Hamburg Bank v. Ahrens

| Ark. | May 17, 1915

Kirby, J.,

(.after stating the facts.) It is contended first that the court erred in not excluding from the consideration of the jury the testimony of the witnesses relative to the parol agreement .to deliver to Brown’s insurance agency the insurance business of the officers of the bank and its customers, which could be controlled by it, it being claimed that if such 'an agreement was made, it was not to be performed wibbin a year and was within the statute of frauds and therefore the failure to carry it out could not constitute a failure o'f consideration of the notes.

(1) This court has held that a defendant may show in defense of a suit upon promissory notes 'a partial failure of the consideration therefor by 'way of a recoupment in abatement of so much of the consideration as has failed. Webster v. Carter, 99 Ark. 458" date_filed="1911-06-19" court="Ark." case_name="Webster v. Carter">99 Ark. 458; Dutton v. Million, 169 S.W. 1184" date_filed="1914-10-12" court="Ark." case_name="Lewis v. Rieff">169 S. W. 1184, 114 Ark. 330" date_filed="1914-10-12" court="Ark." case_name="Dutton v. Million">114 Ark. 330.

Brown testified that he executed the notes upon the agreement of Hie bank’s officers to deliver to his agency their insurance business and Ithe insurance business of such other customers as it could control. That he did this after they had shown him a list of the business that would 'Come to Ms agency which was .sufficient to take care of the notes as (they matured; said that he got none of the companies of the old Elmo agency (because Brown iand Tebbs had failed to pay his indebtedness to the companies and that the list of the dates of expiration of the policies was secured through Albert Ahrens’ .agency .and “that the agency, the bank agreed to turn over to him was not worth anything at all.”

After the bank refused to continue to have the insurance business of its officers and others given to the Brown Agency in accordance with the .agreement, Brown declined to pay any of 'the remaining notes and sold his agency for barely enough to pay the indebtedness due from him to the insurance companies he represented. Brown had paid .sixteen of the series of notes.

(2) The first instruction, telling the jury that if they found that the consideration for which the notes sued on was given had failed or (had not been performed by the plaintiffs that they should find for the defendants, was not erroneous as being abstract, Brown’s testimony showing that the officers of the bank bad ait first given enough business to his agency to justify his paying the notes maturing, that the agency they agreed to deliver was worthless 'and that they had finally failed to perform the agreement to' deliver the insurance business to his agency. It may be 'that the agreement to deliver such insurance business, .since the last of the series of notes in consideration of which it was made was not due for more than two years thereafter, was not to be performed within one year from the time it was made, but there was no legal obstacle to the performance of this -agreement by the bank and its officers and certainly it was a moving .consideration for the execution of the notes, the makers of which declined to pay the remaining notes after the failure of the bank to deliver any considerable portion of the insurance business in performance of its agreement.

Conceding ithat the agreement was within the statute of frauds and .could not be enforced by Brown against a plea thereof in another proceeding, it -still could foe availed of as a defense to the notes, the partial failure of consideration of which may foe -shown upon the theory that it wias a recoupment and not -a .set-off or counterclaim and the right to reduce the claim sued on -continued as long as plaintiffs’ cause -of action thereon existed. State v. Ark. Brick & Mfg. Co., 98 Ark. 129.

(3) If the bank was -allowed to procure the -execution of these notes upon -agreement to furnish -enough insurance (business to the -agency to enalhle its manager to pay them off and then refuse to perform its -agreement 'because it was not in writing and in -contravention of the statute of frauds -and collect the notes notwithstanding, it would foe perpetrating -a fraud under the forms of law -and the terms of -a -statute -designed to prevent and protect against fraud.

The court did not err in refusing plaintiffs ’ said requested instruction 19, telling the jury that a failure to deliver part of their insurance to the -defendant by Blanks -and others under a promise to do -s-o, not -due to his inability to meat’the rates of other companies, could not foe considered -as a total failure of consideration, unless it appeared from a -pi-eponderance -of the testimony what was the damage in dollars -and -cents -on -account of such failure -and that no recoupment -eo-uld foe fo-aid for a partial failure. It had -already instructed the jury in appellee’s requested instru'ction numbered 2 that if the plaintiffs partially -failed to' perform the consideration for which the notes sued on were -given, -and that by reason of the breach oif -contract the defendants -were -damaged in an amount equal to or -greater than the amount of the notes sued on, they would find for the -defendant and the jury must have understood from the instructions given that in order to relieve the defendants from the payment -of the notes, that th-e bank’s officers had failed to deliver enough insurance -business under the agreement so to do to damage the makers of the n-ote-s in a sum equal to or greater than the amount due thereon. And there i-s -substantial testimony from which the jury might -have found that the failure to. carry out the agreement to deliver insurance 'business to Brown’s agency caused him a loss of more than the amount of the notes sued ion iby the bank. Sixteen of the series of notes had already been paid and 'the defense is not available against the notes sued on by T. N. Doyle.

(4) It is understood that he purchased them for a valuable consideration before maturity and the testimony does not show that he had notice of any defect therein or any defense thereto. The burden was upon 'appellees to show after the testimony disclosed that Doyle had purchased 'the notes for value before maturity that he had such notice of failure of 'consideration as would prevent his being a bona fide purchaser, the presumption otherwise. being 'that he was a purchaser in good faith without notice. Harbison v. Hammons, 113 Ark. 120" date_filed="1914-05-11" court="Ark." case_name="Harbison v. Hammons">113 Ark. 120, 167 S. W. 849; Little v. Ark. National Bank, 113 Ark. 72, 167 S. W. 75.

The testimony does disclose that J. P. Blanks, the president of the bank, knew of the infirmity in the notes, that he negotiated the sale of them to T. N. Doyle for the bank and that he was salesman for and a stockholder in the Beal-Doyle Dry Goods Go., a corporation in which said Doyle was largely interested. Blanks was not the agent of Doyle, however, but of the bank in the sale and he stated that he did not tell the purchaser anything about any defense to the notes or refusal of the makers to pay same,, but on the contrary recommended them as ‘ a good investment. There was nothing shown in the transaction that would impute notice to the purchaser of these notes before maturity, who paid an adequate consideration" therefor, of any defense thereto.

It follows that the judgment against appellant Doyle, there being no testimony to support the verdict, must be reversed and a judgment will be entered here in 'his favor.

The record not disclosing any prejudicial error, the judgment against the bank will be affirmed. It is so ordered.