Holland Banking Co. v. Booth

Wood, J., (after stating the facts). (1) Counsel for appellant contend that the uncontradicted evidence shows that the appellant was a bona fide holder of the notes for value before maturity, and that the court therefore erred in refusing its prayer for ,a directed verdict. They say that the answer wholly fails to allege that the Holland Banking Company had, at the time of its purchase of the notes, any notice or knowledge of the 'alleged misrepresentations of the agent of the Holland Stock Farm, nor does the proof, taken in its strongest light, show that the hanking company had knowledge of the misrepresentations alleged. But the answer of the appellees, in which they deny that the appellant procured the notes in due course, and in which they deny that the appellant acted in -good faith in the purchase of the notes, was sufficient to raise the issue as to whether the appellant was an innocent purchaser of the notes, that is, one who had purchased the notes for value, before maturity, and in good faith. It is true that W. B. -Sanford, who was the cashier of the bank at the time 'and purchased for it the notes in controversy, testified that he purchased the notes, paying face value for them, less the credits thereon, and received accrued interest down to the time of the purchase, and that at the timé of the purchase the got information through the payee and holder of the notes and from others concerning’ the solvency of the makers that satisfied him that the notes were good. He bought them without recourse because the payee and holder would not sell them any other way, and he thought that they were good. On cross-examination it was shown that Sanford, cashier, and Charles Holland, the holder of the notes, were brothers-in-law, and that the Holland family and the Sanfords owned all the stock'in the bank. (2) If this was all the testimony we would readily hold, that the evidence was insufficient to submit to the -ury the issue of the bank’s good faith in the purchase of the notes. But the testimony as disclosed by the record in this case was sufficient to make the issue of the bank’s good faith in the purchase of the notes in suit one of fact for the jury. Here it was -shown that the 'Cashier, at the time he purchased the notes, knew they were given for the purchase price of horse-s from Charles Holland; that the bank had bought between twenty-five and fifty thousand dollars worth of notes of this character from Holland ; that it had taken -all of these without recourse; that this indorsement was placed on some of the notes with a rubber ‘stamp; that the bank had such a stamp; that when Holland presented the notes for sale he said that he had letters concerning the solvency of the makers, which he exhibited, and that the cashier wrote letters himself where he was not satisfied; that it was the bank’s custom to take paper maturing in one, two or three years signed by strangers without any financial rating at a discount of the interest on the notes if it had proper evidence that the notes were good; that the bank either paid Holland cash or gave him credit for the notes; that he was a director of the bank and had an account there; that the bank bought the major portion of the notes that Holland took; that the cashier knew that he handled sheep, cattle and horses and transacted a large .amount of business. It was further shown that Charles Holland, holder of the notes, owed the bank at different times different 'amounts. The witnesses were unable to say what the amount of his indebtedness was at the time of the purchase of the notes. The hiank, at the time of the purchase, had a written guaranty from T. B. Holland, the father of Charles Holland, to protect the bank in case of loiss on all the notes that the bank purchased from Charles Holland without recourse. It was not the usual custom of appellant bank or of the banks in Missouri to require customers to give a written guaranty before taking a note without recourse; that the taking of the notes from ‘Charles Holland in this way was “.an exceptional case;” that the usual bank discount in discounting notes in Missouri was 6, 7 or 8 per cent., depending generally upon the customer, the usual •discount being from 6 to 8 per cent on long time notes. The witness who testified as to the guaranty stated later, in explanation, that he could not give the date of such guaranty, but it was on a date later than the notes, .and that it arose out of a private transaction between the stockholders land officers of the bank rather than between Charles Holland and the bank; that Charles Holland was not a party to it. There was testimony that the customary rate of interest in Missouri was 8 per cent; that they were allowed to charge that, but they usually got more. It will be observed that the additional facts developed in this record justified the court in sending to the jury the issue as to whether or not the appellant purchased the notes in controversy in good faith. The principle of law applicable here is stated in 3 R. C. L., p. 1075, sec. 280, as follows: “While the authorities uphold with much unanimity the rule that neither negligence, nor knowledge of suspicious circumstances, nor failure to make inquiries, will in or of itself amount to bad faith in a holder of negotiable .paper who purchases it for value before maturity, yet they are equally consistent in holding that the existence of such facts may be evidence of bad faith sufficient to take the question to the jury. * * * Although suspicious circumstances .are not notice as a matter of law, yet the jury may find them to be so as a matter of fact, and evidence going to show