Strother v. Lynchburg Bank

• Decision Date: 15 January 1931
• Citation: 155 Va. 826
• Parties: PAUL M. STROTHER v. LYNCHBURG TRUST AND SAVINGS BANK AND W. P. OWEN.
• Court: Virginia Supreme Court

Page 826

155 Va. 826

PAUL M. STROTHER v. LYNCHBURG TRUST AND SAVINGS BANK AND W. P. OWEN.

Supreme Court of Virginia, Staunton.

January 15, 1931.

Present, Campbell, Holt, Epes, Hudgins and Gregory, JJ.

1. INFANTS — Acts and Contracts — Whether Void or Voidable. — The acts and contracts of infants generally are voidable and an infant has the right of election to avow or disaffirm.

2. BILLS, NOTES AND CHECKS — Infants — Effect of Indorsement — Case at Bar. — Section 5584 of the Code of 1930 provides that the indorsement or assignment of an instrument by an infant passes the property therein notwithstanding that from want of capacity the infant may incur no liability thereon. In the instant case it was contended by appellant that by this act it was not intended to abrogate the common-law rule as to infants' contracts, but only intended to pass title to the instrument in the event the infant failed to disaffirm his indorsement. It was the contention of appellee, on the other hand, that the indorsement under the statute is an executed contract, and that it passes the property the moment the indorsed paper is delivered, and that the act clearly denotes the intention of the legislature to depart from the common-law rule.

Held: That the contention of appellant was correct, and that the infant may disaffirm his act after maturity.

3. BILLS, NOTES AND CHECKS — Infants — Uniform Negotiable Instruments Act. — When the American uniform negotiable instruments act and the English act are compared it is apparent that the former act only intended to say that one who held the indorsement of an instrument by an infant had title to the property unassailable by the maker and all the previous indorsers of the instrument, but it was not intended to destroy the common-law right of the infant to plead infancy and avoid his act after maturity. The language employed in the section does not import an intention to radically change the status of an infant with reference to his contracts relative to negotiable paper.

4. INFANTS — Acts and Contracts of Infants — Power of Legislature. — It is competent for the legislature to fix an age limit less than twenty-one years and invest an infant with an unrestricted ability to contract.

5. STATUTES — Common Law — Presumption that no Change Intended. — A statute will not be construed as changing the common-law rule beyond what is expressly stated or necessarily implied, and in doubtful cases the presumption is that no change was intended.

6. INFANTS — Favorites of Courts of Equity — One who Deals with an Infant does so at His Peril — Negotiable Paper. — For ages an infant has been the favorite ward of courts of equity. Those who deal with him to so at their peril. In law there is no "twilight zone" between an infant ten years of age and an infant on the verge of maturity. While it may be consonant with the modern idea of progress that banks and others dealing in negotiable paper should be permitted to deal at arm's length with infants, regardless of age, such a conclusion ignores the baneful results should an infant of tender years be thus placed at the mercy of avaricious or unscrupulous persons.

7. BILLS, NOTES AND CHECKS — Infants — Effect of Infant's Indorsement — Case at Bar. — In the instant case appellant, an infant, indorsed a negotiable note and returned it to his guardian. The guardian secured from appellee bank a personal loan and deposited the note of appellant as collateral security, representing to the bank that he was the owner thereof. Before reaching his majority the appellant discovered the embezzlement of the money by the guardian and promptly notified the bank and the maker of the note of the fraud and repudiated his indorsement, and upon the refusal of the bank to make restitution, instituted this suit to disaffirm the contract of indorsement and to recover possession of the note. The ruling of the chancellor was in favor of the appellee bank.

Held: That the decision of the chancellor must be reversed, as the effect of the disaffirmance of his contract of indorsement by the appellant was to extinguish any interest the appellee bank acquired under it; that the title to the note was in appellant, and that he was entitled to have the note redelivered to him by the appellee bank.

Appeal from a decree of the Corporation Court of the city of Lynchburg. Decree for defendant. Complainant appeals.

The opinion states the case.

Thomas J. Williams, for the appellant.

T. J. O'Brien, Fred Harper and Caskie, Frost & Coleman, for the appellees.

CAMPBELL, J., delivered the opinion of the court.

