National Bank v. Anderson

The opinion of the court was delivered by Mr. Justice McGowan. This case was once before in this — 543 — court (see 28 S. C., 144), where the facts are stated as follows : “On July 1, 1884,-the defendants executed a note for $1,000 to B. D. Buford & Co., of Rock Island, Illinois, for value received, payable nine months after date. This promissory note was endorsed as follows: (1) B. D. Buford & Co., by J. M. Buford, assignee; (2) Rock Island Plow Company, P. L. Mitchell, president; (3) pay I. M. Ivy & Co., or order, for collection for First National Bank, Rock Island, Illinois,' Geo. M. Loosley, cashier. The complaint alleged the endorsement' of the note by J. M. Buford, as assignee of B. D. Buford & Co., and the discount of the same by the plaintiff bank in good faith before maturity, on February 9, 1885, for value, and the plaintiff’s ownership thereof. The defendants answered that the consideration of the note was agricultural, implements, which were warranted by B. D. Buford & Co. to be suitable for the cultivation of corn and cotton, for which, however, they proved wholly unfit; that before the commencement of the suit they offered to return the implements, but the offer was declined, and the defendants were thereby damaged to the extent of fifteen hundred dollars; and ‘that if the plaintiff ever became the owner and holder of said note, it became such after notice of the defence and claim of set off; and that the note bad not been transferred to the plaintiff in good faith.’ * * * One of the defendants was állow.ed to testify as to the declarations of John P. Gage, a lawyer, whom it seems the assignee, J. M. Buford, had employed to collect another note of the defendants for $500. It did not appear that Mr. Gage was the attorney or agent of the bank, or had been employed, to collect the $1,000 note. This defendant was also allowed to state that at the time the note was given for agricultural implements there was a general understanding that such of the implements as did not give satisfaction to the farmers should be exchanged for others; that they did not prove satisfactory, but B. D. Buford & Co. refused to take them back or exchange them,” &c. Under the charge of the judge the jury found a verdict for “the defendant”;.but this court set aside the verdict and ordered anew trial for several reasons, and, among them, upon the ground that “a negotiable instrument in the hands of a bona fide endorsee before due is presumed to have been given for valuable consider — 544 — ation ; and possession is ordinarily prima facie evidence that the endorsee received it in good faith for value before maturity,” &c. Accordingly the case went back, and upon the second trial the plaintiff introduced the same evidence as in the first. James M. Buford and George M. Loosley, residents of Rock Island, Illinois, testified by commission as follows : The first that he made the endorsement on the note in blank himself as the assignee of B. D. Buford & Co., and produced the deed of assignment to himself. The latter testified that he was the cashier of the plaintiff corporation on and before February 9, 1885, and that on that day the plaintiff corporation discounted the note at their banking house for value in the usual course of business, and that the plaintiff corporation had no notice whatever of any defence or off-set to the note. There was also evidence tending to show that the purchase of the agricultural implements was sometime in the year 1883; that the account was not closed by note until July 1, 1884, which was not due until nine months thereafter (April, 1885), and that up to within a few days of that time (March 13, 1885), the defendants, in asking for indulgence, wrote that the note is drawing interest, and you will not lose a single cent of it,” &c. Upon the charge of the judge (which should appear in the report of the case), the jury again found for the defendants. The plaintiff’ bank moved for a new trial, which the Circuit Judge, on November 9, 1888, granted. But soon after he requested a reargument of the motion for a new trial, and on November 13 he passed the following order : “After granting the foregoing order, I reflected upon its propriety, and being not entirely satisfied that I did right in setting aside this second verdict of the jury in favor of the defendants, I requested reargument of the matter. After this reargument I am of opinion that the above order should be rescinded. There was evidence tending to sustain the defence, which the jury weighed in favor of the defendants, all issues of fact- were fairly submitted, and for a second time they found for the defendants. Very strong circumstances were adduced going to sustain defendant’s case and to contradict the plaintiff’s testimony. It is ordered, therefore, that the above order be rescinded and a new trial.be refused,” &c. — 545 — The plaintiffs appeal to this court upon the following grounds : “I. Because the judge erred in admitting the testimony of Iredell .Jones, John G. Anderson, and Thomas J. Seward, witnesses for the defendants, as to the contents of a letter alleged to have been written by J. M. Buford, assignee of B. D. Buford' & Co., to John •P. Gage about April 8, 1885, and alleged to have been read or exhibited by Gage to the witnesses about the same time, when there was no evidence going to show that the plaintiff authorized .such letter to be written, or had any knowledge thereof, or that either of the Bufords or Gage were the agents of the plaintiff at that time; besides, the presiding judge further.erred in admitting .testimony of the same witnesses as to the declarations of John P. •Gage, made to the defendants about the same time. 2. Because the presiding judge erred in admitting the testimony of several witnesses of the defendants, tending to prove a failure of consideration as between the makers and payees of the note sued on, when there was no evidence to impeach the bonafides of the plaintiff or its title. 