Newsome v. Bank of Ahoskie, 165 N.C. 91 (1914)

March 4, 1914 · Supreme Court of North Carolina

165 N.C. 91

J. C. NEWSOME and Wife, DORA, v. BANK OF AHOSKIE.

(Filed 4 March, 1914.)

Pleadings — Trials—Evidence—Questions for Jury — Bills and Notes —Banks and Banking — Collaterals—Fraud—Rights of Creditors.

The plaintiffs, husband and wife, in their action against a bank, alleged that the' defendant was endeavoring to apply collateral notes of the feme plaintiff to the security of a note held • by the bank, made by her husband to its director and obtained by fraud and collusion between him and the defendant. These allegations were denied in the answer, which further alleged that the male plaintiff was the owner of the lands, securing the . collateral notes, and that these notes were given for the purchase price, and that he had had the lands conveyed to his wife to defraud Ms creditors, one of whom was the ■ director, its in-dorsee; the answer also alleged that the feme plaintiff was not the real owner of the collaterals, but if so, she had given full authority for the defendant to hold them as collateral to her husband’s note: Held, the pleadings raised issues of fact to be submitted to the jury, and a judgment thereon in plaintiff’s favor was erroneous.

Appeal by defendant from Peebles, J., at October Term, 1913, of HERTFORD.

Civil action beard upon motion by tbe plaintiff for judgment upon tbe pleadings. Tbe court, upon such motion, rendered tbe following judgment :

Tbis cause coming at this term to be beard, all }3arties being before tbe court, and tbe court, after bearing tbe pleadings and admissions in open court, that J. B. Garrett, named in tbe .pleadings, is a director of tbe defendant, being of tbe opinion that tbe feme plaintiff, Dora M. Newsome, is tbe owner and entitled to tbe possession of tbe collateral notes described in tbe complaint and answer, towit, note against T. B. Hall for $765 and interest; note against N. Hall for $600, and note against Hoard Newsome for $700, all payable to said feme plaintiff, subject only to tbe payment of tbe note against J. C. Newsome for $1,100 and interest, set forth in tbe pleadings:

It is, on motion of plaintiffs’ counsel, considered and adjudged that upon tbe payment of said note for $1,100 and interest, by tbe plaintiffs, or by any one for them, that tbe receivers, herein-before appointed to take charge and Control of said collateral notes by Lane, judge, at February Term, .1913, of tbis court, shall deliver said collateral notes to tbe said feme plaintiff, Dora M. Newsome.

By consent of all parties to tbis action, it is ordered and adjudged that tbe said receivers, John E. Yann and Stanly Win-borne, proceed to collect said collateral notes against Hall and Hoard Newsome, above described, by sale under tbe mortgage or deed of trust securing tbe same, or otherwise, as to them may seem best, with,interest thereon, and apply tbe collection ' so made as follows :

1. To tbe payment of tbe said $1,100 note and interest due tbe defendant bank by J. C. Newsome.

2. Of tbe balance, retain enough to pay tbe $700 note of J. C. Newsome to J. R. Garrett, now claimed by said bank and described in tbe pleadings, together with tbe cost of this action, to await tbe decision of tbe Supreme’ Court as to such appeal as may be taken from this judgment; and

3. Any balance, after deducting tbe amounts named in sections 1 and 2 above, pay over to feme plaintiff, Dora M. New-some, or to her attorneys of record'.

It is further adjudged that tbe defendant pay tbe cost of this action, to be taxed by tbe clerk, including $2 for tbe stenographer.

This judgment is, by consent, without prejudice to plaintiffs’ right to show fraud or want of consideration for tbe said note for $700 executed by J. C. Newsome to J. R. Garrett, and that tbe defendant bank is not tbe bona, fide owner of said note.

Tbe plaintiff is also taxed with $2 for benefit of stenographer.

• R. B. Peebles,

Judge Presiding. ■

From this judgment tbe defendant appeals.

No counsel for plaintiffs.

Winston & Matthews for defendant.

BeowN, J.

