Worth Co. v. International Sugar Feed No. 2 Co.

AlleN, J. The intervening bank was the holder of the draft duly indorsed, and as there is neither allegation nor proof that the title of the feed company, which negotiated the draft, was defective (Bev., sec. 2204), the only question presented by the appeal is‘whether his Honor correctly held, as matter of law, that the bank held the draft for collection and not as a purchaser for value. If it was a purchaser for value, the draft became the property of the bank, and the proceeds could not be attached in the hands of the Murchison Bank as the property of the feed company; but if a mere collecting agent, the proceeds would belong to the feed company and be the subject of attachment. *342 The holder of a negotiable instrument duly indorsed (and it is not contended that the draft was not negotiable) is, under the statute (Rev., sec. 2201), prima facie a purchaser for value, in good faith, before maturity, and without notice of any defect in the title of the person negotiating it. If the instrument is negotiable, the holder may, upon proof of the indorsement, rest his case, because the statute says, under such conditions and nothing else appearing, that he is a purchaser for value. Moon v. Simpson, 170 N. C., 336, and cases cited. In this last case the Court says: “The burden is upon the holder of a negotiable instrument payable to order, which has been indorsed, to prove the indorsement (Tyson v. Joyner, 139 N. C., 69), and when he does so he is deemed prima facie to be a holder in due course (Rev., sec. 2208), that is, he is deemed prima, facie to be a purchaser in good faith for value, before maturity, and without notice of any infirmity in the instrument or of any defect in the title of the person negotiating it. Revisal, sec. 2201. He is not required to prove that he paid value for the instrument, as the statute furnishes this evidence for him. The following authorities and others sustain this position: Mfg. Co. v. Tierney, 133 N. C., 630; Evans v. Freeman, 142 N. C., 61; Trust Co. v. Bank, 167 N. C., 261; Bank v. Roberts, 168 N. C., 475.” It follows, as the bank introduced the draft and proved the indorsement, it made out a prima facie case, which it was entitled to' have submitted to the jury, and, therefore, there was error in instructing the jury to answer the second issue “No.” Currie v. R. R., 156 N. C., 425. The plaintiff contends, however, that it appears from the oral evidence introduced by the plaintiff that the draft was taken for collection and not as a purchase; that the drawer had at all times a large amount to its credit and that the prima facie case of the bank is rebutted. The rule prevails with us, and it is supported by the weight of authority elsewhere, that if a bank discounts a paper and places the amount, less the discount, to the credit of the indorser, with the right to check on it, and reserves the right to charge back the amount if the paper is not paid, by express agreement or one implied from the course of dealing, and not "by reason of liability on the indorsement, the bank is an agent for collection and not a purchaser. Packing Co. v. Davis, 118 N. C., 548; Cotton Mills v. Weil, 129 N. C., 452; Davis v. Lumber Co., 130 N. C., 176, and Bank v. Exum, 163 N. C., 202. The difficulty with the plaintiff in the application of this principle is, first, while a party cannot impeach his own witness, he may show the facts otherwise than as testified to by him (Smith v. R. R., 147 N. C., 608), and the bank had the right to rely on its prima facie case, although *343 the oral evidence tended to rebut it; and, secondly, all o£ the evidence introduced did not necessarily lead to the conclusion that the bank was a collecting agent. The witness Eiee, vice president of the bank, testified that the bank purchased the draft and put the amount to the credit of the feed company with the right to draw on it, and that there was no agreement with reference to charging back the proceeds if the draft was not paid. His cross-examination weakens this statement, and furnishes evidence of the contention of the plaintiffs, that there was an agreement, expressed or implied, to charge back the draft, as he says that if the feed company had not assented to charging it back he would have done so arbitrarily. The witness Hall, who was the manager of the feed company, testified that the draft was sold to the bank, and the amount credited as cash to the feed company, with the right to draw on it; that there was no agreement that it should be charged back, and, in substance, that the feed company did not expect to pay the draft unless compelled to do so by -law. This was at least evidence of a purchase by the bank. The other position taken by the plaintiff, that the bank is not a purchaser for value because the drawer had at all times a considerable amount to his credit, is supported by authority, Mann v. Bank 30 Kan., 421; Blake v. Bank, 79 Ohio St., 189; Citizens Bank v. Cowles, 180 N. Y., 346; Mod. Am. L., 119; and other cases hold to the contrary, that if an unqualified credit is given, it is as if money was paid, and is a purchase. Wassen v. Lamb, 120 Ind., 514; Bank v. Loyd, 90 N. Y., 535; Taft v. Bank, 172 Mass., 365; Williams v. Cox, 97 Tenn., 555; Aebi v. Bank, 124 Wis., 76; Hoffman v. Bank, 46 N. J. L., 607; Armstrong v. Bank, 90 Ky., 436; Hazlett v. Bank, 132 Pa., 118; Milling Co. v. Bank, 18 L. R. A. (N. S.), 44; In re Bank, 56 Minn., 119; Piano Co. v. Aulo, 86 A. S. R., 782. Still others, which in our opinion are supported by the better reason, hold that crediting to the account of the drawer or indorser with the right to check on the account is evidence of a purchase for value, without regard to the state of the account, and that the real determinative question is as to the intention of the parties, to be determined as a fact. R. R. v. Johnson, 133 U. S., 566; Burton v. U. S., 196 U. S., 302; Shaw v. Jacobs, 89 Iowa, 713; Ditch v. Bank, 47 A. S. R., 389, and extended note; Strong v. King, 31 Ill., 1; 7.C. J., 599; Bank v. Summers, 7 L. R. A. (N. S.), 695, and note; 3 R. C. L., 633. "Was it the mutual understanding and intention that the title should pass unconditionally to the bank, with no right to charge back except by *344 reason of tbe indorsement, or was it tbe intention of tbe parties that tbe title sbonld only pass conditionally, and tbat credit should be given temporarily for tbe convenience of tbe parties, with tbe right arising by express or implied agreement to charge back? If the first, tbe bank would be a purchaser for value and tbe owner, and, if the second, it would be an agent for collection. In passing upon tbe question of tbe intention of tbe parties, it is competent to consider tbe course of dealing, tbe rate of discount, tbe state of tbe account, and other relevant circumstances. There is a statement in Latham v. Spragins, 162 N. C., at page 408, apparently in conflict with tbe conclusion we have reached, but it was not necessary to the decision of the case, as it appeared tbat Spragins was indebted to tbe bank, and it can be distinguished from tbe present case because it is based on tbe supposition tbat tbe bank incurred no increased obligation; whereas, if tbe contention of tbe bank in this case is true, it incurred tbe increased obligation of paying the amount credited to tbe depositor upon its check. We are therefore of opinion it was error to instruct the jury to answer tbe second issue “No.” New trial.