St. Louis National Bank v. Flanagan
| Decision Date | 18 June 1895 |
| Parties | St. Louis National Bank, Appellant, v. Flanagan |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. L. B. Valliant Judge.
Affirmed.
T. K Skinker for appellant.
(1) Plaintiff is a purchaser for value because the discount of the note operated an extension of the time of payment of the debt caused by the overdraft. Cass County v. Oldham, 75 Mo. 52; Martin v. Nixon, 92 Mo. 26; Deere v Marsden, 88 Mo. 512; Napa Valley Wine Co. v. Rinehart, 42 Mo.App. 172. (2) It operated an extension, though not expressly stipulated. York v. Pearson, 63 Me. 587; Holzworth v. Koch, 26 Ohio St. 33; Bank v. Penfield, 7 Hun, 282; Fellows v. Prentiss, 3 Denio, 520; Okie v. Spencer, 2 Whart. 253; Bank v. Cheeney, 87 Ill. 602; Manning v. McClure, 36 Ill. 497; Blanchard v. Stevens, 3 Cush. 168; Kenrick v. Lomax, 2 Cromp. & Jer. 405. (3) Crediting the proceeds of discount as cash operated payment. Davenport v. Elliott, 10 Kan. 587; Place v. McIlvain, 38 N.Y. 96. (4) The bank may be a holder for value though named as payee. Whitemore v. Obear, 58 Mo. 280; Hard v. Quin, 43 Vt. 375; Bank v. Goss, 31 Vt. 315; Jordan v. Jordan, 10 Lea, 124. (5) The bank is none the less a purchaser for value, though the discount went to pay a pre-existing debt. Fitzgerald v. Barker, 96 Mo. 665; Crawford v. Spencer, 92 Mo. 489; Deere v. Marsden, 88 Mo. 512; Lawrence v. Owens, 39 Mo.App. 319; Redpath v. Lawrence, 42 Mo.App. 101; 1 Daniel, Neg. Inst. [4 Ed.] sec. 184; 2 Randolph, Commercial Paper, secs. 461, 995; Tiedeman, Commercial Paper, secs. 164, 165. (6) Flanagan's alleged understanding with Florida that the note was to be used to obtain a present loan constitutes no defense. Whittemore v. Obear, 58 Mo. 280; Hard v. Quin, 43 Vt. 375; Blanchard v. Stevens, 3 Cush. 162; Stoddard v. Kimball, 6 Cush. 469; Hart v. Trust Co. 118 Pa. St. 565; Cozens v. Middleton, 118 Pa. St. 622; Morris v. Norton, 14 Neb. 358; Arnold v. Caldwell, 1 Manitoba, 81; Frank v. Quast, 86 Ky. 649; Winters v. Home Ins. Co., 30 Iowa 172; Laub v. Rudd, 37 Iowa 617. (7) It was immaterial to defendant what use was made of the note; hence he can not make the defense. Bank v. Corey, 1 Hill, 513; Fetters v. Bank, 34 Ind. 251; Reed v. Trentman, 53 Ind. 438; Meeker v. Shanks, 112 Ind. 207; Laub v. Rudd, 37 Iowa 617; Tindale v. Murray, 9 Daly, 448; Wheeler v. Allen, 59 How. Prac. 118; Mayer v. Mode, 14 Hun, 155; Bank v. Wood, 28 S.W. 384. (8) Besides, the note effected the sustantial purpose designed by the parties; that is enough. Powell v. Waters, 17 John. 177; Bank v. Hyde, 4 Cow. 567; Parker v. Sutton, 103 N.C. 191; Parker v. McDonald, 95 N.C. 219; Jackson v. Bank, 42 N. J. L. 177; Duncan v. Gilbert, 29 N. J. L. 511; Zellmeyer v. Caffee, 5 Duer, 94; Bank v. Buck; 5 Wend. 66. (9) An agreement not to use the paper till an additional signature had been obtained would have been no defense. Bank v. Philips, 17 Mo. 29; Bank v. Goss, 31 Vt. 315; Jordan v. Jordan, 10 Lea, 124. (10) Neither would be an agreement not to use the note till Flanagan had been indemnified. Carter v. Moulton, 51 Kan. 9; Gage v. Sharp, 24 Iowa 15; Deardorf v. Foresman, 24 Ind. 481; Bonner v. Nelson, 57 Ga. 433; Fowler v. Allen, 32 S.C. 229. (11) The same rules apply where the paper is non-negotiable. Sweetser v. French, 2 Cush. 309; Bank v. Lincoln, 3 Allen, 192; Bank v. Humphrey, 36 Vt. 554. (12) And even to penal bonds. State v. Potter, 63 Mo. 212; State v. Modrel, 69 Mo. 152; State v. Hewitt, 72 Mo. 603. (13) Evidence tending to show that Florida ratified the discount was admissible. Bank v. Gay, 63 Mo. 33; Walker v. Linn County, 72 Mo. 650; Campbell v. Pope, 96 Mo. 468; Bank v. Fricke, 75 Mo. 178; Cook v. Tullis, 18 Wall. 332; Story on Agency, sec. 244; Williams v. Butler, 35 Ill. 544; Pollock v. Cohen, 32 Ohio St. 514. (14) Evidence tending to show what Florida said touching the nature of the consideration of the note as between himself and defendant was admissible. Boyd v. Jones, 60 Mo. 470; Stewart v. Johnson, 18 N. J. L. 87; Stovall v. Bank, 18 S. & M. 305; 2 Rice on Evidence, sec. 371a; Costello v. Cave, 2 Hill (S. C.), 528; Bound v. Lathrop, 4 Conn. 336; Coit v. Tracy, 8 Conn. 268; Lowe v. Boteler, 4 Harr. & Mc. H. 346; Bradner on Evidence, p. 112, sec. 11. (15) Nelson's deposition was not admissible as the declaration of plaintiff. 1 Greenleaf, Evidence, sec. 114; Northrup v. Ins. Co., 47 Mo. 435; McDermott v. Railroad, 73 Mo. 516; Kelly v. Railroad, 88 Mo. 534; Adams v. Railroad, 74 Mo. 533; Chillicothe v. Raynard, 80 Mo. 185. (16) Hammett's deposition was not admissible. R. S., sec. 4461; Ober v. Pratte, 1 Mo. 80; State v. Hays, 78 Mo. 606; Grinnan v. Mockbee, 29 Mo. 345; Carpenter v. Lippitt, 77 Mo. 242.
