Sims v. Kline

• Decision Date: 11 May 1925
• Docket Number: 24660
• Court: Mississippi Supreme Court
• Parties: SIMS et al. v. KLINE. [*]

104 So. 85

139 Miss. 246

SIMS et al. v. KLINE. ^[*]

No. 24660

Supreme Court of Mississippi

May 11, 1925

Division B

(Division B.).

1 PARTNERSHIP. Note executed by member of debtor firm in satisfaction of account in larger amount, on which suit was threatened, held supported by sufficient consideration.

Where an account carried on the books of a cotton company against a firm had been assigned to a bank as collateral security, and had been placed with attorneys for suit on the amount, an agreement by a member of the firm against whom the account was charged and suit threatened, executing notes for less amount than the amount of the account, in satisfaction of the account, is a sufficient consideration to support the note regardless of whether the firm actually owed the account or not.

2. BILLS AND NOTES. Bank taking notes without knowledge of extraneous agreement between maker and payee held purchaser for value.

Where notes are given to a named person or bearer, in satisfaction of a book account claimed against the maker of the note, and assigned by the payee to a bank in satisfaction, or part payment, of the debt of the payee, without knowledge of agreement between the maker and payee not contained in the note, this constitutes the bank a purchaser for value.

3. PRINCIPAL AND AGENT. Representations by bank's debtor in securing notes in settlement of collateral account turned over to him for collection held not notice to bank.

Where a bank held an account against a person, and another account as collateral security, and turned over the account held as collateral security to its principal debtor for collection without releasing it from liability, and notes are given to the one member of the firm against whom the collateral account was held in settlement of the account representations by such debtor of the bank to the debtor in the collateral account is not notice to the bank, unless actual notice is brought to the bank or sufficient facts to constitute notice if followed up by inquiry. The mere knowledge of the intermediary in securing the notes would not be charged to the bank, as such intermediary is personally interested in furthering his own business in securing the note, and his interest conflicts with that of his principal.

4. BILLS AND NOTES. Letter to maker held not agreement that he would never have to pay note, but only that he could renew it at maturity.

In such case, where a letter is given to the maker of the note, assuring him that he would never be bothered by suit if said notes are signed, and that the payee had assurance of the officer of the bank that, if he finds it impossible to take up the notes when due they could be renewed, and that the signing of the notes would mean that the payee would be enabled to use the notes to put the payee's account in shape with a newly organized bank and thus give the payee a bank to do business with, which would prevent the necessity of its removing its business to another point, it is not an agreement that the maker of the note will never have to pay the same, but it is an agreement that, if he is not able to pay at maturity, he will be allowed to renew the note.

5. BILLS AND NOTES. Whether others were to sign as condition of maker's signing held for jury on conflicting testimony.

Disputed questions of fact are for the jury, and, where the maker of a note testifies that others were also to sign the notes with the maker as a condition of the maker's signing, and this testimony is contradicted by the person who secured the delivery of the notes, a peremptory instruction should not be given the maker of the notes.

HON. W. A. ALCORN, JR., Judge.

APPEAL from circuit court of Second District, Bolivar county, HON. W. A. ALCORN, JR., Judge.

Action by R. N. Sims and others, as trustees, against M. Kline. From judgment for defendant, plaintiffs appeal. Reversed and remanded.

Judgment reversed, and cause remanded.

Shands Elmore & Causey, for appellants.

After the plaintiffs had introduced their evidence and rested, the defendant moved for a peremptory instruction which was granted. The assignment of error which we shall discuss chiefly is based on the giving of the peremptory instruction against plaintiffs. The first ground relied on is stated as follows:

"That the proof as established by the plaintiff in this case, indisputably proves and shows that the note or notes executed by Meyer Kline here sued on were obtained by fraudulent representations of Mr. Fisher, acting on behalf of the Fisher Cotton Company."

