American National Bank v. Hill

Civil action, tried upon these issues:

1. Is the plaintiff the owner and holds in due course the notes described in the complaint? Answer: "Yes."

2. What amount, if any, is the plaintiff entitled to recover of the defendant? Answer: "$935, with interest from 12 October, 1914."

The defendant introduced no evidence. His Honor instructed the jury. There was no exception to the evidence or the charge of the court. In apt time the plaintiff moved to strike out the "further evidence" set up by the defendant in his answer. The motion was allowed, and the defendant excepted. The plaintiff introduced evidence sustaining the allegations contained in the complaint. From the judgment rendered the defendant appealed.

The only assignment of error is the granting of the said motion. This is an action to recover upon a promissory note executed by the defendant to the Southern Savings Bank of Wadesboro, N.C. and duly indorsed to the plaintiff before maturity. The execution of the note and its nonpayment are admitted. The findings of the jury under the charge of the court, to which no exception is taken, establish the fact that the plaintiff is the owner and holder in due course of the said note.

Striking out the answer, or other pleading, or a part of it, is an unusual practice in this State, but is recognized as proper practice elsewhere. "It is often necessary," says 5 Enc. P. and P., and 341, "for the court, in the administration of justice, to strike out a count," citingSherratt v. Webster, 9 Jur. U.S., 629; Chapman v. King, 4 D. and L., 311, and other cases.

The evident purpose of the part of the answer stricken out is to set up a counterclaim or set-off against the note sued on in plaintiff's hands. We will, therefore, treat the motion to strike out the (237) "further answer" as a demurrer ore tenus to it, upon the ground that it fails to state a valid counterclaim.

It is admitted that the plaintiff bank holds the note of the defendant as collateral security for the note of the Southern Savings Bank. The jury find that the plaintiff was the holder in due course of the note used on; that is to say, that plaintiff received it by indorsement before maturity for value and without knowledge of any infirmity.

The note is a negotiable instrument on its face, and the fact that it was indorsed to the plaintiff as collateral security for the debt of the indorser, the Southern Savings Bank, does not invalidate the position of the plaintiff that it is a holder in due course.

The plaintiff has the legal right to collect the collateral which it has thus received in due course in its own name, and can maintain an action thereon against the maker. Bank v. Oil Co., 157 N.C. 302.

It is true that where, in an action on a note, the plaintiff proves only an equitable title thereto, the defendant, maker of the note, cannot properly be cut off from matters of defense existing between the defendant, maker and indorsee or payee. Tyson v. Joyner, 139 N.C. 70.

In this case the defendant fails to allege that the debt due to the plaintiff by the Southern Savings Bank has been paid and discharged by the collection of the collateral or in any other way. There is no allegation in the answer that the payment of the note in this case will overpay the indebtedness due by the said Savings Bank to the plaintiff, and that, therefore, the defendant would have a right to set up the alleged counterclaim.

If the defendant had alleged in his answer that the plaintiff held a large amount of collateral as security for the note executed to it by the Savings Bank, and that the plaintiff's note had been fully paid by collections from his collateral or otherwise, then a very different case would have been presented for the consideration of the Court. As it is, nothing of that sort appears in the answer.

A further and conclusive reason supporting the ruling of the court below is that the answer does not allege any set-off or counterclaim. It simply alleges that the note used on was given to the Savings Bank as a renewal for one previously given to the Dixie Development Company and indorsed to the Savings Bank and originally given for the purchase money of land; that the Dixie Company cannot make good title to said land for the reason that there was a mortgage on the same in favor of one Little, and another mortgage on the same in favor of the said Savings Bank.

When the defendant executed the note used on to the Savings Bank it was made payable to the Savings Bank, and, evidently, the (238) note to the Dixie Company, executed by the defendant, was discharged and canceled. The renewal note to the Savings Bank was a contract between the defendant and the Savings Bank, and if the defendant had any equity, set-off, or counterclaim against the Dixie Company, it was his duty to make it known to the Savings Bank at the time when the Savings Bank discharged the note indorsed to it by the Dixie Company and took the defendant's note payable directly to itself instead.

Again, the allegations of the answer attempting to set up a counterclaim or set-off are too vague, indefinite, and uncertain upon which to raise an issue. It is well-settled that the averments as to set-off or counterclaim must be definite and certain. Vague, general, and indefinite allegations are not sufficient. The counterclaim is substantially the allegation of a cause of action on the part of a defendant against the plaintiff, and it ought to be set forth with the same precision and certainty. Smith v.McGregor, 96 N.C. 101. See, also, a case similar to this and from the same county, at this term, the American National Bank v. Northcutt, ante, 225.

If it be a fact, which is not alleged in the answer, that after the collection of all the collateral in its hands, the plaintiff should have in its possession funds in excess of the amount due by the Savings Bank to it, the proper course is for the receivers of the Savings Bank to institute action against the plaintiff, if it fails to make a proper accounting and pay over the funds in its hands in excess of the amount due it.

The judgment of the Superior Court is

Affirmed.

Cited: Davenport v. Vaughn, 193 N.C. 650; C.I.T. Corp. v. Watkins,208 N.C. 450; Jenkins v. Fields, 240 N.C. 779.