Hiram J. Grover, with whom is George Webster, for respondent.
(1) The case was tried by the court without the aid of a jury. The issues of fact raised by the pleadings were all found for the defendants. There was substantial evidence to sustain the findings of the court on the facts. Under the settled practice of this court the judgment will be affirmed, unless there was prejudicial error in the ruling of the lower court on instructions or upon questions of evidence. (2) While there is a conflict in the decisions of other appellate courts on the point, in Missouri at least, a person who receives a promissory note (whether it be for accommodation or not) as security for an antecedent indebtedness, is not a taker for value and holds the note subject to all equities, unless there is a new and presently moving consideration. Goodman v. Simons, 19 Mo. 106; Terry v. Hickman, 1 Mo. App, 119; Bernard v. Reavis, 2 Mo.App. 490; Hodges v. Black, 8 Mo.App. 394; Logan v. Smith, 62 Mo. 455; Davis v. Carson, 69 Mo. 609; Skilling v. Bolman, 73 Mo. 665; Deere v. Marsden, 88 Mo. 512; Crawford v. Spencer, 92 Mo. 498; Feder v. Abrams, 28 Mo.App. 454. (3) The court did not err in its rulings on the evidence. (4) Florida could not ratify Nelson's unauthorized act in making the discount so as to bind Flanagan thereby. If the negotiation of the note depended for validity upon "ratification" Flanagan was the man to do the ratifying. 1 Am. and Eng. Encyclopedia of Law, p. 429; 19 Ibid, 970; Mechem on Agency, sec. 127. (5) The judgment was for the right party and should be affirmed. First. The note was accommodation paper. Until Florida negotiated it, it belonged to no one. Tiedeman, Com. Paper, p. 258. Second. Accommodation paper has no effect until it is negotiated. While it remains in the hands of the persons authorized to negotiate it, it has no binding effect. Tilden v. Blair, 21 Wall. 246; Rodecker v. Littauer, 8 C. C. A. 320; Chaplin v. Boorman, 122 N.Y. 385. Diversion. "If anyone purchases accommodation paper with knowledge that the terms and conditions on which the accommodation was given have been violated, he is not a bona fide holder as against the party who lent his name for accommodation." 1 Dan. Neg. Inst. 790, 791, 792, 794; Conrad v. Fisher, 37 Mo.App. 420; Wagner v. Dietrich, 50 Mo. 484; Bank v. Lorrillord, 18 N.Y.S. 861. Third. The note was not negotiated and the plaintiff acquired no title to it. Fourth. The bank gave no consideration for the note. Fifth. The apparent purchase must have been a purchase in fact and not a mere bookkeeping entry. "The mere credit of a check upon the books of the bank, which may be canceled at any time, does not make the bank a bona fide purchaser for value." Thompson v. Bank, 150 U.S. 244. Where there is a mere discount "on paper" and the apparent borrower never receives or draws out any of the pretended discount, the whole transaction is a fiction and can not eventuate in a title to the bank. Mann v. Bank, 30 Kan. 412; Fox v. Bank, 30 Kan. 444; Dresser v. Railroad, 93 U.S. 92.
This is an action on the following note:
"$ 6,000.
St. Louis, December 14, 1892.
The petition was in the usual form. The answer of respondent Flanagan set up as a defense that he signed the note as maker with Florida for the accommodation purely of Florida and without receiving any value or consideration whatever, and that plaintiff knew this when it took the note; that Florida never negotiated or delivered the note for value to plaintiff, and, if he ever delivered it at all, plaintiff gave no value for it; that plaintiff did not acquire the note in good faith or in the ordinary course of business, but wrongfully appropriated the same, and pretended to discount it and place the proceeds of said discount to the credit of Florida for the purpose of paying an existing indebtedness of Florida to the bank, caused by overdrafts, to the amount of $ 7,789.53.
The reply denied all the allegations of the answer, but admitted that Florida was indebted to the bank upon his account current by overdrafts to the amount of $ 7,789.53, and averred that on the ninth day of January, 1893, Florida requested plaintiff to discount the note in suit; that this was done and the proceeds, $ 5,989.34, were placed to Florida's credit in his account current, and that plaintiff applied the same toward payment of his said overdrafts.
At the trial the plaintiff offered the note in evidence and rested.
The defendant then offered to read the deposition of Lewis C Nelson, taken by a notary public, August 23, 1893, at the instance and on behalf of defendant, as the declaration of the plaintiff. Plaintiff objected on the ground that...
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