Albany National Bank of Laramie v. Dodge

• Decision Date: 10 March 1930
• Docket Number: 1569
• Parties: ALBANY NATIONAL BANK OF LARAMIE v. DODGE, ET AL. [*]
• Court: Wyoming Supreme Court

285 P. 790

41 Wyo. 286

ALBANY NATIONAL BANK OF LARAMIE v. DODGE, ET AL. ^[*]

No. 1569

Supreme Court of Wyoming

March 10, 1930

ERROR to District Court, Albany County; VOLNEY J. TIDBALL, Judge.

Action by the Albany National Bank of Laramie against T. B. Dodge and others. Judgment for defendants and plaintiff brings error.

Affirmed.

For the plaintiff in error there was a brief by Corthell, McCollough and Corthell, of Laramie, and oral argument by M. E Corthell.

The trial court found that the Rock River State Bank through Butler had agreed, with plaintiff, to obtain a guaranty of the Hall notes signed by directors of the State Bank. Plaintiff performed its part of this agreement. Failure of the State Bank to secure a guaranty of the notes from its directors, gave plaintiff the right to rescind the agreement and sue for damages, or recover the money paid for the Hall notes. 6 R. C. L. 310. The notes represented excess loans made by the State Bank to one of its directors, and it was obligated to get rid of these notes. 5146, 5186 C. S. The stockholders and directors had no authority for their action taken in May and June, 1921, in the consolidation of the State Bank with the First National Bank. 7 R. C. L. 132. Defendants became liable to creditors of the State Bank by reason thereof. 5439-5441-5442-5443 C. S. Plaintiff might have pressed its claim then, but was induced to defer action by representatives of the consolidated bank. The consolidation was without legislative sanction and illegal. 7 R. C. L. 132 and cases cited. Bank v. Ringling, 7 F 539; Express Co. v. Fleishman, etc., 141 S.E. 258; Garrett v. Cattle Co., (Ariz.) 270 P. 1049; Overstreet v. Bank, (Okla.) 72 P. 379; Trust Company v. Doyle, (Ill.) 102 N.E. 790; 47 L. R. A. (N. S.) 1066; 14a C. J. 1056; American Co. v. Bullard, 290 F. 896. There is a distinction between selling all assets of a corporation for cash, and exchanging assets for stock of another corporation as was done here. Mason v. Mining Co., 133 U.S. 50; 3rd Cook's Corps. 671; Kremer v. Drug Co., (S. D.) 170 N.W. 571; Koehler v. Brewing Co., (Pa.) 77 A. 1016; Jones v. Electric Co., 144 F. 765; Wheeler v. Bldg. Co., 159 F. 391; Backus v. Fickelstein, (D. C.) 23 F.2d 357; Theis v. Light Co., (Wash.) 74 P. 1004; Ins. Co. v. Worchester R. R. Co., (Mass.) 21 N.E. 364; Deposit Co. v. Life Ins. Co., (Mo.) 249 S.W. 680. The new company receiving stock of the old company is obligated to carry out the obligations of the old company. Ins. Co. v. R. R. Co., (Mass.) 21 N.E. 364; 1 Thomp. Corps. 382; McAlister v. Express Co., (N. C.) 103 S.E. 130; Express Co. v. Snead, (Okla.) 221 P. 1032 and cases cited. Peet v. Bank, (Calif.) 266 P. 303; Gibson v. Express Co., 193 N.W. 274; Oil Co. v. Payne, (Ky.) 268 S.W. 584; 7 R. C. L. 1871; Thompson Corps. (3rd Ed.) 6050; Bank v. Appleton, 216 U.S. 196; Riegel v. Bank, (Okla.) 227 P. 105. The First National Bank assumed the liabilities of The Rock River State Bank when it took over its assets, and was obligated to account to plaintiff for the money received from plaintiff upon the Hall notes. There was ample consideration for the execution of the guaranty by defendants, who were then directors of the consolidated bank. It does not matter whether the consideration be the original consideration passing at the time of the acceptance of the original notes by plaintiff, and the subsequent right thereof by defendants, thus relieving them of liability for excess loans, or whether the consideration be the forbearance on plaintiff's part to sue defendants for their liability arising out of the transfer of all of the property of the Rock River State Bank, or forbearance to sue the First National Bank of Rock River on the liability of the Rock River State Bank, and the giving of the credit of the First National Bank when the guaranty was signed. 12 R. C. L. 28; Bank v. Browne, (Calif.) 264 P. 267; Bank v. Branagan, (Ia.) 198 N.W. 659; Bank v. Branagan, 199 N.W. 973; Kinney v. Co., (Calif.) 200 P. 737; McDonald v. Koltes, (Minn.) 192 N.W. 109; R. R. Co. v. Texas Ry. Co., 282 F. 61; In re All Star Feature Corp. 232 F. 1004; Dempsey v. Hussey, (Tex.) 254 S.W. 590; Powers v. Woolfolk, (Mo.) 111 S.W. 1187; Doughtery v. Duckels, (Ill.) 135 N.E. 737; Ditch Co. v. Old, (Colo.) 163 P. 79. The settlement of a long and continued controversy was a sufficient consideration. Daly v. Tunnel Co., 129 F. 513; Swem v. Green Co., (Colo.) 12 P. 202; Coffee v. Emigh, (Colo.) 25 P. 83; Fairchild v. Cartwright, (Calif.) 178 P. 333. Where there is a valid consideration, the law will not attempt to measure the amount thereof. Whelan v. Swain, (Cal.) 64 P. 560. Defendants having been benefitted by the transaction should not be permitted to evade the obligation of the guaranty.

