Van Winkle Gin & Machinery Co. v. Citizens' Bank

• Decision Date: 27 January 1896
• Citation: 33 S.W. 862
• Parties: VAN WINKLE GIN & MACHINERY CO. v. CITIZENS' BANK OF BUFFALO.
• Court: Texas Supreme Court

33 S.W. 862

VAN WINKLE GIN & MACHINERY CO. v. CITIZENS' BANK OF BUFFALO.

Supreme Court of Texas.

January 27, 1896.

Error to court of civil appeals of Fifth supreme judicial district.

Action by the Citizens' Bank of Buffalo against the Van Winkle Gin & Machinery Company. A judgment for plaintiff was affirmed by the court of civil appeals, and defendant brings error. Reversed.

Harris & Knight, for plaintiff in error. Thompson & Thompson and T. T. Vander Hoeven, for defendant in error.

DENMAN, J.

On the 27th day of June, 1892, the Buffalo Forge Company, a partnership doing business in Buffalo, N. Y., drew on the Van Winkle Gin & Machinery Company, of Dallas, Tex., the following instrument: "$1,930 50/100. Buffalo, N. Y., June 27th, 1892. Four months after date pay to the order of ourselves nineteen hundred and thirty 50/100 dollars, value received, with exchange on Buffalo or New York. Buffalo Forge Co., W. F. Wendt, Sec'y. To Van Winkle Gin & Mchy. Co., Dallas, Texas. No. 10,195." A few days thereafter the said drawee accepted said bill in the following words: "Accepted, payable at National Exchange Bank, Dallas, Texas. Van Winkle Gin & Machinery Co., W. E. Elam, Mgr." On the 25th day of July, 1892, the Buffalo Forge Company indorsed said accepted bill in blank to the Citizens' Bank of Buffalo, a corporation engaged in the banking business at Buffalo, N. Y.; said bank paying value therefor, without any notice of any defense or failure of consideration. The consideration for the acceptance of said instrument was the sale, by the Buffalo Forge Company, of certain machinery manufactured and warranted by it to be adapted for the purposes for which it was intended, and which wholly failed to answer such purposes after the acceptance of said bill, whereby the consideration for said acceptance failed, of which fact the Buffalo Forge Company was notified September 16, 1892. Upon the maturity of the bill it was presented for payment, which being refused, it was duly protested, and notice thereof given all of the parties to the same. On the 18th day of November, 1892, the Citizens' Bank of Buffalo, indorsee and holder of said bill, brought suit thereon against the Van Winkle Gin & Machinery Company, acceptor, for the face of the instrument and protest fees. The defendant filed its original answer on the 29th day of November, 1892, which is not contained in the record. On the 23d day of February, 1893, the depositions of the president, cashier, and bookkeeper of said bank were taken, disclosing the fact that the Buffalo Forge Company had been for some time a regular customer of said bank, and had to its credit therein at the date of the filing of the suit $2,300, and at the date of the taking of such depositions $2,880, and was entirely solvent; that upon the nonpayment of the bill it was not presented to the Buffalo Forge Company for payment, and, according to the testimony of the cashier, which is not contradicted: "The paper was sent by us to Dallas, Tex., and has never been returned. We were requested by the Buffalo Forge Company to bring suit on it there. W. F. Wendt has stock in the bank, and is a director, and has been since October, 1890. The Buffalo Forge Company stands the expenses of this suit if we are defeated." There is nothing in the record tending to show whether the balance of $2,880 to the credit of the forge company in said bank on February 23, 1893, was ever drawn out. The depositions of said officers disclose the fact that they were fully interrogated, in the interrogatories upon which said depositions were taken, in regard to the failure of consideration for said bill and acceptance, and as to whether said bank had notice thereof at the time it acquired same. On the 8th day of April, 1893, the defendant filed its first amended original answer, amending and substituting its original answer, filed November 29, 1892, as aforesaid, and pleaded, among other things, said failure of consideration; that plaintiff was informed thereof about the date of the maturity of the bill; that said Buffalo Forge Company then had to its credit, on the books of plaintiff bank, more than $2,300, which plaintiff could have immediately applied thereto; that, for the purpose of defrauding defendant, said bank entered into a fraudulent combination and conspiracy with said Buffalo Forge Company, whereby it agreed, at the expense of said company, to prosecute this suit in the name of the bank, and thereby attempt to defeat the plea of failure of consideration; that, pursuant to such combination, this suit was filed, and the forge company was permitted to draw out such balance; that afterwards it made other deposits with said bank, and now has to its credit therein a sum in excess of that sued for, which said bank is at liberty to apply on such debt, but refuses to do so, pursuant to said conspiracy; that the bank, on account of such deposits, is indebted to the Buffalo Forge Company in a sum largely in excess of the amount sued for herein, to wit, the sum of $3,000, which it prays it may be compelled to offset against the indebtedness sued on. The plaintiff, by supplemental petition, filed May 12, 1893, pleaded that it acquired said bill of exchange in the regular course of business, for a valuable consideration, before maturity, without any notice of any failure of consideration or other defense thereto. On the trial of the cause without a jury, the court found that the consideration for said instrument had failed, as claimed by defendant, but that said bank had no notice thereof at the time it acquired same, and rendered judgment in favor of the bank against the Van Winkle Gin & Machinery Company for the amount of the bill and protest fees, which judgment having been affirmed by the court of civil appeals, the defendant below, as plaintiff in error here, makes the following assignment of error: "The court erred in holding that defendant, having shown a total failure of consideration for which the instrument sued on was executed, could not pleaded by way of offset against same the deposit of the forge company in plaintiff's bank, especially when it was shown that both plaintiff and the forge company resided in Buffalo, N. Y., beyond the jurisdiction of this court, and the latter had directed this suit to be brought and would stand the expense thereof,"—and also urged, in various assignments, that the court erred in allowing the bank to recover on its plea of innocent holder of commercial paper.

It is contended by defendant in error that the record does not show any notice to the bank of failure of consideration until the amended answer was filed on April 8, 1893, and that there is no evidence that at that time the Buffalo Forge Company had any deposit in the bank. The record shows that the original answer was filed November 29, 1892, but does not show the contents thereof. We are...