Tbe complaint in substance alleges: In tbe year 1911 Dora M. Newsome borrowed of defendant $1,000, and deposited with said bank, as collateral for a loan, several notes of Hall, Newsome, and others, said notes being given to Dora M. Newsome for land sold them; that Dora M. Newsome never indorsed said collateral to tbe bank, but did authorize her bus-band to deposit them with tbe bank as collateral for tbe loan to her of $1,000, and no more, and that tbe cashier bad knowledge of these facts; that a note for $1,000 was given for tbe loan, and when same was due, tbe cashier, without tbe knowledge or consent of tbe feme defendant, induced her husband to renew tbe note and to include tbe sum of $100 which tbe husband personally owed tbe bank, and for which tbe collateral was not liable; that on 15 January, 1912, J. R. Garrett, a director of tbe bant, through deceit and cunning, induced J. C. Newsome to give him an accommodation note for $731.67, stating that he wanted to buy land, and stating that J. C. Newsome would never have the note to pay; that by teasing and begging and whiskey, .Garrett finally got the accommodation note without consideration, and that Newsome owed Garrett nothing thereon; that soon thereafter J. 0. Newsome saw the note in the hands of the Bank of Ahoskie and asked the cashier what he was doing with same, to which the cashier replied that he was simply transferring same from Garrett to Harmon, and that Newsome then and there explained the circumstances under which the note was given, and that the cashier agreed that he would not handle the note, and that' under no circumstances would the bank seek to hold the collateral responsible therefor; that later the cashier came and tried to induce feme plaintiff to sign a paper authorizing the application of the collateral to this note; that owing to the strange action^ and words of the cashier, attorneys for the plaintiffs tendered the cashier $1,100 and demanded, the collateral, which the cashier refused to accept, and notified them that he held the collateral responsible for the $731.67 note as well as the $1,100 note; that at the time of the tender,' and at the time of filing the complaint, Dora M. New-some owed the bank no more than $1,100; that holding the collateral as security for the $731.67 is a plot and conspiracy between the bank and J. R. Garrett; that the bank’s refusal to surrender the collateral has injured feme plaintiff’s credit.

The feme plaintiff demands judgment for possession of 'the collateral upon payment of $1,000; for $1,000 damages for the detention of the notes, and costs of action.

The answer denies categorically the several allegations of the-complaint, except as- to the tender' and refusal, and avers that the bank is a tona fide purchaser for value and without notice before maturity of the $731.67 note, and holds the same lawfully secured by said collateral. The answer also denies that the feme plaintiff did not indorse the three collateral notes.

The answer also sets out at great length an affirmative defense, and asks equitable relief. It avers that in 1907 the husband, Jokn C. Newsome, purchased the laud described iu the deed iu trust securing the three collateral notes of T. B. Hall for $165, N. Hall for $600, and J. H. Newsome for $700, and paid the purchase money and took a deed therefor; and

15. That on 11 March, 1908, or thereabouts, the said John O. Newsome married the plaintiff, Dora M. Newsome; and then being heavily indebted, and especially being indebted unto J. E. Garrett, • and to hinder and delay and defeat the said Garrett and his other creditors in the collection of their debts against him, the sáid John C. Newsome destroyed the deed for said land which the said E. E. Oowand and wife had made and delivered to him, and falsely and fraudulently procured said Gowand to make and deliver the deed for said land in the name of his wife, the feme plaintiff, Dora M. Newsome, who paid nothing therefor and was ignorant of the fact that said deed was so made, and who took said deed and title as trustee for her husband, and for those whom he owed.

16. That at the time the said J. 0. Newsome so fraudulently had.said deed made to his wife he was indebted, not only to said J. E. Garrett, but also to O. W. Mitchell, since reduced to judgment, in the sum of $238.53, with interest and costs; to Lynch-burg Shoe Company in the sum of $144.65, with interest and costs; Petersburg Dry Goods Company in the sum of $164.66, with interest'and costs; Etchison Hat Company in the sum of $68.85, with interest and costs, and to Montague & Bunting in. the sum of $36, with interest and costs, all of which amounts and claims were reduced to judgments in the year of 1905, and which defendant is informed and believes, and so avers, have not been paid, but are -now due and owing by the said John 0. Newsome; and that he procured said deed to be made to his said wife for the purpose of hindering, delaying, and defrauding them in the collection of their debts, all as above alleged.

The answer then 'avers that the plaintiff and wife sold the land and took the three collateral notes and deed in trust aforesaid payable to feme plaintiff in pursuance of their fraudulent scheme aforesaid.

His Honor evidently rendered tbe judgment above set out upon the -theory that the creditors alleged to be defrauded are not parties to this action, and are not seeking the relief prayed for by the defendant, and that such creditors must fight their own battles, and that this defendant cannot fight for them.

. It is to be noted that among the creditors alleged to have been defrauded is J. R. Garrett, to whom the $731.67 note was given, and who indorsed it to defendant, and to secure which the defendant avers the collateral is bound, and it is substantially alleged that this indebtedness existed at the date of the fraudulent transaction. It is denied that this note is accommodation paper, and the inference is that the defendant claims that the consideration for this note is the indebtedness to Garrett alleged to be existing prior to 11 March, 1908.

The defendant further alleges that Dora M. Newsome is not the yeal owner of said notes, but that if she is such owner, she gave her husband full authority to negotiate them to secure this indebtedness, and that under his indorsement and the terms of the paper-writing, Exhibit B, they became bound for his entire indebtedness.

It is plain that the answer raises issues of fact, which must be determined by a jury before the rights of the parties can be finally adjudicated.

The judgment practically determines that the collateral notes, under the allegations of the complaint, which must be taken to be true, are not in any view of the case security for the $731.67. In this there was error.'

The cause is remanded, to the end that the issues raised by the pleadings be submitted to a jury.

Reversed.