Case ID: iowa_196/html/0689-01.html
Source: Caselaw Access Project
Author: {"author": "Stevens, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Citizens Savings Bank of Letts, Appellee, v. Alex N. Herring, Appellant.
    1 BILLS AND NOTES: Form — Effect. The form of a negotiable promissory note, although authorized by law, might be a eireumstanee of some weight in determining a claim of fraud in its procurement.
    
      2 BILLS AND NOTES: Fraud — Promise to Pay — Estoppel. Tlie fact that the maker of a negotiable promissory note promised the indorsee to pay the note does not constitute a waiver of the right to plead fraud in the inception of the note, when the indorsee in no manner changed his position because of such promise.
    
      Appeal from Johnson District Court. — Ralph Otto, Judge.
    October 23, 1923.
    Action upon a promissory note. Verdict and judgment for plaintiff. Defendant appeals.
    
    Reversed.
    
      Walter M. Davis, for appellant.
    
      R. P. Howell .and Arthur Springer, for appellee.
   Stevens, J.

The note in suit was given by appellant, is .made payable to himself, and indorsed in blank by him. It was delivered to an agent of the Disposal Plants Company. The consideration was stock in the above company, to be later issued and delivered to appellant. No stock was ever issued or delivered to him. The note passed into the hands of appellee, as it claims, as an innocent purchaser. The defendant set up fraud in the 'inception of the note. The plaintiff replied, admitting that the representations alleged in defendant’s answer and relied upon as constituting fraud were made, as charged, but denied notice or knowledge thereof. Under the issues, plaintiff assumed the burden, and went forward with its proof..

The only errors complained of are as to three paragraphs of the court’s charge to the jury. The court in one paragraph instructed the jury that the law authorized the making and negotiating of notes in the form in which the ]lote in question appeared, and that the form thereof was not a circumstance tobe considered by the jury in determining the question of fraud; in another, that, if they found that the defendant, at the time he had a conversation with the officer of the bank, knew of the alleged fraud practiced •upon him in securing the note, and agreed to pay it, he thereby waived the fraud, and a verdict should be returned for the plaintiff. The instruction on the form of a note and its negotiation is not, per se, erroneous. Whether it is true in this case or not, it is possible that the form of the note, although authorized by law, might be a circumstance of some weight in determining a claim of fraud in its procurement. Standing alone, it could not be considered as a circumstance tending in any degree to establish fraud. A reversal of the judgment in this case cannot properly be based upon alleged error in giving this instruction. The form of the note in question is authorized by the Uniform Negotiable Instrument Law, and its validity could not be impeached because its negotiability could have been preserved in some other form.

The note bears date August 17, 1920, and came due February 1, 1921. It was purchased by the bank very shortly after it was executed. The vice president, bookkeeper, and assistant cashier of the bank testified that appellant came into the bank, some time before the maturity of the note, and asked to see it; that on this occasion he was asked by the vice president whether there was anything wrong with the note, and if he wanted to pay it; and that he replied, ‘ ‘ No, not right now, ’ ’ — that he wanted to look at it, to see how it was drawn, and that he would “take care of it a little later.” Appellant’s version of the conversation was slightly different. He testified, and is corroborated by the testimony of a witness by the name of Timmerman, who was with him at the bank, that the vice president got the note, and asked him if he wanted to pay it; that he replied, “no,” — that he would take it up, or see about it, later; that the vice president asked him if there was something wrong with the note; that he replied:

“No; I guess it is all.right. It is the one I made out. I told him that it was the note I made out. ’ ’

The court, as stated, instructed the jury that, if the defendant, at the time this conversation was had, knew of the fraud, and agreed to pay the note, he thereby waived the fraud, and a verdict should be returned for the plaintiff. It is not claimed that the bank was in any way prejudiced by the statements of appellant, or that it changed its position with respect to the note, in any particular. It was signed and indorsed by appellant only. The mere promise to pay the note under the circumstances detailed did not constitute a waiver of appellant’s right to plead fraud in its execution. This question is foreclosed by our decision in Ford v. Ott, 186 Iowa 820.

The instruction was clearly erroneous, and a reversal must follow, unless, as contended by appellee, a verdict should have been directed by the court in its favor. ¥e have held that where, under the issues, a verdict should have been directed, error in an instruction in favor of the successful party is nonprejudicial. Mulroney Mfg. Co. v. Weeks, 185 Iowa 714.

The facts relied upon to sustain the appellant’s plea of fraud were admitted by appellee, and the only question of fact to be submitted to.the jury was whether the bank had notice thereof at the time the note was purchased. No motion was made for a directed verdict. The officers of the bank testified quite' fully concerning the purchase of the note and their knowledge of the business and transaction of the Disposal Plants Company; but viewing the record in its entirety, we are not convinced that the instruction was not prejudicial upon the ground that a verdict should have been directed for.plaintiff'. As to the merits, we express no opinion, further than to say that, in view of the error pointed out, and of .the issues, the motion for a hew trial should have been sustained. ¥e deem it unnecessary to discuss the remaining instruction complained of. The judgment of the court below is, therefore, — Reversed.

Preston, C. J., Weaver and De Grape, JJ., concur.