Mechanics Bank v. Terry

ON MOTION FOR REHEARING.

Biggs, J.

The theory of the defense is that the defendants were accommodation makers of the note, and in consideration of its execution by them Florida, who was the real debtor, and Ferguson, the president of the plaintiff bank, agreed with them that a note for $6,000 which had been previously pledged by Florida to plaintiff to secure a debt of $2,500 should be held primarily for the security of the latter debt, and secondarily for the security of the note in suit; that, prior to the commencement of the present action, the plaintiff realized from the collateral note the sum of $5,000, which was more than sufficient to pay both debts. It was contended that, as both debts were due at the time the plaintiff received the money, its receipt *19was tantamount to payment, and it was so* pleaded in the answer.

The plaintiff denied that any such agreement was entered into, and at the trial its counsel objected to evidence tending to prove it, for the reason that it tended to contradict or vary the note, in that by the terms of the note the obligation of the defendants to pay $1,100 was absolute, whereas the evidence adduced tended to prove that they were only liable for whatever deficit there might be after realizing on the collateral. The original opinion adopts the plaintiff’s view of the law, and the judgment was affirmed on that ground alone. The argument in support of the motion for rehearing is devoted entirely to an attempt to combat that position.

At the original hearing I was of the opinion (which I still entertain), that the agreement was well pleaded, and that the evidence of it was properly admitted. I concurred in the result reached in the opinion, because the defense had been submitted to the jury under proper instructions and was found adversely to the defendants.

The defendants testified to the arrangement as above stated. The plaintiff’s president and cashier, with whom it was claimed the contract was made, denied that any such an agreement was entered into. There was also evidence tending to prove that the collateral note was held by the plaintiff, not only as security for the debt of $2,500, but for all other debts which Florida owed the plaintiff; and that, at the time the note in suit was given, Florida owed plaintiff an additional sum of $3,800, to the partial discharge of which the amount realized from the collateral had been applied.

At the instance of the defendants the court instructed the jury as follows:

*20“The court instructs the jury that, if you believe and find from the evidence in this case that the defendants executed the note in suit as accommodation for one A. K. Florida, and so advised the plaintiff bank upon the date of its execution; and if you further believe from the evidence that before the execution of said note the plaintiff bank by its officers represented to defendants that said bank held, as collateral security for a then existing indebtedness of said Florida to said bank of $2,500, a collateral note of one Julia Stratton, secured by deed of trust, which last note was for the sum of $6,000; and if you further believe and find from the evidence that the plaintiff bank, acting through any of its officers, agreed with defendants that, if they would execute the note here sued upon, it, said plaintiff bank, would, subject to the payment of $2,500 then due to it by said Florida, hold said collateral note of $6,000 as collateral for the payment of the note herein sued upon; then, if you further believe and find from the evidence in this case that the plaintiff bank subsequently realized upon said note of $6,000 a sum sufficient to discharge the indebtedness, due to it by said Florida prior to the execution of the note herein sued upon, and also to discharge the note here sued upon, your finding and verdict will be in favor of the defendants.
“The court instructs the jury that, if you believe and find from the evidence in this case that one A. K. Florida deposited with the plaintiff bank a note for $6,000 secured by a. deed of trust, and it agreed with said Florida to hold same as security for a sum then borrowed, and also for any general indebtedness which might be due by the said Florida to said bank; and if you further believe that thereafter plaintiff bank, in consideration of defendants executing the note herein sued upon, agreed with said Florida and defendants *21that, after the payment of the indebtedness for which said deed of trust and note for $6,000 was primarily pledged, it would hold said $6,000 deed of trust and note as security or collateral to the payment of the note herein sued upon; and if you further believe that thereafter plaintiff bank by foreclosure proceedings realized upon said note of $6,000 the sum of $5,000, or any amount; then, if you believe that said sum realized was sufficient to pay the amount due upon the indebtedness for which said collateral was first pledged to plaintiff bank, and also leave a surplus thereafter, then and in said event the court instructs the jury that it was the duty of the plaintiff bank to apply said surplus, if any, to the payment of the note in suit, and it is your duty to credit said amount upon said note as a payment thereon, and render a verdict against defendants herein for the difference, if any, between the amount of said note and the credit, if any, which under the instructions given to you by the court, should have been credited thereon.”

On behalf of the plaintiff the court instructed as follows:

“If you believe from the evidence that the Stratton note and deed of trust were pledged to the plaintiff by A. K. Florida according to the terms of the $4,000 note put in evidence; and if you further believe that the said $4,000 note remained unpaid at its maturity, and that thereupon $200 of the principal was paid, and for the balance of $3,800, the $3,800 note put in evidence was given with said Stratton note and deed of trust as collateral security according to the written pledge in said note set forth; and if you further believe that said Florida indorsed and discounted with the plaintiff the $1,000 note of Chas. H. Gleason & Company, put in evidence; and if you further believe that, at the time of the sale of the property covered *22Tby said Stratton deed of trust, said note of $3,800 and said note of Gleason & Company for $1,000, indorsed by Florida, were past due and unpaid in plaintiff’s hands; and if you further believe that the plaintiff did not, before the note of the defendants here sued on was delivered to plaintiff, promise the defendants or said Florida that the proceeds of the Stratton note should be applied to the payment of the note of defendants in preference to the said $3,800 note and the said $1,000 note of Gleason & Company, or in preference to either of said two notes; and if you further believe that said Florida never directed plaintiff so to apply the same; then you are instructed that plaintiff had the right to apply the proceeds of said Stratton note and deed of trust to payment of said $3,800 note and said $1,000, without applying any part thereof to the note of the defendants in suit, your verdict must be for the plaintiff for the full amount of defendants’ note, and interest thereon at the rate of eight per cent per annum from the twenty-ninth day of April, 1893, to this day.
“The court instructs you that the burden of proof is upon the defendants to show that the note here sued pn has been paid wholly or in part; and unless, upon the whole evidence before you, you believe that plaintiff has received money which it promised A. K. Florida or the defendants, before it received the note in suit, to apply to the payment of this note, or which said Florida directed plaintiff to apply specifically toward the payment of this note, you must find for the plaintiff for the full amount of the note and interest.”

The court on its own motion instructed as follows •• “If the jury believe from the evidence that the defendants made and executed the note mentioned in plaintiff’s petition, and delivered the same to A. K. Florida, and that the said Florida afterward and before the maturity of said note, for value received, indorsed and delivered *23the same to plaintiff, and that the said note is due and unpaid, and no payments thereon were made to plaintiff, either by said Florida or the defendants herein, then you will find for the plaintiff in the sum of $1,100 the amount ofsaidnote, together with the interest on same at eight per cent per annum from the twenty-ninth of April, 1893, to this date, and state the' full amount now due in your verdict.”

It will not be necessary for me to answer the various objections urged against the instructions. I do not think that they are open to serious criticism. I understand my associates to be of the same opinion. Therefore the motion for rehearing ought to be denied, even though it be conceded that the position taken in the opinion, and upon which the judgment was affirmed, is untenable.