the existence of such grounds for suspicion is .always admissible.” It is declared in our act to make uniform the law of negotiable instruments, (Act 81 Acts of 1913, see. 56) that, “To constitute notice of an infirmity in the instrument, or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that 'his action in taking the instrument amounted to bad faith. ’ ’ This is but a reiteration of the rule which was well settled by our own court and the authorities generally before the passage of this act. (See Bothell v. Fletcher, 94 Ark. 100; Mee v. Carlson, 29 L. R. A. (N. S.), p. 351, note, and summary at page 388 et seq. “But the prevailing view for many years has been to the effect that mere ground of suspicion as to the existence of defenses to the instrument is not equivalent to knowledge thereof by the purchaser. * * * Knowledge, however, may be shown to have been possessed by the party either by direct proof, or by facts and circumstances that fairly lead to that conclusion, and circumstances that are not of any great probative force in themselves are admissible in connection with other proof to show guilty knowledge or want of good faith. ” 3 R. C. L. pp. 1073-4-5, and oases in note; Arnd v. Aylesworth, (Iowa), 123 N. W. 1000, 29 L. R. A. (N. S.) 638. The testimony of Sanford to the effect that he purchased the notes before their maturity, and that he paid value for them, and he 'knew nothing of the transaction between the makers of the notes '.and the seller of the horses, and that the notes were purchased in due course, would not have warranted the court, in view of other facts developed iby his testimony and the testimony of other witnesses, in directing the jury to return a verdict in appellant’s favor. The good faith in making the purchase was still in our opinion, an issue of fact for the jury under the evidence. In Skillern v. Baker, 82 Ark. 86, we said: “It may be said to be the g-eneral rule that where an unimpeached witness testified distinctly and particularly to a fact and is not contradicted, and there is no circumstance shown from which an inference against the fact testified to by ■the witness can be drawn, the fact must be taken as established and a verdict directed accordingly, is inapplicable where the witness is interested in the result of the suit, or facts are shown which might bias his testimony,' or from which an inference might be drawn unfavorable to his testimony or against the fact testified to by him. Then the case should go to the jury.” In Olsen v. Hendrickson, 12 Iowa 222, it is said: “The witnesses, though unimpeached, may have such .an interest in the question at issue as to affect their credibility, and .furthermore, it is often a difficult question to decide when a witness is, in a legal sense, uncontradicted. He may be contradicted by circumstance® as well as by statements of others contrary to 'his own.” And in Arnd v. Aylesworth, supra, it is said: “That circumstances under which a note is negotiated may 'be sufficient to sustain a verdict against the holder’s positive denial of notice has been frequently held.” See McNight v. Parsons, 136 Ia. 390, 15 A. & E. Ann. Cas. 665; Bolt v. State Savings Bank, 145 S. W. 707. The court did not err in refusing to single out the fact that Charles Holland was a director, and the fact that the notes were indorsed without recourse, and in refusing to tell the jury that these facts could not be taken as showing that appellant was a bona fide holder of the notes. If these had been the only facts on the issues of good faith ,and due course such declarations might have been correct. But the above facts were proper to be considered in the case with all the other facts on that issue. (3) The testimony of witness McDaniel showed that he had been a cashier of banks since 1891, and wias familiar with the rules .and customs of the banking business in the city of Springfield ¡and in Missouri. His testimony related to the custom of banks in that city as to discounting paper and was competent on the issues as to whether appellant was a purchaser in due course and in good faith. Moreover witnessSanf ord had testified on cross-examination, that it was the custom of this bank to take paper in one, two ¡and three years signed by .strangers without rating at a discount on the note; witness stated he could not tell what banks in Missouri did. Nevertheless he testified: “but they all did it more or less.” The testimony of witness McDaniel tended to rebut this testimony and was also competent for that reason. The jury under the instructions of the court could not have rendered a verdict in favor of appellees unless they found that appellant was not an innocent purchaser for value. Therefore, since the verdict was in favor of appellees, the jury must have found that appellant was not a bona fide holder for value. That left the issue raised by ¡appellees ’ answer as to whether they had good defenses to the notes as against the payee. The appellant’s abstract does not show that appellant denied the allegations of appellees’ answer as to breach of warranty, failure of Consideration, false representation, etc., and appellant did not adduce any testimony bearing on these issues. The uncontroverted testimony of the appellees sustained the allegations of their answer on these issues and even though there might have been technical errors in some of the instructions on these issues the verdict as to these was nevertheless correct upon the pleadings and the undisputed evidence. We therefore find no error prejudicial to appellant on this branch of the case. The judgment in the whole case is free from prejudicial error and must therefore be affirmed.