Shawnee State Bank v. Lydick

• Decision Date: 19 July 1922
• Docket Number: 22051
• Citation: 189 N.W. 603,109 Neb. 76
• Parties: SHAWNEE STATE BANK, APPELLEE, v. ALVIN LYDICK, APPELLANT
• Court: Nebraska Supreme Court

189 N.W. 603

109 Neb. 76

SHAWNEE STATE BANK, APPELLEE, v. ALVIN LYDICK, APPELLANT

No. 22051

Supreme Court of Nebraska

July 19, 1922

APPEAL from the district court for Douglas county: L. B. DAY, JUDGE. Reversed.

REVERSED.

North & Donovan, for appellant.

Stout Rose, Wells & Martin, contra.

Heard before LETTON, DEAN and DAY, JJ., CLEMENTS (E. J.) and WELCH District Judges.

OPINION

WELCH, District Judge.

This is an action brought by appellee on a promissory note for the sum of $ 2,500, dated August 14, 1919, due one year from date, with interest at 8 per cent. from its date, executed by the appellant, Alvin Lydick, in favor of the Missouri Valley Cattle Loan Company. The plaintiff alleged that before said note became due the Missouri Valley Cattle Loan Company, for a valuable consideration paid by plaintiff in the regular course of business, sold, indorsed, transferred and delivered said note to plaintiff. The defendant, Lydick, denied that the Missouri Valley Cattle Loan Company sold, indorsed, transferred and delivered said note to plaintiff; denied that the plaintiff was the owner and holder of said note for value, and alleged that there was no consideration for said note. He also alleged facts constituting fraud in the inception of said note. Plaintiff replied by general denial. The plaintiff at the commencement of the trial proceeded to introduce evidence to show that it purchased said note in good faith, for a valuable consideration, before maturity, without notice of any infirmity in the note. After plaintiff had introduced the evidence relied upon by it to establish the foregoing facts and rested, the defendant, Lydick, proceeded to introduce and offer evidence in support of his answer. Upon objection by plaintiff that the same was irrelevant and immaterial, all evidence offered by said defendant to prove his allegations of want of consideration and fraud in the inception of the note was excluded by the court. The court also, on plaintiff's objection, denied the said defendant the right to prove the specific facts offered by him to establish want of consideration of the note and fraud in its inception. Upon the close of the trial the court, on motion therefor, discharged the jury and found for the plaintiff and against the defendant, Lydick, and also against his codefendant, Missouri Valley Cattle Loan Company, for the full amount of the note with interest. From the judgment rendered on this finding the defendant, Lydick, has appealed.

The question now to be determined is whether or not the purchase of said note, in good faith, for a valuable consideration, by plaintiff, and its indorsement and delivery before it became due by the payee thereof to plaintiff, was established by the evidence to such an extent that there was nothing for the jury to pass upon. If each and all of said facts were not so established, then such of them as were not so established by the evidence were for the jury to determine, and not the court, and there was error in not submitting the same to the jury, and also error in excluding the evidence offered by the defendant, Lydick, to prove want of consideration and fraud in the inception of the note.

The evidence introduced by plaintiff to prove that it was an innocent holder of the note for value, in good faith, before the same became due, tended to show that before maturity of the note the plaintiff, by its cashier, who conducted all the negotiations therefor, purchased said note and paid therefor its face value with accrued interest. The cashier of plaintiff testified that he had no knowledge of the consideration for the note or of any defense thereto. He testified that he purchased said note through one Huttig, a note broker residing at Muscatine, Iowa, who was also engaged in the manufacturing business at that point; that before the purchase thereof he had a conversation with said Huttig at Topeka and in reference thereto testifies as follows: "He was there; it was either the last part of July or in August; I do not remember the date; and he said he would have a lot of this cattle loan paper. He thought some good farmers' paper. He did not say good cattle loan notes; he said good farmers' and bankers' paper, and wanted to know if we had funds, if we were in financial condition to handle them, and I told him I would take it up with the board and he might submit us a list." On cross-examination said witness produced two letters received by him from said Huttig in reference to the transaction, and testifies that he did not have there all of the correspondence he had with Huttig. He also testifies that Huttig furnished him with a financial statement made by the Missouri Valley Cattle Loan Company. This statement was introduced in evidence and showed among its resources the following items: "Commission, $ 117,525;" "paper on hand, $ 508,591.22; " "paper past due, $ 62,251.57;" "paper redeemed awaiting maturity, $ 17,055.61;" "loans sold on approval, $ 52,656.45;" "notes receivable, $ 269,387.48;" "rediscounts pending, $ 89,145.24;" "suspense, $ 8,554.16." Said statement showed among its liabilities items, "paper paid not redeemed, $ 43,593.68;" "escrow, $ 276,780.94." The court in the trial, on objection by plaintiff, would not permit plaintiff's cashier to testify what his understanding was as to said items, "commission, $ 117,525" and "suspense, $ 8,554.16." To the ordinary layman these items without explanation are unintelligible. He would also think that the item, "paper on hand, $ 508,591.22," would include the items "paper past due," "paper redeemed awaiting maturity," "loans sold on approval," "notes receivable," and "rediscounts pending," above set forth. Without any explanation as to those items, it would appear as if there was a duplication of the assets in said statement. It is also unintelligible how property in "escrow" can become a liability, unless it be by a conversion of the property in escrow. And such would be the interpretation naturally to be placed upon such a statement. Here was in the hands of the plaintiff before it purchased the note in suit notice that the payee of the note had property in escrow which was a liability against the payee. Such property, on account of the nature of the business of the payee, one would naturally infer would be notes in escrow. Plaintiff's cashier also testified that he was informed by said Huttig that he (Huttig) was to receive 5 per cent. commission for selling the note, and that plaintiff should apply this commission on an indebtedness then owing to plaintiff by said Huttig. Plaintiff purchased said note September 12, 1919, paying therefor its face value with accrued interest, and crediting the said note broker on his indebtedness to plaintiff 5 per cent. of the face of the note on account of said broker's commission for selling the same. And at the same time it purchased a number of other notes in favor of the Missouri Valley Cattle Loan Company, and prior thereto in the month of August had also purchased through said Huttig other notes in favor of Missouri Valley Cattle Loan Company. The aggregate amount of notes so purchased by plaintiff was $ 68,000, all of which were purchased on the same terms and said commission of 5 per cent. credited on said note broker's indebtedness to plaintiff. The cashier of plaintiff also testified that he purchased said notes from a list of notes in favor of Missouri Valley Cattle Loan Company submitted to him by said Huttig; that he had never before heard of the Missouri Valley Cattle Loan Company, but that, in addition to examining said financial statement of said company, and reports submitted to him by said note broker covering the makers and indorsers of the notes, he made an independent investigation through the bank at Mr. Lydick's home and selected this note with others for purchase. Said cashier also testified that he did not think that note brokers usually received 5 per cent. commission for selling notes.

It would seem that the paying of a commission of 5 per cent. by the payee of said note for selling the same would not be in the ordinary course of business unless some reason therefor is shown. The name of payee, Missouri Valley Cattle Loan Company, would imply that it was engaged in loaning money on cattle security or to farmers. The note bore interest at 8 per cent. and was due in one year. It was sold within about one month after its date and 5 per cent. of the face value paid as a commission for making the sale. This would make the cost to the Missouri Valley Cattle Loan Company for the money it received for the note...