Green v. Harsh , 204 Ala. 520 ( 1920 )

Upon a survey of the whole evidence, we think the trial judge was fairly justified in submitting to the jury the question of fraud in the procurement of the note sued on, and also the question of material alteration in the note by the first holder's insertion, after its delivery, of a date earlier than the true date, without the maker's knowledge or consent.

Assuming that the jury found for the defendant on one or both of those issues, there arose under the pleadings and evidence several other material questions:

(1) Was the Jefferson County Bank, as purchaser for value of the note, chargeable with notice of either the fraudulent manner of its procurement, or of its material alteration by antedating, so as to destroy the status of the bank as a holder in due course?

(2) If the bank was not, for that reason, a holder in due course, so that the defenses available against the original holder, Jackson, were equally available against the bank, did the defendant nevertheless ratify the alleged alteration in the date by making a partial payment thereon, and promising to pay the balance, after he knew of the alteration?

(3) If those issues were determined against the plaintiff, can the defendant be held bound to pay the note upon a new and independent promise made by him to plaintiff's agent, Crawford, and founded upon a valid consideration, as declared upon in the third and sixth counts of the complaint.

We discuss these several matters in their order:

1. It is well settled that a principal is not chargeable as a matter of law with knowledge acquired by an agent in the transaction of the agent's own business. H. B. W. M. Co. v. Haley, F. M. Co., 174 Ala. 190, 56 So. 726, L.R.A. 1918B, 924.

But we think the testimony in this case, considered in all of its aspects and tendencies, would permit a reasonable inference that, in selling the bank stock to defendant, the vendor Jackson, although nominally representing himself and associates as a holding syndicate, was nevertheless carrying out a scheme devised by the officers and directors of the bank, directly for its benefit, and that therefore this sale was in effect a sale for and on behalf of the bank itself, and in furtherance of its business, and for its sole benefit and advantage. We conclude, therefore, that this issue, involving the status of the bank as a holder in due course, was properly submitted to the jury.

2. The principle is well settled by our decisions that if the maker of a note, with knowledge of an unauthorized alteration made after its delivery, either promises to pay the note, or makes a partial payment thereon, he thereby ratifies the alteration and waives the defense. Montgomery v. Crossthwait,90 Ala. 553, 8 So. 498, 12 L.R.A. 140, 24 Am. St. Rep. 832; Payne v. Long, 121 Ala. 385, 25 So. 780.

Refused charge A, requested by plaintiff, correctly presented this principle as applicable to the testimony, and its refusal was prejudicial error.

Such a payment or promise would, of course, be a waiver also of the defense of fraud, if made with knowledge of the falsity of the representations which induced plaintiff to purchase the stock; but the testimony has no tendency to show such a knowledge.

3. If the defendant, being informed that his note had been transferred by the Jefferson County Bank to a St. Louis bank as collateral security, procured its release from that bank and its return to plaintiff through the payment by Crawford, as plaintiff's agent, of $12,500 to the St. Louis bank, upon defendant's promise to take up the note in a short time thereafter, this would have estopped defendant from setting up his defenses to the note, if any material prejudice had resulted to plaintiff by reason of acting upon defendant's promise. The trial judge correctly treated the question as one of estoppel vel non, and thus submitted it to the jury. There was a material conflict in the testimony as to the transaction between defendant and Mr. Crawford; and, moreover, the testimony tended to show that plaintiff would, in any event, have taken up the note from the St. Louis bank in the regular line of his administrative duties, without the inducement of defendant's promise. So the question was one for the jury to determine, and we find no prejudice to plaintiff, with respect thereto, by reason of instructions given or refused.

The Negotiable Instruments Law (Code, § 5073) provides:

"But when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor."

This rule was applied by the Court of Appeals in Bledsoe v. City National Bank, 7 Ala. App. 195, 60 So. 942, and see, also, 8 Corp. Jur. 730, § 1011. In the charge given to the jury by the trial judge ex mero motu, this rule was overlooked and denied. That part of the charge was duly excepted to by defendant, and its giving must be pronounced reversible error.

The assignments of error present several questions upon the admissibility of evidence offered by defendant, which we deem it unnecessary to pass upon, as they may not recur upon another trial.

For the errors noted, the judgment will be reversed, and the cause remanded.

Reversed and remanded.

ANDERSON, C. J., and McCLELLAN and THOMAS, JJ., concur.