Loan Company, which note was transferred to the plaintiff. The case was submitted to the jury, which returned a verdict in behalf of the defendants. The plaintiff appeals.

Affirmed.

George Wright and Stout, Rose, Wells & Martin, for appellant.

Shelby Cullison, for appellees.

FAVILLE J. PRESTON, C. J., EVANS and ARTHUR, JJ., concur.

OPINION

FAVILLE, J.

On August 15, 1919, appellees executed and delivered to the Missouri Valley Cattle Loan Company, a Nebraska corporation, their certain promissory note for $ 5,000, payable in one year, and bearing interest at eight per cent. The note was given in consideration for certain shares of capital stock of the said loan company. The record shows that the said note was obtained from the makers by false and fraudulent representations. Appellant contended that it was a bona-fide purchaser of the note in due course, and offered proof to sustain this contention. The cause was submitted to the jury, and a verdict was returned in behalf of appellees.

The sole question for our determination is whether, under the record in this case, appellant's motion for a directed verdict in its behalf should have been sustained by the trial court. The appellees having offered testimony of the false and fraudulent representations that induced the execution of the note, the burden rested upon appellant to establish that it was a holder in due course. Code Supplement, 1913, Section 3060-a59; State Bank of Chicago v. Oyloe Piano Co., 195 Iowa 1152, 193 N.W. 403; Anderson Sav. Bank v. Hopkins, 195 Iowa 655, 192 N.W. 824.

Appellees contend that, in every case where there is proof that the note was procured by fraud, a question is presented for the determination of a jury as to whether or not the payee is a holder in due course, and that in no such instance is a court justified in directing a verdict for the holder on this question. The argument is to the effect that the question of the credibility of the witnesses in behalf of the holder is one for the jury, and that, even if there be direct and positive evidence that the payee is a holder in due course, a question arises for the jury to determine the credibility of the witnesses, and that the question does not become, in any instance, one of law for the court.

This contention of appellees' is too broad and sweeping, and is not in line with the previous holdings of this court. The evidence that the transferee of a negotiable instrument is a holder in due course may be so indubitable as to make it the duty of the trial court to direct a verdict in behalf of the holder of such instrument, even though it be established that the instrument was induced by fraud on the part of the original payee. Central State Bank v. Spurlin, 111 Iowa 187, 82 N.W. 493; Johnson v. Buffalo Center St. Bank, 134 Iowa 731, 112 N.W. 165; Arnd v. Aylesworth, 136 Iowa 297, 111 N.W. 407; Robertson v. U.S. Live Stock Co., 164 Iowa 230, 145 N.W. 535; City Nat. Bank of Auburn v. Mason, 192 Iowa 1048, 186 N.W. 30; Grinnel. Sav. Bank v. Gordon, 195 Iowa 208, 191 N.W. 852.

It is also true that, although the payee may offer testimony direct and positive to the effect that he is a holder in due course, still the facts and circumstances surrounding the transaction may be such as to leave the question as to whether or not the payee is a holder in due course, one for the determination of the jury. Connelly v. Greenfield Sav. Bank, 192 Iowa 876, 185 N.W. 887; German Am. Nat. Bank v. Kelley, 183 Iowa 269, 166 N.W. 1053; Anthon St. Bank v. Bernard, 194 Iowa 1090, 191 N.W. 283; Mooers v. Stalker, 194 Iowa 1354, 191 N.W. 175; Farmers Nat. Bank v. Pratt, 193 Iowa 406, 186 N.W. 924; McLaughlin-Gormley-King Co. v. Hauser, 195 Iowa 224, 191 N.W. 880; Commercial Sav. Bank v. Colthurst, 195 Iowa 1032, 188 N.W. 844.

In the case at bar, it appears that the original payee of the note, the Missouri Valley Cattle Loan Company, was the successor of the McNish Cattle Loan Company, and that both of said companies were under the management of one McGrew. The makers of the note in suit are farmers, residing near Irwin, in Shelby County. The record shows that the president of appellant bank had, at various times for some ten years prior to the purchase of the note in suit, bought commercial paper of one Huttig, a note broker, at Muscatine, Iowa. On June 7, 1919, McGrew had written appellant, announcing the change in the corporation from the McNish Cattle Loan Company to the Missouri Valley Cattle Loan Company. Appellant had purchased, at various times, commercial paper from the McNish company, and after the change in the corporation, purchased a considerable amount of notes given to the Missouri Valley Cattle Loan Company.

In regard to the particular transaction in question, it appears that, sometime prior to September 15, 1919, the broker, Huttig, had written to appellant, offering to sell to said bank certain notes described in said letter, including the note of appellees. On September 16th, Huttig again wrote appellant, and inclosed two letters which he had previously addressed to two banks in the town of Irwin, where appellees lived. Each of said banks made statements on said letters regarding the financial standing of appellees, and returned said letters with such indorsements to Huttig, who forwarded them to appellant. On September 15th, appellant wrote Huttig, stating that it had selected certain notes submitted by Huttig, including the note in suit, with others. This letter referred to letters from Huttig of the 12th and 13th of September.

On September 17th, the loan company wrote directly to the bank saying that, on instruction from Huttig, they were sending the bank certain notes, aggregating, with interest, $ 10,858.21, and advised appellant that it was drawing on appellant for the face of said note, plus the accrued interest, and less the sum of $ 750. The loan company drew...