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Schmid v. Haines

Decided: May 21, 1935.

JOSEPH A. SCHMID, JOHN H. MCCULLEY AND JOSEPH R. POWELL, TRUSTEES (SUBSTITUTED IN PLACE OF THE CLEMENTON NATIONAL BANK), PLAINTIFFS-APPELLANTS,
v.
ROYDEN HAINES AND BERTHA HAINES, DEFENDANTS-RESPONDENTS



On appeal from a judgment of the Camden County Circuit Court.

For the appellants, Grover C. Richman.

For the respondents, C. Richard Allen.

Heher

The opinion of the court was delivered by

HEHER, J. The Clementon National Bank sued upon twenty-five promissory notes, variously made and endorsed

by the defendants, Royden Haines and his wife, Bertha. Thirteen of the notes were in issue at the trial. Royden was the maker of eleven of these; and the Robert Coat Company, Incorporated, a corporation created under the laws of the State of New York, was the maker of the remaining two, one of which Royden endorsed. Bertha Haines endorsed all thirteen notes. These notes were discounted by the bank for the coat company; the latter received the proceeds thereof. Eleven of the notes were renewals of prior obligations; and it is conceded that Bertha endorsed the original notes after they had been discounted by the bank.

Royden answered, setting up (a) "fraud and misrepresentation" by the plaintiff bank, in that it "falsely and fraudulently advised" him that "it would be necessary for him, in order to protect himself for the advances theretofore made by him to" the coat company, to make or endorse promissory notes for that company, "so that said bank could advance further and sufficient moneys to said company;" that it "had investigated the financial standing" of the coat company, and its president, one Leibman, and that "they, or either of them, were well able to repay said advances;" and that Royden, relying upon the truth of these statements, made or endorsed the several obligations without consideration; and (b) that he became a party to the several obligations, "at the special instance and request of the plaintiff * * *, for its accommodation and for no other reason." Bertha likewise charged (a) "fraud and misrepresentation," in that she was "falsely and fraudulently advised" by plaintiff bank, "that it was necessary for the purpose of executing a chattel mortgage for the alleged purpose of protecting her husband [Royden] that she endorse certain notes," of the coat company, "then in possession of the plaintiff bank;" and that she, relying upon the truth of these statements, endorsed the notes in question, and the renewals, without consideration; and asserted that she was (b) a mere guarantor of the obligations without consideration.

On March 4th, 1933, after the institution of this action, the bank closed pursuant to the presidential proclamation of a bank holiday. A conservator was shortly thereafter

appointed under the Federal Bank Conservation act; and this was followed by a reorganization under that act, and the transfer and assignment of the notes in suit, with other assets, to the plaintiffs as trustees. The trustees were thereupon substituted as parties plaintiff.

There were cross-motions for directed verdicts in favor of the several parties. The trial judge directed a verdict in favor of Bertha, upon the ground that she was a mere guarantor, without consideration, and "the endorsement of the renewals by her did not change her original status." He denied plaintiffs' motion for a directed verdict against Royden, and submitted to the jury what he conceived to be an issue of fact respecting Royden's obligation upon the several notes, under a charge that required a verdict in favor of Royden if it were found that "his signature upon these notes as maker or endorser was for the accommodation of the Clementon National Bank." He found no evidence tending to establish the allegations of fraud; and we concur in that view. Appropriate exceptions to these rulings were taken by plaintiffs.

Neither judgment can be sustained. The trial judge should have directed a verdict against both defendants. The essential facts were not controverted; and there was ...


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