This appeal involves no disputed questions of fact. The sole question to be answered is one of law.

Paul M. Strother and his brother, William, infants, inherited from their father a certain house and lot situated in Bedford county. Upon attaining his majority, William M. Strother instituted suit to have confirmed by the court the offer of W. P. Owen to purchase the property at the price of $4,000.00. Mayo C. Brown, now serving a penitentiary term for embezzlement, was attorney for W. M. Strother, while appellant was represented by a guardian ad litem. The chancery court accepted the offer of Owen, and pursuant to the terms of agreement entered a decree providing, "that Mayo Co. Brown be and he is hereby appointed commissioner for the purpose, together with William M. Strother and his wife, to convey the said property to W. P. Owen, taking from the said W. P. Owen coupon bonds for the deferred payment, with interest payable semi-annually, secured by the proper deed of trust, and one-half part of said bonds to the extent of $2,000.00, less one-half of the costs of this suit, shall be delivered to the said infant defendant, Paul Strother, when he becomes of age. It is further ordered that the cash payment of $750.00 be made direct to William M. Strother, who is of age and who will settle with Mayo C. Brown for his services in this suit * * *." At the time of the institution of the partition suit appellant was a resident of New Jersey. Brown was the administrator of the ancestor's estate and guardian for appellant.

On November 3, 1927, Brown, contrary to the terms of the decree which provided for a delivery of the note when appellant attained his majority, forwarded to appellant the $2,000.00 note with the suggestion that if appellant wished to negotiate the note he indorse same and return it to him. Upon the return of the note indorsed by appellant, Brown secured from the appellee bank a personal loan for $2,200.00 and deposited the note of appellant as collateral security, representing to the bank that he was the owner thereof. Before reaching his majority appellant discovered the embezzlement of the money by Brown and promptly notified the bank and Owen of the fraud and repudiated his indorsement of the note. Attaining his majority on September 17, 1928, appellant again notified the bank of his repudiation of his indorsement, and upon the refusal of the bank to make restitution, instituted this suit to disaffirm the contract of indorsement and to recover possession of the note. The ruling of the chancellor was in favor of the bank and Owen (who is merely a nominal party), and a decree was entered declaring the bank to be the legal holder of the note and entitled to collect from Owen the amount due by him.

A most interesting discussion of the question involving the rights and liabilities of an infant in regard to contracts made by him is to be found in an exhaustive note by Mr. Freeman, following the case of Craig Van Bebber, 18 Am.St.Rep. 573. It is there said: "There is, perhaps, no subject of the law about which there has been more apparent as well as real conflict of opinion than upon the effect to be given to the contracts of infants."

At common law the contracts of infants were divided into three classes — void, voidable and valid. Vol. 1 Minor's Inst. (3rd ed.) pages 521-529.

The decisions regarding the status of an infant were conflicting, and not until the decision of this court in Mustard Wohlford, 15 Gratt. (56 Va.) 329, 76 Am.Dec. 209, was his status definitely determined in Virginia. That decision firmly established the doctrine that the acts and contracts of infants generally are voidable and an infant has the right of election to avow or disaffirm.

In Mustard Wohlford, supra, Judge Moncure said:

"The court is of opinion that the contract of the 16th of January, 1852, between Nisewander and the appellant though made when the former was under age, and when the fact was known to the appellant, was not a void contract, but only voidable, and subject to be affirmed or disaffirmed by the former after his arrival at age. `The tendency of the modern decisions (says Chancellor Kent) is in favor of the reasonableness and policy of a very liberal extension of the rule, that the acts and contracts of infants should be deemed voidable only, and subject to their election, when they become of age, either to affirm or disavow them.' 2 Kent.Com. 235. The authorities on this subject are fully collected in the valuable notes of Hare & Wallace, appended to the case of Tucker, &c. Moreland, in 1 American Leading Cases, edition of 1857, pages 224-267. And from the numerous decisions which have been had in this country, the annotators deduce the following rule, as one that is subject to no exceptions. "The only contract binding on an infant is the implied contract for necessaries; the only act which he is under a legal capacity to perform is the appointment of an attorney; all other acts and contracts, executed or...