Exchange National Bank v. Little

Hart, J., (after stating the facts). In regard to the case against J. F. Little, J.'T. Lipscomb et al., the appellees alleged that the note was altered after it was delivered to Eagle & Co. and that therefore appellant is not an innocent purchaser for value. Counsel for appellant have not abstracted the testimony on this point, and state that the chancellor dismissed the complaint in this case for want of equity on other grounds. It is the practice of this court to try chancery cases de novo on the record made in the court below. It is true the original note in question is not here for our inspection, but Mr. Lipscomb testified positively that the words “with 10 per cent interest per annum from date” were added in the note after it was delivered to the payee, Eagle & Co. He further stated that the makers of the note did not, at the date of its execution, owe anything to Eagle & Co„ and that the note was given for supplies to be furnished by Eagle & Co. to the makers during the year 1911) that he signed the note as surety. The note bears date of January 17, 1911, and was payable to the order of Ea'gle & Co. on October 1, after date. The note was paid in full to Eagle & Co. in the fall of 1911. Mr. Hudson, the bookkeeper of Eagle & Co., first stated that the note was in his handwriting, but was later recalled as a witness and stated upon further reflection that the words “with 10 per cent interest from date ’ ’ were in the handwriting of R. E. L. Eagle and were placed in the note after its execution by the makers thereof. Expert witnesses were introduced by appellant, who testified that the note was in the bandwriting of Hudson. We have not the note before us, and can only inspect tbe copy of it as shown by the record, but we think the testimony is sufficient to show that the note was altered after it was delivered to Eagle & Co. and that the makers of the note did not authorize the alteration made in it. In the case of Fordyce v Kosminisky, 49 Ark. 40, it was held that the alteration of negotiable paper 'after it has been signed and delivered to the payee, although done in such manner as to leave no mark or indication of the alteration observable by a man of ordinary prudence, avoids the check as to the drawer, even in the hands of one to .whom it is negotiated before maturity for a valuable consideration and without notice of the forgery. The adding of the words “with 10 per cent interest per annum from date” was a material alteration in the note, and the finding of the chancellor that the complaint should be dismissed for want of equity was therefore correct. In regard to the other cases, no such defense was made, and they are ruled by the case of the Exchange National Bank v. Steele et al., 109 Ark. 107; 158 S. W. (Ark.) 969. In that case the court held that one who takes negotiable paper before maturity as security for a debt without notice of any defects receives it in due course and is a tona fide holder. The court further held that where the maker of a negotiable instrument pays the same to the payee, who is not the holder, he is not discharged from his obligation unless the payee was authorized by the holder to receive payment or the holder held out that he authorized such payment. In that case, under a state of facts in all essential respects similar to the facts proved in the case at bar, this court held that the trial court erred in not directing a verdict in favor of the holder of the note. In the present case, the officers of the appellant bank all testified that no authority was given to Eagle & Co. to collect the notes involved in this suit, and they had no knowledge that Eagle & Co. had been in the habit of collecting them. They said that the collateral notes almost invariably fell dne after the note of Eagle & Co. became due. That they never surrendered the collateral notes until the note of Eagle & Co. had been paid or until other notes were put up as collateral in their place. It is true that Hudson, the bookkeeper of Eagle & Co., testified that it had been the custom of Eagle & Co. to collect the collateral notes and that the bank had knowledge of that fact; but when he was cross examined on the point he admitted that the bank had never given them authority to collect the notes and that the only reason that he stated that the bank knew they had been collecting them was the fact that they had done so. So it may be said that the decided preponderance of the evidence shows that the bank never gave Eagle & Co. authority to collect these collateral notes, and that it never had any knowledge that they were collecting them. Again it may be said that the testimony was introduced by appellees tending to show that it was the custom of the banks at England to collect collateral notes which they had put up as collateral with banks in Little Bock and St. Louis, and that it was also their custom to permit merchants and other customers who had put up collateral notes with them to collect them when they fell due. But it will be noted that these witnesses on cross examination stated in each instance that the bank which held the collateral notified them to collect the notes. In these cases, .then, it may be said that the fact that the bank collected the notes was not the result of custom, but was on account of being authorized to do so by the bank which held the collateral. One of these witnesses stated that his bank had formerly done business with the appellant bank, and that it was their custom to put up notes as collateral which fell due after its note to appellant’s bank became due; that appellant bank had sometimes sent collateral notes to it to collect in rare instances where such collateral notes had fallen due before its note to appellant had become due. This testimony negatives the idea that it was the custom of appellant bank to permit banks which had' deposited notes for collateral security with it to collect the same. Therefore, we think that when the testimony is considered in all its bearings a preponderance of the evidence shows that there was no local custom permitting banks which had deposited notes as collateral security to collect the same. Moreover, in the case of Arkadelphia Lumber Company v. Henderson, 84 Ark. 389, the court said: “Particular usages and customs of trade or business must be known by the party to be affected by them, or they will not be binding, unless they are so notorious, universal and well established that his knowledge of them will be conclusively presumed. ’ ’ In the case of J. J. Moore & Co. v. United States, 196 U. S. 157, the court said: Where the rights and liabilities of the parties to a contract are fixed by the general principles of the common law, they can not be changed by a local custom of the place where the contract is made. There is no testimony in the record tending to show that appellant had notice of any such local custom on the part of the banks at England, or that it contracted with Eagle & Co. with reference to such custom. It follows that the decree of the chancellor dismissing the complaints in the cases of the Exchange National Bank v. John Decent et al. and Exchange National Bank v. J. H. White et al., was erroneous and must be reversed with directions to enter a decree in favor of appellant. As above indicated, in the case of the Exchange National Bank v. J. F. Little et al., the decree of the chancellor was correct, and it will be affirmed.