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    Commercial Bank of Lafayette Trust Co. v. Barry Digest

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    rgtan3
    The case involves a promissory note for $8,711 signed by John C. Barry as trustee for the Bank of Lafayette Trust Company (BLTC) where Barry was president. In 1931, BLTC sold its assets including the note to the Commercial Bank of Lafayette Trust Company. The court ruled that as the note was unendorsed, Commercial Bank did not have title as a holder in due course and was subject to the defenses of the prior parties. The court also allowed evidence that the note was issued without valuable consideration and in violation of banking laws, and therefore ruled that Barry was not personally liable on the note.

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    Commercial Bank of Lafayette Trust Co. v. Barry Digest

    Uploaded by

    rgtan3
    215 views2 pages
    The case involves a promissory note for $8,711 signed by John C. Barry as trustee for the Bank of Lafayette Trust Company (BLTC) where Barry was president. In 1931, BLTC sold its assets including the note to the Commercial Bank of Lafayette Trust Company. The court ruled that as the note was unendorsed, Commercial Bank did not have title as a holder in due course and was subject to the defenses of the prior parties. The court also allowed evidence that the note was issued without valuable consideration and in violation of banking laws, and therefore ruled that Barry was not personally liable on the note.

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    Commercial Bank of Lafayette Trust Co. v. Barry Digest

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    The case involves a promissory note for $8,711 signed by John C. Barry as trustee for the Bank of Lafayette Trust Company (BLTC) where Barry was president. In 1931, BLTC sold its assets including the note to the Commercial Bank of Lafayette Trust Company. The court ruled that as the note was unendorsed, Commercial Bank did not have title as a holder in due course and was subject to the defenses of the prior parties. The court also allowed evidence that the note was issued without valuable consideration and in violation of banking laws, and therefore ruled that Barry was not personally liable on the note.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    215 views2 pages

    Commercial Bank of Lafayette Trust Co. v. Barry Digest

    Uploaded by

    rgtan3
    The case involves a promissory note for $8,711 signed by John C. Barry as trustee for the Bank of Lafayette Trust Company (BLTC) where Barry was president. In 1931, BLTC sold its assets including the note to the Commercial Bank of Lafayette Trust Company. The court ruled that as the note was unendorsed, Commercial Bank did not have title as a holder in due course and was subject to the defenses of the prior parties. The court also allowed evidence that the note was issued without valuable consideration and in violation of banking laws, and therefore ruled that Barry was not personally liable on the note.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    COMMERCIAL BANK OF LAFAYETTE TRUST CO. V. NO. 32420.

    BARRY

    1934 J. Rogers

    Topic in Syllabus: Transfer of unindorsed instruments

    Doctrine: An unindorsed instrument vests upon the transferee any right that the
    transferor had therein, subject to the equities and defenses between prior parties.

    FACTS:

    1. The subject of the case is a promissory note for USD 8,711 signed on by defendant John C.
    Barry as “J.C. Barry, Trustee” and is payable on demand to the order of Bank of Lafayette
    Trust Company (BLTC), of which Barry was the president.

    2. Ever since the financial crises of 1920, it became customary for the bank to purchase and
    resell a small amount of its capital stock to prevent distressed shareholders from selling
    these to the general public at prices so low as would case irreparable injury to the bank.

    3. In connection with this scheme, Barry, as trustee, issued certificates for the purchase of
    such stocks with the distinct understanding that no personal liability would attach to him,
    and that the certificates would be discharged out of the monies that would be received by
    the bank upon the resale of the stocks. The certificates were retained by the bank.

    4. In 1931, the Bank of Lafayette Trust Company sold all its assets to plaintiff Commercial
    Bank of Lafayette Trust Company. Among these assets was the note sued upon.

    5. The lower court ruled for the defendant.

    PETITIONER’S ARGUMENT: (1) It acquired the note for valuable consideration before
    maturity, and hence a holder in due course; and (2) Barry is personally liable.

    RESPONDENT’S ARGUMENT: (1) The instrument was issued without valuable


    consideration and defendant is not a holder in due course; or (2) The note was given for an
    illegal consideration. Having been issued in violation of the law, the rights arising from the
    ISSUE: Whether Plaintiff is a holder in due course.

    HELD: No. Barry is not liable

    1. The note was unindorsed; it was acquired by Plaintiff from the BLTC, payee, by merger
    or sale. Hence, no title vested in Plaintiff.

    2. The transfer vested in the transferee (Plaintiff) such title as the transferor (BLTC) had
    therein, and the transferee acquires, in addition, the right to have the indorsement of the
    transferor. However, the transferee cannot be considered a holder in due course until

    EDWARD DAYOG CASE #75


    indorsement. As such, its holding of the instrument is subject to all equities and defenses
    prior parties may have therein. One such defense is the lack of valuable consideration.

    3. Because the instrument is to be treated as if it was nonnegotiable, the court allowed


    Plaintiff to introduce parol evidence to the effect that it was issued in violation of Act No.
    179 of 1902, which prohibited banks from purchasing directly or indirectly any of their
    own stock, as was done here, albeit indirectly, by BLTC acting through Barry.

    4. In view of the facts, the Court held that there was no intention to bind Barry personally
    and, applying the rule on in pari delicto (since because of the merger, any benefit that may
    have accrued to BLTC due to the illegal scheme is ascribed to Plaintiff), Barry cannot be
    bound to return any money in favor of Plaintiff.

    Fallo: Judgment affirmed.

    EDWARD DAYOG CASE #75

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