Standing Stone Nat. Bank v. Walser
| Decision Date | 23 April 1913 |
| Citation | 77 S.E. 1006,162 N.C. 53 |
| Parties | STANDING STONE NAT. BANK v. WALSER et al. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Davidson County; C. M. Cooke, Judge.
Action by the Standing Stone National Bank against J. G. Walser and another. Judgment for plaintiff, and defendants appeal.
Affirmed.
Breach of warranty of a horse held not a defense to an action on a note for the price, where the purchaser had not complied with the warranty relative to returning the horse and accepting another in its place.
E. E Raper and Walser & Walser, all of Lexington, for appellants.
Avery & Avery, of Morganton, and Walter Clark, Jr., of Raleigh, for appellee.
This action was brought by the plaintiff on a note given by defendants to H. P. Reynolds & Co., or bearer, at Lexington N. C., September, 13, 1907, due 30 months after date, with interest, and payable at the National Bank of Lexington. The plaintiff acquired the note at its bank in Pennsylvania May 4, 1908, and gave $350 credit therefor to H. P. Reynolds on his checking account. The note was indorsed: H. P. Reynolds & Co., are customers of the plaintiff bank, keeping a checking account there. Plaintiff alleges in the complaint that it took the note as assignee and innocent purchaser for value, before maturity. The note was duly protested for nonpayment, upon presentation at maturity, and plaintiff has since demanded payment thereof of the defendants, but no part thereof has been paid.
The answer admits the execution of the note, but sets up as a defense that its execution was procured by fraud and misrepresentation on the part of the payees, H. P. Reynolds & Co., in that: (1) They falsely and fraudulently represented to the plaintiff that a number of gentlemen, including J. C Ripple and others, had agreed to purchase a certain horse and pay therefor the price of $3,400; whereas, in fact, their agreement with said Ripple, and perhaps others, was that they were not to pay for said horse, except out of the profits of the same, which fact was unknown to the defendants, and they executed the note in ignorance thereof. There was no proof of this, and it would have been irrelevant in this action. (2) That said Reynolds & Co. falsely represented that the horse which they sold to the defendants and others was an imported German coach, and was a reasonably sure foal-getter, and they also entered into a written guaranty and warranted the said horse to that effect, when in fact, as defendants are informed and believe, the said horse was not an imported German coach and was not a reasonably sure foal-getter as guaranteed, and tendered the said horse back to Reynolds & Co., who refused to accept the same. The defendants further aver that, if the plaintiff is in fact a holder of the notes sued on, he did not take same for valuable consideration and without notice of the defenses above set forth.
In the reply the plaintiff sets out that the defendants and 10 others on September 12, 1907, executed three promissory notes, due, respectively, in 18, 30, and 42 months after date, with interest from date, aggregating altogether $3,400; that on the next day these two defendants sought the said H. P. Reynolds, and proposed that if he would release them from liability as makers on said three notes, aggregating $3,400, they would execute said $400 note now in suit, which offer was accepted, and the defendants were released from the other three notes, which the plaintiff pleads was a valid arrangement under Rev. § 859.
On the trial the jury found, by consent, that the note sued on was executed by the defendants in consideration of their release from liability on the three notes executed by them and others, aggregating $3,400, which had been executed on the previous day to said Reynolds & Co. for the purchase money of a horse. But this consent was subject to the exceptions as to the ruling of the court as to the competency of the evidence offered as to this issue and excluded by the court. The jury further found that the plaintiff purchased the note sued on before maturity, for a valuable consideration, and in due course of trade, and without notice of any alleged fraud, or of any infirmity affecting the validity of said note.
It was in evidence for the plaintiff by depositions of its officers that the note was passed upon in regular course by the finance committee of the plaintiff bank and approved by its board of directors, and it was purchased in good faith, for value, and without notice of any alleged infirmity. On cross-examination, the officials of the plaintiff bank stated that they paid $350 for the note; that is, that they gave Reynolds credit to that amount on his checking account which he had with the bank. The witnesses for the plaintiff bank were a member of the finance committee and the cashier, whose evidence was full and explicit on these points, and there was no evidence to the contrary. There was testimony as to their good character. Protest of the note at maturity and nonpayment was also shown.
The defendants in reply introduced evidence that in the meeting between them and Reynolds the agreement was that this note of $400 was to be executed in consideration of their release from the $3,400 notes theretofore given, and $400 was indorsed upon the said three previous notes as having been paid by them. But they further testified that the $400 note was given with a further agreement that the same contract of guaranty as to the character of the horse was to apply to the new note, and that in that respect the horse was a total failure.
The first exception is because the court excluded the written guaranty given by Reynolds & Co. at the time the notes were executed for the $3,400. The defendants also excepted because the court ruled that, the $400 note sued on having been given in consideration of a release of these defendants from the three original notes, he refused to admit the evidence as to the retention of the guaranty as to the character of the horse as a part of the consideration for the note of $400. The defendants further excepted that the court charged that, the only evidence before the jury as to the note being taken for value before maturity and without notice being that contained in the depositions offered by the plaintiff, if it was believed by the jury, it should answer the last issue, "Yes."
The contention of the defendants before us was based upon the allegations of "fraud and false representations," and that the plaintiff took the note with notice of "defect in the title." There was no proof that the horse was not a German coach. While it is alleged in the complaint that Reynolds & Co. represented the horse to be a good foal-getter and that as a matter of fact he was totally worthless in that respect, there is no allegation in the complaint that said Reynolds & Co. knew that the horse was defective, and no proof whatever as to that effect was offered.
The new note having been taken in discharge or compromise of the liability of the defendants upon the three former notes, evidence as to any false representations, or other defects affecting the validity of said prior notes, was properly excluded. 6 A. & E. 713; Rev. § 859. Also the guaranty accompanying the execution of said prior notes would not be competent, but for the fact that the defendants offered evidence that a part of the consideration of the new $400 note was that it should "retain the same guaranty." It was error in the court, therefore, to exclude such evidence; for, if it was believed, such guaranty was a part of the consideration for the new note. But the exclusion of this evidence was harmless error, for such guaranty was an equity, and did not accompany the note into the hands of a purchaser for value, without notice, and before maturity. The court properly told the jury that the only evidence as to the purchase of the note was the depositions offered by the plaintiff, and that if it was to be believed the plaintiff was an innocent purchaser for value, and to answer the last issue, "Yes."
The defendants, however, contend that the burden was upon the plaintiff to prove that it actually paid out to Reynolds the $350 which the bank placed to the credit of Reynolds' checking account on May 4, 1908. It is true that, if such money was not checked out by Reynolds, the bank would not be purchaser of the note for value. Under the decisions of this state the rule is: "The first money in, the first money out." Reid v. Bank, 159 N.C. 101, 74 S.E. 746. And the strong presumption is that a credit of $350 placed on the checking account of Reynolds nearly two years before the maturity of the note was drawn out by him. But the case does not depend upon probabilities. Rev. § 2201, defines "what constitutes a holder in due course" as follows: (1) That the instrument is complete and regular upon its face; (2) and the holder acquired it before due, and without notice of previous dishonor; (3) that he took it for good faith and value; (4) that he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. The uncontradicted evidence of the plaintiff, if believed, filled all the above requirements. The only question which can be raised is as to whether the plaintiff took "for value," inasmuch as it is not shown that the $350 credit given Reynolds on his checking account two years before maturity was actually checked out. In short, the controversy narrows down to the proposition: Upon whom rests the burden of showing or disproving the receipt of the money by the indorser?
Rev. § 2208, provides: "Every holder is deemed prima facie to be a...
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