National Loan & Exchange Bank v. Hoyt

The opinion of the Court was delivered by Mr. Justice StabeEr. This is an action for recovery on a promissory note for $3,000.00, dated April 23, 1923, payable ninety days after date, given to The Liberty National Bank of Columbia (hereinafter referred to as the Liberty Bank) by the defendant, James A. Hoyt, the complaint alleging that the plaintiff, the National Loan & Exchange Bank of Columbia (hereinafter referred to as the Exchange Bank), “is now the owner and holder thereof.” The answer alleges that during the year 1921 defendant was a member of the Board of Directors of the Liberty Bank, but seldom attended the meetings of the board because he was a nonresident of the State; that in April, 1921, the president of the bank informed him that it had lost heavily by the defalcation of one of its employees, and that the various members of the board had each given to the bank a note for $3,000.00, and requested him to give the bank his note for that amount, assuring him that it would be held in the bank for the protection of the depositors, that he would never have to pay it, and that it would be an accommodation to the bank; that, upon the faith of these assurances, he gave the bank his note as requested, for which he received no consideration; that the note was renewed from time to time without payment of any interest or principal; that, prior to *522 the commencement of the suit, the depositors of the Liberty Bank were fully protected by the Exchange Bank for a valuable consideration; that the plaintiff took the note after its maturity, with full knowledge of the facts stated; and that, “the consideration upon which said note was given having been complied with, namely, the depositors having been fully protected, said note was at the time this suit was entered and is now void and of none effect and without consideration.” At the close of plaintiff’s testimony, defendant made a motion for a nonsuit, which was refused. At the close of all the testimony, plaintiff and defendant each made a motion for a directed verdict. The trial Judge refused both motions and submitted the case to the jury, who found for the plaintiff. Defendant appeals. There is little dispute as to the facts. The defendant testified that, in April, 1921, he was notified by the president of the Liberty Bank that there had been a defalcation by one of the officers of the bank amounting to more than $125,-000.00, and that he was asked, in order to safeguard the depositors of the bank, to give his note for $3,000.00, on which no interest would be charged, and which would be carried for the benefit of the bank; that he gave such a note to the bank to protect the depositors, it being one of the “directors’ notes,” and that it was then his intention to pay the note if this should be necessary to accomplish such purpose; and that the note here sued on is a renewal of this note. He also conceded that the Liberty Bank was insolvent in 1923, and introduced in evidence an agreement dated October 23, 1923, between that bank and the Exchange Bank, whereby the former conveyed to the latter all its assets, and the latter guaranteed the payment of the amounts due to the former’s depositors as such and its obligations for bills payable and rediscounts, the Exchange Bank to act as liquidating agent for the Liberty Bank, the contracting parties to have certain rights and liabilities not necessary to be considered here. The note in question passed to the Exchange *523 Bank under this agreement. On March 4, 1926, a receiver was appointed for the Liberty Bank, and on March 10, 1927, under order of the United States District Court, he conveyed to the Exchange Bank all the right, title, interest, and equity of redemption of the Liberty Bank and the receiver thereof in and to the remaining assets of the Liberty Bank, including any equity of redemption or rights of any kind that the latter bank or the receiver might have in any property assigned or conveyed to the Exchange Bank pursuant to the contract dated the 23d day of October, 1923, between the two banks, but excluding the assessments against the shareholders of the Liberty Bank, the purchase price of such assets to be credited on the indebtedness of the Liberty Bank to the Exchange Bank. Among the assets so conveyed was the note here i'n question. Assessments were duly made against the stockholders, and the defendant paid his assessment in full. According to defendant’s testimony, he executed the note and left it with the Liberty Bank for the protection of its depositors; by so doing he virtually created that bank his agent for handling the note for that purpose. The bank, being about to go upon the rocks and facing disaster to its depositors, secured, through the agreement already referred to, the complete protection of its depositors by transferring to the Exchange Bank all its assets, including defendant’s note. The Exchange Bank carried out its obligation to the Liberty Bank by paying the latter’s depositors in full. The Liberty Bank, on its part, used the note for the identical purpose for which the defendant gave it, and he cannot now be heard to complain. As stated by the trial Judge upon argument of defendant’s motion for a new trial, a directed verdict should have been granted for the plaintiff. Under the view which we take of the matter, it is unnecessary to consider all the exceptions seriatim, but none of them have been overlooked. The judgment of the Circuit Court is affirmed. *524 Mr. Chiee Justice Brease and Messrs. Justices Carter and Bonham concur.