3. Because the presiding judge erred in undertaking, on November 13, 1888, to rescind an order made by him on November 9, and duly entered in the minutes of the court, .setting aside the verdict herein and granting a new trial, especially where counsel for plaintiff was not present in court, having undei-stood the presiding judge to refuse to disturb his order of November 9th, 4. Because the presiding judge erred in not granting a new trial, for the reason that incompetent testimony had been admitted, and for the further reason, that the verdict of the jury, was unsupported by any evidence,” &e. Without going into the question as to whether the Circuit Judge had the right to rescind his own order granting a new trial, we think his first impression was right. We have, for the second time, looked carefully through this whole case, and we are unable to see any substantial difference between the defence as made on the second trial and that made on the first. It seems to us, to allow this verdict to stand, would be not only to disregard the rulings upon the former appeal, but to ignore the old well settled principle of commercial law — that if a promissory note, not yet due and fair upon its face, is transferred to a bona fide holder for .value, without notice of any defence, which may exist between — 546 — the original parties, the makers of such note may not, .against such holder, set up any defence which tends to alter the terms of the note as to what was the original contract, or to show failure ■of consideration. This principle of commercial paper is so important that it'mustbe maintained in all its integrity. This note was not due until April 1, 1885. The makers had put it in circulation. Was it transferred to the bank on January 9, 1885? Such is the direct positive proof and unless it is entirely fabricated, there is, necessarily, an end of the defence. There is not a scintilla of direct proof to the contrary. But it is earnestly urged, that all the circumstances, taken together, show that the bank had notice of the defence now made. It was not made to appear that the defendants ever claimed to have a defence — certainly down to March 13, 1885, when, in asking for indulgence, they wrote that the whole debt was drawing interest, and every cent of it would be paid. If, as testified to clearly and positively, the note, then, had already been transferred to the bank, how could it have notice of that which up to that time had no existence ? But, it is suggested, that the note was never really transferred to the bank, as shoivn by the fact, that James M. Buford, as assignee, after the alleged transfer to the bank, still took an interest in collecting the note, and wrote letters upon the subject. We cannot think this circumstance so strange and unusual as to nullify the endorsements on the note itself, and to overthrow the positive testimony that the bank became the bona fide holder of the note on February 9, 1885. We entirely agree with what the Circuit Judge said in his charge. “The bank is bound to recover, unless there was a conspiring against the defendants, to get rid of this plea of failure of consideration, and the Rock Island Bank was used as a cat’s paw. In order to establish that, certain declarations from B. D. Buford, or one of the Bufords, and also another one, are introduced here— some conversation of Mr. Gage, some statement of a letter he had, and the contents of the letter. Not a single word that Buford said, not a single word that another one said, would bind the bank, if it were done after the bank became the owner of the paper, and unless the party were the actual agent of the bank, after it became the owner of the paper. Buford could not say anything to hold — 547 — the bank after he had traded the paper, neither could his (Buford’s) assignee, for he had traded the paper. Neither could bind the bank, if it was an innocent purchaser for valuable consideration. You have heard the testimony about this conversation with Mr. Gage, and that it was about a letter purporting to be from Buford. Mr. Gage says that at that time he was not the agent of the bank for the collection of this note, so this plaintiff cannot be estopped except by some actual agent, having authority to make such statements,” &c. Under the proof in this case, we cannot think that such notice of the defence now made was so fixed upon the bank, before it discounted the note on February 9, 1885, as to authorize the admission of testimony as to the alleged guaranty, that the agricultural implements would “prove satisfactory,” or as to the alleged failure of consideration. This being the case, we think it was error to admit that evidence. Nor can we say that the error was cured by its “admission, subject to objection.” That may be done in some cases where the court is to pronounce the judgment. But in a trial by jury, such evidence may have its effect simply by being admitted at all. See Bonham v. Bishop, 23 S. C., 105. The judgment of this court is, that the judgment of the Circuit Court be reversed, and the cause remanded for a new trial.