Spurway v. Read

• Decision Date: 23 June 1930
• Docket Number: 40109
• Citation: 231 N.W. 306,210 Iowa 710
• Parties: H. J. SPURWAY, Receiver, Appellee, v. ELBERT A. READ, Appellant
• Court: Iowa Supreme Court

231 N.W. 306

210 Iowa 710

H. J. SPURWAY, Receiver, Appellee, v. ELBERT A. READ, Appellant

No. 40109

Supreme Court of Iowa, Des Moines

June 23, 1930

Appeal from Page District Court.--W. C. RATCLIFF, Judge.

Action to recover against defendant as an indorser on a promissory note. From a verdict in favor of the plaintiff, the defendant appeals.

Reversed.

Thos W. Keenan and Claude M. Clovis, for appellant.

Ferguson & Ferguson, for appellee.

ALBERT J. MORLING, C. J., and EVANS, FAVILLE, DE GRAFF, and WAGNER JJ., concur.

OPINION

ALBERT, J.

This action was commenced to recover on three promissory notes, but at the time of the trial, one was withdrawn by the plaintiff, and the other two were submitted to the jury, the jury finding for the plaintiff on one of the notes, and for the defendant on the other. From judgment entered on the verdict of the jury, the defendant appeals. We are concerned on this appeal with only one of these notes.

The petition of the plaintiff is the ordinary form in a suit by an innocent holder of a promissory note. The defendant answers with a general denial, and alleges that he at no time had any interest in these notes, and that there was no consideration for his indorsement thereon, and that the notes were at all times the property of the First National Bank of Shenandoah, Iowa, of which he was vice president, and that the notes and real estate mortgages securing the same were taken in his name for the purpose of keeping the name of the bank off the mortgage records in the offices of the recorders of various counties, and were so taken for the convenience and accommodation of the bank; that they were indorsed by Read for the purpose of passing the naked, legal title to said bank; that said bank understood and knew at all times that this defendant never, at any time, had any interest in said notes and mortgages, and knew that the purpose of the indorsement was purely to vest in the bank the legal title to said instruments, the equitable title to which it at all times owned.

We glean the following facts from the record:

In July, 1920, Lingo Brothers (Otis A., Walter M., and Earnest S.) were indebted to the First National Bank of Shenandoah in a sum totaling $ 52,000. Being called upon by the bank to refinance their loans, they executed a mortgage on certain real estate in the sum of $ 12,000, the proceeds of which were turned over to the bank, and notes in the amount of $ 40,000 were executed by them on July 20, 1920, to take care of the balance of their indebtedness, these notes being also secured by real estate mortgages. Among these latter notes was the note now involved in this appeal. It was for $ 5,000, dated July 20, 1920, due March 1, 1921, payable to Elbert A. Read or order, and signed by Walter M. and Earnest S. Lingo.

When this financing scheme had been completed, various notes, constituting the original indebtedness of $ 52,000, were charged off the books of the First National Bank of Shenandoah, and on that date there were placed on the books of the bank the notes of the Lingo Brothers, representing $ 40,000, which, together with the $ 12,000 cash received from the real estate loan, replaced the original notes of $ 52,000.

On May 13, 1926, the First National Bank of Shenandoah was closed by the comptroller of currency, and H. J. Spurway was appointed receiver thereof; and as such, he brings this action, to recover on the note now before us.

It was stipulated that the note was genuine; that it was duly executed and signed by Walter M. and Earnest S. Lingo; that, on the back of the note appeared the genuine signature of Elbert A. Read; that, at the time of the closing of the bank, on May 13, 1926, the note was carried and owned by the first National Bank of Shenandoah; that it is now held by Spurway, as receiver of said bank, and is unpaid. It is further stipulated:

"It is not the intention, however, of the defendant to admit that said notes were executed to or delivered to Elbert A. Read, nor to admit that he at any time had any interest therein; neither do we admit that he appeared there as indorser."

Under the general denial of the defendant herein, the burden of proof is upon the plaintiff to establish the allegations of his petition. Defendant's propositions are:

First, that he had no interest at any time in said note, that it was simply taken in his name as an accommodation to the bank, and his indorsement thereon was simply for the purpose of transferring to the bank the naked legal title, because the bank was the owner of the paper; and second, and cognate to the first, that no consideration whatever passed to Elbert A. Read for putting his name on the back of this note.

Section 9484, Code, 1927, provides:

"Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon...