Robertson v. City National Bank of Bowie

This is a certified question from the Court of Civil Appeals for the Second Supreme Judicial District. The certificate is as follows:

"This suit was instituted by the City National Bank of Bowie against W. F. Robertson and C. T. Bryson to recover principal, interest and attorneys fees on a promissory note executed by the defendants on October 13, 1924, in the sum of $2182.60, and to foreclose certain trust deed liens on specified tracts of land.

"The defendants answered, among other things, in substance, that the note declared upon by the plaintiff bank was a renewal of an original note executed by the defendants for the sum of $2000 on or about the first day of February, 1923; that the original note was executed under the following circumstances, in substance:

"That at that time the defendants W. F. Robertson and Bryson were stockholders in the Guaranty State Bank at Sunset, Texas, W. F. Robertson being its cashier; that at the time, the Guaranty State Bank at Sunset was in a very bad financial condition; that one Charles Hutchinson was a large stockholders in the Guaranty State Bank and was also the cashier of the plaintiff bank at Bowie; that an assessment of 100% upon the stock in the Guaranty State Bank had been made by the bank examiner, and that Hutchinson and both defendants, and others that need not be mentioned, fully paid the assessment upon the stock held by them, but that there were some twenty of the stockholders who were not notified of the assessment, and upon the suggestion and advice of Hutchinson, with the concurrence of the bank examiner, the defendants had executed said original note for $2000 and said trust deeds to cover the assessments against the non-notified stockholders, this course being pursued as urged by Hutchinson for fear that the non-notified stockholders would, if notified of the assessment, withdraw their deposits in the Guaranty State Bank and thus bring about its immediate dissolution; that defendants Robertson and Bryson, being thus influenced, executed said original note with the distinct understanding and agreement that they were not to be held liable thereon and that the same should be paid out of the proceeds of the charged off paper belonging to the Sunset Bank; that defendants executed said note purely as an accommodation.

"The defendants further alleged and introduced evidence tending to show that until the institution of this suit, they had not been called upon to pay the note or any renewal thereof of any interest thereon; that during the interval between the institution of the suit and the execution of the original note, the interest was paid, as had been arranged, out of the proceeds of the Guaranty State Bank at Sunset that Hutchinson later became president of the Guaranty State Bank at Sunset, and that that bank had in fact collected out of its charged off paper sums sufficient in the aggregate to have discharged the note in question; that on several occasions Hutchinson had reiterated to defendants his assertion that they should not be held personally liable upon the note, and that it would be paid for out of the proceeds of the Guaranty State Bank; that on one or more occasions Hutchinson had promised to re-deliver and release the note in question, but that he had failed to do so, etc.

"A jury was impanelled, but after the introduction and tender of evidence in behalf of defendants, as above outlined, the court sustained the plaintiff's objection to the evidence offered and tendered on the ground that it sought to vary the effect and terms of a written contract, and peremptorily instructed the jury to find for the plaintiff, and judgment was entered in accordance therewith.

"The defendants excepted to the exclusion of this evidence and the court's peremptory charge, and requested that the issues suggested by the evidence be submitted to the jury (Hutchinson, in his testimony, having denied the agreement relied on by the defendants), and error is assigned to the action of the court in excluding the evidence and in refusing the special issues tendered, and in giving the peremptory instruction.

"We are not entirely agreed as to the proper dispostion to be made of the case, because of which and because of the importance of the questions presented, we deem it advisable to certify to your Honors the following question, towit:

"Does the evidence offered and tendered in behalf of the defendants show or tend to show that they were purely accommodation makers of the indebtedness declared on, and, as such, not liable to the plaintiff bank? In other words, did the court err, as assigned, in the rulings complained of and in giving its peremptory instruction to the jury to find for plaintiffs?

"In this connection we refer to the following authorities cited in behalf of appellant, towit: State Banking Board v. James (Texas Civ. App.), 264 S.W. 145; Chapman v. Southwest National Bank (Texas Civ. App.), 276 S.W. 731; Central Bank Trust Co. v. Ford (Texas Civ. App.), 152 S.W. 700. See also Commonwealth National Bank v. Goldstein (Tex. Civ. App.),261 S.W. 538. In this connection also we venture to add that we considered the scope of the duty and authority of the cashier of the plaintiff bank as indicated in the cases of Rosenberg v. First National Bank (Texas Civ. App.), 27 S.W. 897, and First National Bank v. Ledbetter (Texas Civ. App.), 34 S.W. 1042, and the authority found in 5 Cyc., p. 460, to the effect that:

" 'A bank is charged with the knowledge acquired by its cashier, president or other officers pertaining to transactions within the scope of the bank's business although such knowledge be acquired in another transaction than that to which it relates. * * * And when a bank officer is acting as president or director of another concern, or as trustee or executor of an estate, the knowledge acquired in the latter capacity is imputed to his bank according to the most general rule.' "

Section 29 of the Negotiable Instruments Law (article 5933, R. S. 1925) defines an accommodation party as one who has signed the instrument as maker, drawer, acceptor or endorser without receiving value therefor and for the purpose of lending his name to some other person.

In order that one may avail himself of the defense of an accommodation maker, under the above provisions he must not be the recipient of any consideration deemed valuable in law. His act in executing the paper must be void of present or anticipated personal profit, gain or advantage. Commonwealth National Bank v. Goldstein (Texas Civ. App.), 261 S.W. 538; Exum v. Mayfield (Texas Civ. App.), 286 S.W. 481; Waller v. Gorman Mercantile Company (Texas Civ. App.), 141 S.W. 833; Brinker v. First National Bank (Texas Civ. App.),16 S.W.2d 965; Magill v. McCamley (Texas Civ. App.), 182 S.W. 22; Skagit State Bank v. Moody, 86 Wash. 286, 150 P. 425.

The record in this case contains the frank admission of appellants that they executed a note in question for the purpose of obtaining the proceeds thereof for the use of the Guaranty State Bank in order to prevent its closing and consequent loss of the stock owned by them.

It has been held that it is no accommodation paper where stockholders of a corporation, for the protection of their interest therein, execute a note in order to obtain funds essential to its continued operation. 8 C. J., sec. 43, p. 256; Lewisville First National Bank v. Bickel, 143 Ky. 754,137 S.W. 790; McDonald v. Luckenbach, 170 Fed., 434, 95 Cow. C. A., 604.

It appears that appellants believed that if money obtained by the execution of the note to appellee had not been forthcoming the bank would have been compelled to close its doors and their stock would have become worthless. By reason of the use of the funds procured by the execution of the note the bank was enabled to continue in business and the makers of the note thereafter disposed of their stock while the bank was a going concern. Under such circumstances it cannot be held that the note was executed without valuable consideration.

The note being executed for a valuable consideration, parol evidence was not admissible to show an agreement on the part of the makers with appellee's cashier that they would not be required to pay such note but that the same would be paid out of the assets of the Guaranty State Bank. Such evidence tends to vary the unconditional promise of the makers to pay such instrument according to its tenor and effect, which is not permissible in the absence of a plead of fraud, accident or mistake. Exum v. Mayfield, supra; Ellington v. Commercial State Bank (Texas Civ. App.), 15 S.W.2d 59; Canadian Long Distance Tel. Co. v. Seiber (Texas Civ. App.), 159 S.W. 897; Dolinski v. First National Bank of Pittsburg (Texas Civ. App.),122 S.W. 276; Clark v. Gramling, 54 Ark. 525, 16 S.W. 475; Parker v. Mayes, 85 S.C. 419, 67 S.E. 559; German American State Bank v. Watson, 99 Kan. 686, 163 P. 637.

We recommend that the question certified be answered that the trial court did not err in the ruling complained of or in peremptorily instructing a verdict in favor of appellee.

The opinion of the Commission of Appeals answering the certified questions is adopted and ordered certified.

C. M. CURETON, Chief Justice.