188 Iowa 168 | Iowa | 1920
The note in suit appears upon its face to have been made by Osborn to the appellant Davis, who is alleged to have endorsed it to the plaintiff bank.
Stating the defenses on which reliance is placed, in briefer terms, they are, as we understand them, about as follows: (1) Denial made in general terms; (2) want of consideration for the appellant’s endorsement of the note; (3) failure of consideration for the endorsement; (4) payment of the note by Osborn; (5) that there was never any delivery of the endorsed note to the plaintiff, or that the delivery was, at most, conditional; and (6) that the note was endorsed in consideration of a representation by the bank that it held a mortgage on Osborn’s property of sufficient value to secure payment of all his debts to the bank, including the note in question, and that, if appellant would endorse said note, the bank would proceed to collect the same from the proceeds of the sale of said mortgaged property, and would apply the first money received on such sale to the payment of said note; that said promise and agreement were never performed, and were never intended to be performed, but were made with the fraudulent intent and purpose to entrap the appellant into an endorsement of the note, and that plaintiff did, in fact, collect enough from the security held by it to pay the note, but failed to apply it upon such indebtedness, as agreed.
The alleged facts on which these various defenses are sought to be founded are substantially as follows: The appellant Davis, a farmer, was about to hold a public sale, to dispose of a considerable quantity of personal property. Preparatory to such sale, he entered into an agreement with the bank by which said bank was to purchase all the promissory notes given by purchasers of the property so sold, and to that end, and to satisfy itself of the financial respon
Later, as we understand the answer, the bank did obtain a new note from Osborn, stamped the first note “paid,” and delivered it to Osborn. Thereafter, the appellant, at the request of the bank, endorsed the new note it had theretofore obtained from Osborn. The pleading further shows that, to obtain said endorsement, the bank, by the officer having the .matter in charge, stated and represented to the appellant that it held a chattel mortgage on the property of Osborn to the value of more than $500; and that, if appellant would make the endorsement requested, the bank would credit and apply the first moneys collected from Osborn or from the said security to the payment of said note; and that, relying upon said representation and promise, appellant did endorse the note; that, thereafter, the bank did collect from the sale of said mortgaged property more
The narrative of these alleged facts is restated and repeated, in various forms and with various embellishments; but what we have said is sufficient, we think, to enable us to get at the meat of the controversy on which we are asked to pass. The amended and substituted answer, setting up the defense or defenses to which we referred, was not demurred to; but plaintiff moved the court to strike out substantially everything contained in the pleading (except mere denials) as being “incompetent, irrelevant, and redundant matter.” The motion was sustained, and, defendant excepting to the ruling and declining to further plead, judgment was rendered against him for the amount of the note.
In entering the ruling, the court explained its action by saying:
“This answer suggests what might raise several issues; but it seems to the court that, under the negotiable instrument law, the endorsement by the defendant upon the original note, of which the note in suit is but a renewal, would not admit of oral evidence to explain such endorsement.”
I. Is there anything in the Negotiable Instruments Act which precludes the defense which appellant pleaded ? Counsel for appellee lay much stress, in argument for an affirmance, upon the proposition that defendant, by its answer, set up a plea of fraud in the procurement of his endorsement ; and it is said that the matters so pleaded are, at most, mere promises, to be performed in the future; and that a failure to so perform does not amount to fraud. As a general, abstract proposition, this is, no doubt, true. It is also true that the answer indulges very freely in the words “fraud” and “misrepresentation;” but, when shorn of its unnecessary and luxuriant verbiage, we still have left a
There is nothing in the Negotiable Instrument Act or in the familiar rule against parol evidence to vary the terms or legal effect of a writing which, as between the original parties, precludes plea or proof of no consideration or failure of consideration. Farmers Sav. Bank v. Hansmann, 114 Iowa 49; 7 Cyc. 690 ; Agricultural Bank v. Robinson, 24 Me. 274; Lackawanna Trust Co. v. Carlucci, 264 Pa. 226 (107 Atl. 693) ; Coghlin v. May, 17 Cal. 515.
The general principle of the law of contracts, that, to be valid and legally enforcible, as between the parties thereto, an agreement or undertáking of any kind must be supported by a consideration, is too elementary to call for citation of authorities. To that rule, commercial paper affords no exception.
This is not a case in which the plaintiff occupies the relation of an innocent purchaser of the paper or a holder in due course, if the allegations of the answer be true,— and, for the purposes of the appeal, they must be accepted as true, or, at least, as being susceptible of proof. The allegation is to the effect that the bank had entered into an agreement to purchase all the notes taken at the sale, and assure itself of the sufficiency of such notes by having its own officer act as clerk, make settlement with the purchasers, and take their notes direct to the bank itself, without the assumption of any personal liability thei’eon by the appellant. Accoi*diixg to the pleading, the appellant never at any time had possession of or exercised any dominion over the note. It was taken by the bank, and was at all times held by it; and the endorsement was made, not by way of negotiation of the paper to the bank, but was a subsequent act or independent transaction which, if the answer be true, would require some consideration other than the original agreement. And if, as counsel say, the bank paid
Appellee says, in avoidance of this defense, that, even if this be true as to the note and endorsement first made, it has no relevance at this time, because this action is upon a new note and new endorsement. Without taking time to consider other features of the answer bearing upon the proposition so urged, we think it quite clear that appellant does plead a failure of consideration as to this endorsement also, as we have before pointed out. The answer alleges that this last endorsement was made upon the assurance and promise of the bank that it held security by chattel mortgage upon the property of Osborn to a valué in excess of this debt, and would apply the first money realized from such security to its payment. It is also alleged that, having thus secured the defendant’s endorsement, the bank did collect and receive from said security an amount of money sufficient to pay off the note; but, instead of so applying it, as agreed,
The foregoing is sufficient to indicate our view that the trial court erred in striking the defendant’s answer, and that the judgment rendered against him must be reversed, and new trial ordered.
What we have said in this opinion in relation to matters of fact will, of course, be understood as having reference to the sufficiency of the answer, and not to the merits of the dispute between the parties. That is a subject to be considered only when the issues have been framed, and the parties have both had opportunity to be heard.
For the reasons stated, the judgment below is reversed and cause remanded for further proceedings in harmony with this opinion. — Reversed.