There is no ground there for the peremptory instruction. Saving for the present any discussion of constructive notice, there is abundant evidence that neither the liquidating agent who took the notes nor the chairman of the board of bank examiners who was acting with him, had any sort of actual notice whatever of said alleged fraudulent representations. If the Fisher letter and the testimony of Jake Fink furnish evidence that they did have notice of said alleged false representations, we are not aware of any reason why such evidence is conclusive in its character as against the positive negative testimony of Mr. Kretschmar, and Mr. Anderson especially in view of the positive denial of the writer of the letter that he had the agreements, etc., which he said he had.

Conceding that there was proof of fraudulent representations, yet there was a wealth of proof that the indorsers had no notice of such. It was sufficient, amply sufficient, to make a jury question and to bar a peremptory instruction on the ground merely of fraudulent misrepresentations.

The second ground of the motion is: "That the alleged holders of the note, Kretschmar, Sims & Metcalf, as trustees, had full knowledge of the manner in which the notes were secured and acquired."

Knowledge here must mean of course knowledge of some of the alleged defenses relied on by the defendant. Inasmuch as there is no testimony that the plaintiffs had such knowledge except the Fisher letter which was hearsay on that issue and some scraps of hearsay in Jake Fink's testimony; but abundant testimony that Mr. Kretschmar and Mr. Anderson who were active in the matter of taking the notes did not have such knowledge we know not how to argue the proposition that the second alleged ground for a peremptory instruction was in reality no ground.

The third ground of the motion is in the following words: "That in securing and acquiring the notes herein sued on Mr. Fisher of the Fisher Cotton Company was acting for and on behalf of, and at the instance and request of Mr. Kretschmar, representing the trustees and plaintiffs in this case, and the State Banking Department, at that time, being or purporting to act as a liquidating agent."

It was sought to rest this ground on the evidence of W. P. Kretschmar to the effect that the claim of the Fisher Cotton Company against Fink and Kline had been assigned to the old bank, the Commercial Savings Bank, but "The assignment was thereafter turned back to Mr. Fisher to put the account in the hands of an attorney" (R. 133) or "in order that he might make a collection of it" (R. 175) "for our account."

This evidence served as the basis for urging on the court below that in handling this matter Mr. Fisher of the Fisher Cotton Company was the agent of the liquidating agent or the plaintiffs in this case; that as Fisher to obtain the notes made fraudulent representations and promised never to sue on the notes, so it was contended, this served as constructive notice to his principal whether the facts were communicated to the principal or not.

The general rule without doubt is that notice to an agent while engaged about that business is notice to the principal, whether the agent imparts the information to the principal or not. The rule is founded on the notion that the agent will communicate material matters affecting the business to his principal.

The facts, however, do not seem to require or permit the application of that rule here for several reasons: (1) The account was given back to Fisher and was in the hands of his attorneys as early as February, 1921. The bank was closed for liquidation in March, 1921. The notes were executed in May, 1921. The defendant makes no claim that he did not know the old bank was closed for liquidation. In fact the very letter he relies on was fair notice of such fact. Appellee now contends on this point that Fisher was acting as agent for the liquidating agent, but appellee was charged by law with notice that the liquidating agent had no authority to make an agreement that collection of the notes would not be enforced and much less did he have authority to authorize a sort of alleged sporadic agent to make such an agreement. Even a cashier or president of a live and going bank would have no authority to make such an agreement. If made it would not be binding. Gills et al. v. First National Bank, 148 P. 944, citing many authorities. (2) But the notes which the alleged agent obtained were not notes in favor of the principal, as would have been the case in the usual course of an agent making a collection or settlement with a debtor of a claim of the principal. (3) The notes were not delivered to the alleged principal in the way of an agent delivering the principal's property to the principal. They were indorsed in usual course by the payee and the payee received full credit on his, the payee's, indebtedness and a corresponding amount of his own notes in exchange. (4) It is reasonably clear that in this transaction Fisher was acting in his own interest. He said as much in the letter to Fink which was shown to Kline before the latter signed the notes and thus Kline was put on notice that Fisher was acting for himself. The letter said: ...