For the defendants in error there was a brief by G. R. McConnell, of Laramie, and oral argument by Mr. McConnell and Mr. Alfred M. Pence, of Laramie.

The notes were indorsed "without recourse" by the Rock River State Bank and renewals thereof were likewise indorsed by the First National Bank of Rock River. The endorsement had a definite meaning that cannot be contradicted by parol testimony. Joyce's Com. Pap. pp. 713-14; Johnson v. Willard, (Wis.) 53 N.W. 776; Bank v. Moore, (N. C.) 51 S.E. 79; Trust Co. v. Kennedy, (Pa.) 34 A. 659; Wright v. Remington, (N. J. L.) 32 Am. Reps. 180. If it be considered an agreement between the Rock River State Bank and plaintiff, it would be ultra vires and void. 7 C. J. 814. There was no evidence that the First National Bank assumed liabilities or assets of the State Bank. The new company does not assume liabilities of the old company if the transaction is by way of purchase. Riegel v. Bank, 227 P. 105. There is no general rule of law that a corporation taking over assets of another corporation assumes liability for all of its debts. 3 Cook's Corps. 2648. If the contract be by purchase, no liability for debts of the old company is assumed. Gray v. Co., 115 U.S. 116; Evens v. Unity, etc., (Mo.) 196 S.W. 49; Hagemann v. R. R. Co., 202 Mo. 249. The evidence in this case shows a purchase by the First National Bank of the assets of the State Bank. A pre-existing obligation is no consideration for a subsequent guarantee. Williston Contrs., Vol. 1, p. 318; Bank v. Tichenor, 200 F. 318. It must be supported by an additional consideration. In re Thomson's Estate, (Cal.) 131 P. 1045, or some direct benefit to the promisor. Johnson v. Rycroft, 61 S.E. 1052; Grob v. Gross, 84 A. 1064; Bank v. Hawkins, (Ore.) 144 P. 131 and cases cited. The Rock River State Bank never agreed to furnish the guaranty; it was the act of Lewis C. Butler, personally, so the plaintiff had no right to draw the paper to the Rock River State Bank, even if the State Bank had agreed to take back paper unless some one guaranteed it, the agreement would be ultra vires and void. 7 C. J. 814, and cases stated in note. Plaintiff never sought to press its claim if it had any against the State Bank, it did seek to press its claim against the First National Bank, a different institution, which had incurred no obligation on this paper. It seems absurd to argue that the National Bank was liable on paper sold without recourse by the State Bank, so the cancellation of the charge first made by the plaintiff bank against the National Bank did not constitute consideration for this guaranty. Butler was not the agent of defendants, and could not bind them, hence there was no ratification by defendants of Butler's acts, or promise to secure the guaranty. 2 C. J. 467-484 and cases cited; Williams v. Stears, 59 Oh. Stat. 28; Bank v. Weaver, (Okla.) 154 P. 478. Moreover it is not pleaded that Butler acted as the agent of defendants. Defendants never ratified Butler's acts. The judgment should be confirmed.

KIMBALL, Justice. BLUME, Ch. J., and RINER, J., concur.

OPINION

KIMBALL, Justice.

This suit is by the Albany National Bank against T. B. Dodge, Thomas McGill, H. A. Thompson and C. D. Spalding, as guarantors in writing of two promissory notes made by H. Ralph Hall. Judgment was for defendants, and the plaintiff brings the case here by proceeding in error.

The written guaranty is in the form of a letter addressed to the plaintiff, and reads as follows:

"We hereby endorse and guarantee payment at maturity of the following described promissory notes, and expressly waive demand of payment, protest and notice of non-payment of said instrument, and consent that the time of payment may be extended without notice to or further assent from us: H. Ralph Hall in favor of First National Bank, Rock River, Wyo., for $ 3640.00, dated March 10, 1922, payable 180 days after date with interest at 8%. H. Ralph Hall in favor First National Bank, Rock River, Wyo., for $ 2500.00, dated March 10, 1922, payable 180 days after date with interest at 8%."

The writing is not dated, but other evidence shows it was signed and delivered May 20, 1922. It was signed by the defendants and Lewis C. Butler. Butler who was not sued, is insolvent and a non-resident. Defendant Thompson, a bankrupt, does not appear to have been represented at the trial, and has not been served with summons in error. Defendant Spalding is an officer of the plaintiff for whom he acted in the transactions in question. He was plaintiff's sole witness at the trial. He filed an answer, but made no defense at the trial, and evidently took the position that he was liable on the guaranty if the other defendants were liable. His answer alleged that he signed the guaranty "at the request of the other defendants and on the consideration that all of said defendants should become equally bound thereby. " Defendants McGill and Dodge defended on the ground that there was no consideration for the guaranty, and the decision of the...