The Nashville State Bank v. Weiser

• Decision Date: 10 January 1925
• Docket Number: 25,525
• Citation: 232 P. 613,117 Kan. 389
• Parties: THE NASHVILLE STATE BANK, Appellant, v. JOHN WEISER, Appellee
• Court: Kansas Supreme Court

232 P. 613

117 Kan. 389

THE NASHVILLE STATE BANK, Appellant, v. JOHN WEISER, Appellee

No. 25,525

Supreme Court of Kansas

January 10, 1925

Decided January, 1925

Appeal from Kingman district court; GEORGE L. HAY, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. PROMISSORY NOTE--Consideration Life Insurance--No Policy Delivered--Acquisition by Bank with Notice. Where a bank acquired from an agent of a life insurance company a promissory note in which the bank was named as payee, and the bank knew at the time that one part of the consideration for the note was to be a life insurance policy to the maker but which had not then been issued, and that the other part of the consideration was a certificate for a $ 100 share of the insurance company's corporate stock which had not then been delivered to the maker of the note, and where the bank's acquisition of the note was made by its cashier and managing officer who was privy to and had a personal interest in the transaction in which the note was given, and where the bank upon its purchase of the note imposed a condition that the proceeds, less a nominal sum, should be kept on deposit in the bank to the credit of the insurance company, it is held that the bank's right to recover on the note and renewal thereof was subject to the same defenses as the maker might have pleaded and proved against the insurance company.

2. SAME--Refusal of Applicant for Insurance to Submit to Medical Examination--Breach of Implied Obligation--Nature of Plaintiff's Action. The remedy, if any, for breach of an implied obligation to submit to a medical examination to determine defendant's qualifications as a life insurance risk, after his making an application therefor and giving in advance his promissory note to pay premium on life insurance in case he were accepted as a risk and a policy of insurance delivered to him, was not an action on the note but one for damages to the insurer.

3. SAME--Note Renewed--Whether a Payment, for the Jury. Rule followed that the question whether a promissory note was given pursuant to an express agreement to compromise, settle and satisfy a preexisting debt, or merely given to extend the time for payment, was for the jury's determination on the evidence submitted thereon.

4. SAME. Other errors urged against the judgment examined and not sustained.

Charles C. Calkin, of Kingman, for the appellant.

John McKenna, of Kingman, for the appellee.

OPINION

DAWSON, J.:

Plaintiff bank brought an action to recover on a note for $ 222 executed by defendant.

Defendant answered that the note was a renewal of one given in consideration of a policy of life insurance which defendant had applied for but never received. Another consideration was to have been a $ 100 certificate of stock in the insurance corporation and that had not been received. Defendant also alleged that the plaintiff's cashier, Hemphill, was working in connection with one Higgins, agent of the insurance company--

"That Hemphill was fully cognizant of what Higgins was doing in reference to writing life insurance and was advising and directing Higgins as to prospective applicants, and directing Higgins to call on defendant for the purpose of selling him life insurance, and knew at the time Higgins delivered the note dated August 10, 1921, for $ 214.50 to the bank that the same was taken by Higgins as a premium for a policy of life insurance to be thereafter delivered to defendant; that Hemphill knew at the time the bank took said note that no policy of life insurance had been delivered to defendant and that no stock in said company had been issued or delivered to defendant. . . .

"That the note sued on by plaintiff was only a renewal of the note for $ 214.50 given August 10, 1921, and was taken by the bank with full knowledge of all the foregoing facts, and was not taken as payment of the prior note but only as a renewal thereof, the bank simply retaining the first note."

In the original note as well as the renewal note the Nashville State Bank was named as payee.

Plaintiff replied with a general denial, a plea of waiver and estoppel, and of compromise and settlement, and that the bank had advanced money to agent Higgins on defendant's note merely as a loan to defendant.

The controlling facts were mainly these: Hemphill, the plaintiff's cashier, knew all the circumstances of the giving of the note. He was to receive from Higgins some commission on all policies after the first three had been written for persons suggested by Hemphill. Higgins delivered the note to the bank, which cashed it upon an understanding that the proceeds, less $ 10 or $ 15 paid in money to Higgins, should remain on deposit to the credit of the insurance company. After sixty days the insurance company drew out the money. Shortly after defendant signed the application for insurance and after he executed and delivered the original note to Higgins, payable to the bank, defendant was requested to call on a neighboring doctor to take the customary medical examination to the issuance of an insurance policy. He refused to be examined; consequently the policy of insurance never was and could not prudently be delivered to him. At defendant's request Hemphill wrote to the insurance company to get back the money, but the company declined and repeatedly urged defendant to take the medical examination. To explain his refusal to be examined, defendant testified that he "had changed his mind." He admitted that since executing the original note and making the application he had applied for insurance in another company and had passed its medical examination and had obtained insurance. The renewal note was not given until the first note was three months past due, and when renewed it included the accrued and unpaid interest on the first.

After a jury was called and had heard the evidence, plaintiff moved that the jury be instructed to return a verdict in its favor. This was denied; and it was then agreed that the jury might be discharged and the cause submitted to the trial court for decision.

Judgment was entered for defendant, and plaintiff assigns error, arguing, first, that even if plaintiff's rights were not greater than those of the insurance company, it would be entitled to recover. Let us see about that. The statute provides:

"It shall be unlawful for any insurance company or corporation, or any agent thereof, who shall have accepted premium notes in payment for policies of insurance, to sell or assign said note or notes to innocent purchasers prior to the delivery of said insurance policies to the insured." (R. S. 40-225.)

That statute is just as potent as any provision of the negotiable instruments act, and so far...