Traders' Nat. Bank of Ft. Worth v. Smith

• Decision Date: 21 June 1893
• Citation: 22 S.W. 1056
• Parties: TRADERS' NAT. BANK OF FT. WORTH v. SMITH.
• Court: Texas Court of Appeals

22 S.W. 1056

TRADERS' NAT. BANK OF FT. WORTH v. SMITH.

Court of Civil Appeals of Texas.

June 21, 1893.

Appeal from district court, Tarrant county; R. E. Beckham, Judge.

Action on a promissory note by the Traders' National Bank of Ft. Worth against J. P. Smith. Defendant had judgment, and plaintiff appeals. Affirmed.

The other facts fully appear in the following statement by HEAD, J:

On July 18, 1884, the Texas investment Company, Limited, a private corporation, being in embarrassed circumstances, and urgently in need of money, certain of the stockholders therein executed the following agreement in writing:

"Fort Worth, Texas, July 18th, 1884.

"We, the undersigned shareholders of the Texas Investment Company, Limited, feeling the importance of maintaining the credit of said company, and realizing its present financial condition, agree to donate the company our promissory notes, due in twelve months from date, for the same amount as we now hold shares in said company, provided that shareholders now holding the paper of the company will donate as much paper as they hold shares in the company.

                       New Stock.        |
                W. R. Beckwith....$1,000 |  A. M. Britton...40 shares
                W. L. Malone...... 1,000 | W. A. Huffman....25 shares
                D. Boaz........... 1,000 | J. P. Smith......$5,000.00
                Theo. O. Vogel.... 1,000 | J. D. Reed.......$5,000.00
                                         | Fore, Morphy &amp
                                         |  Henderson......200 shares
                                         | Sidney Martin....25 shares
                                         | W. J. Boaz.......25 shares
                                         | J. H. Brown......25 shares."
                

On the next day this agreement was so modified verbally as to authorize Fore, Morphy & Henderson, who were holders of about $20,000 of the paper of the company, to cancel $15,000 of this amount, and execute their note for the remaining $5,000; and on the same day, in pursuance of this agreement as so modified, appellee, with several of the other signers thereto, executed their notes for the several amounts as agreed, but some of the signers never did execute their notes, and Fore, Morphy & Henderson never did cancel the $15,000 of the paper held by them in compliance with said agreement. At the time of the execution of this agreement and of appellee's note in compliance therewith, W. J. Boaz, one of the signers, was a stockholder and director in the said investment company, and was also president and active business manager of appellant. On the day appellee and others executed their notes under the agreement, they were taken charge of by W. J. Morphy, the president and active business manager of the investment company, and indorsed by him for it, and he and Boaz carried them over to appellant's banking office, only a few blocks distant, and Boaz at once, as president of appellant, and acting for it in the transaction, advanced to the said investment company about the sum of $10,000, taking as collateral security for its payment the note of appellee, and some of the other notes executed at the same time. At this time Boaz had full knowledge of the agreement under which appellee's note was given, and he also knew that Fore, Morphy & Henderson had not surrendered the $15,000 in paper held by them, and would not be able to obtain possession of it so as to make such surrender for several days; and he also had notice that some of the signers of the agreement had not executed their notes in compliance therewith. The note given by appellee is as follows:

                "$5,000.00
                   "Fort Worth, Texas, July 19th, 1884
                

"One (1) year after date we promise to pay to the order of Texas Investment Co., Limited, the sum of five thousand and no/100 dollars, for value received, with interest from date until paid at the rate of 12 per cent. per annum. Payable at the Traders' National Bank of Fort Worth. And I agree, if this note is not paid at maturity, to pay all costs and expenses of collection, including attorneys' fees of 10 per cent. on the principal and interest of this note.

                                             J. P. Smith
                  "No. 6,275
                  "Due July 19 — 22 — 85.
                  "Post Office, ____."
                

On August 14, 1885, appellant instituted this suit against appellee to recover upon said note, and in defense appellee answered by general denial, and also by special plea, setting forth the agreement and circumstances under which the note was executed, and alleging noncompliance on the part of some of the signers, as above set forth; that appellant had full knowledge of the agreement and of the failure of the signers to comply at the time it acquired the note; also that this agreement was entered into for the specific purpose of obtaining money to enable the investment company to comply with certain cattle contracts it had outstanding upon which appellee was security; and it was agreed that the money realized thereon was not to be used for any other purpose, but in violation of this agreement some of the notes given by the signers were in fact diverted to other purposes, all of which is charged to have been known to appellant; and by reason of all of the facts it was claimed by the appellee that the consideration for which this note was given had entirely failed, and the conditions upon which it was executed had not been complied with. It is not certain from the record what became of the written agreement executed by the stockholders of the investment company at the time it was signed by them, but at the time appellee's note became due according to its face it was in the hands of appellant in the same package with said note and the others taken at the same time, and the circumstances strongly tend to the conclusion that it was taken with the notes, by Morphy and Boaz, to appellant's office, on the day of its execution, and had remained in its hands ever since. On the trial in the court below the defendant had entered of record his admission of plaintiff's cause of action, except in so far as it might be defeated by the facts set forth in his answer, and was allowed the opening and conclusion in the introduction of the evidence and argument of counsel.

The court gave the following charge to the jury: "The defendant having admitted that the plaintiff has a good cause of action as set forth in the petition, except in so far as it might be defeated by the facts set up in his answer and established by proof, you are instructed to return a verdict for the plaintiff for the amount of the note described in plaintiff's petition, including principal and interest thereon at the rate of twelve per centum per annum from the 19th day of July, 1884, to the present time, and ten per cent. on the amount of such principal and interest, unless, under the instructions hereinafter given,...