Bank of Montreal v. Beecher, 19662[56].

• Court: Supreme Court of Minnesota (US)
• Writing for the Court: HALLAM
• Citation: 157 N.W. 1070,133 Minn. 81
• Parties: BANK OF MONTREAL v. BEECHER.
• Docket Number: No. 19662[56].,19662[56].
• Decision Date: 19 May 1916

133 Minn. 81
157 N.W. 1070

BANK OF MONTREAL
v.
BEECHER.

No. 19662[56].

Supreme Court of Minnesota.

May 19, 1916.

Appeal from District Court, Hennepin County; John H. Steele, Judge.

Action by the Bank of Montreal against E. G. Beecher. From an adverse order, defendant appeals. Affirmed.

Syllabus by the Court

One who takes an indorsement of a promissory note as collateral security for an antecedent debt owing to him by the indorser is a ‘purchaser for value.’

On the other hand, where one takes, as collateral to a debt due from his debtor, the naked promise of a third person who is indebted to neither, such promise is without consideration.

An agreement to forbear the enforcement of a legal right is a sufficient consideration to sustain a promise. Where a negotiable note held by a wife is indorsed and delivered to a judgment creditor of her husband as collateral security for the payment of the judgment, the continuance for a period of three months of proceedings supplementary to execution upon such judgment is a valuable consideration for the transfer.

Whatever may be the nature of the consideration in such a case if it is a valuable consideration the indorsee may hold the collateral, not merely for the amount of the new consideration, but for the full amount of the debt for which it is pledged.

It is claimed that the note was an accommodation note, but there is no evidence that plaintiff had notice of that fact. Notice may be actual or constructive. In order to charge an indorsee with constructive notice, the facts must be such as to impute fraud or actual bad faith.

[157 N.W. 1070]

Cray & Eaton, of Minneapolis, for appellant.

Durment, Moore, Oppenheimer & Haupt, of St. Paul (Hough, Campbell & Ferguson, of Winnipeg, Canada, of counsel), for respondent.

HALLAM, J.

This is an action on a promissory note brought by an indorsee against the maker. Plaintiff acquired the note by indorsement before maturity. Defendant contends that the note was given without consideration and for the accommodation of the payee and offered proof to that effect. The court rejected this evidence on the ground that it appeared that plaintiff was a bona fide holder for value without notice.

If plaintiff was not a purchaser for value, or if charged with notice of the facts claimed in defense, the proffered testimony should have been received.

The facts are these: Lillian K. Elliott was the original payee of the note. Plaintiff had a judgment against David Elliott, her husband. Supplementary proceedings were instituted. Husband and wife were called for examination. After some examination this note was indorsed and delivered by Lillian K. Elliott to plaintiff as collateral security for payment of the judgment against her husband, and a stipulation was made that in consideration thereof further hearing in supplemental proceedings be ‘extended and continued’ from April 25th to June 28th. This extension of time was the only new consideration for the indorsement of the note.

[1] 1. It is settled in this state that one who takes an indorsement of a promissory note as collateral security for an antecedent debt owing to him by the indorser is a purchaser for value. Rosemond v. Graham, 54 Minn. 323, 56 N. W. 38,40 Am. St. Rep. 336;Haugan v. Sunwall, 60 Minn. 367, 62 N. W. 398;First National Bank of Morrison v. Busch, 102 Minn. 365, 113 N. W. 898;German-American State Bank of Ritzville v. Lyons, 127 Minn. 390, 149 N. W. 658;Snelling State Bank v. Clasen, 157 N. W. 643.

[2] 2. On the other hand, it is held that when one takes, as collateral to a debt due from his debtor, the naked promise of a third person who is indebted to neither, such promise is without consideration. Security Bank of Minnesota v. Bell, 32 Minn. 409, 21 N. W. 470;Turle v. Sargent, 63 Minn. 211, 65 N. W. 349,56 Am. St. Rep. 475;West Coast Co. v. Bradley, 111 Minn. 343, 127 N. W. 6; 1 Daniel,

[157 N.W. 1071]

Neg. Insts. (6th Ed.) § 185; 2 Randolph Com. Paper (2d Ed.) § 446; Tiedeman, Com. Paper, § 170.

[3] 3. This case is not quite the same as either. It differs from the first in that the collateral is delivered by one not the debtor, and it differs from the second in that there is here an agreement, in consideration of the transfer, to suspend the enforcement of a lawful remedy for the collection of the debt.

It is said in Railroad Company v. National Bank, 102 U. S. 14, 27, 26 L. Ed. 61, that when a negotiable note upon its delivery to the transferee is in such form that the transfer makes him a party to the instrument, and imposes on him the...