Bank of Montreal v. Beecher

• Court: Supreme Court of Minnesota (US)
• Citation: 133 Minn. 81
• Docket Number: Nos. 19,662-(56).,s. 19,662-(56).
• Parties: BANK OF MONTREAL v. E. G. BEECHER.<SMALL><SUP>1</SUP></SMALL>
• Decision Date: 19 May 1916

Page 81

133 Minn. 81 BANK OF MONTREAL
v.
E. G. BEECHER.¹ Nos. 19,662-(56). Supreme Court of Minnesota. May 19, 1916.

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Action in the district court for Hennepin county to recover $6,250 upon a promissory note. The answer alleged that the note was given without any consideration; that plaintiff, having an overdue claim against David Elliott, the husband of the payee, caused her wrongfully to divert the note from the purpose for which it was given by giving it to plaintiff as collateral to secure the payment of that claim; that plaintiff never gave any consideration whatsoever either to defendant, to the payee or to her said husband, and that plaintiff is not a bona fide holder of the note for a valuable consideration, but received the same with notice of the foregoing facts and solely to secure the payment of an antecedent debt of David Elliott. The case was tried before Steele, J., who made findings and ordered judgment for $5,846.87 in favor of plaintiff. From an order denying his motion to amend the findings and conclusions of law or for a new trial, defendant appealed. Affirmed.

Cray & Eaton, for appellant.

Durment, Moore, Oppenheimer & Haupt, and Hough, Campbell & Ferguson, 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 procedings be "extended and continued" from April 25 to June 28. This

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extension of time was the only new consideration for the indorsement of the note.

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. 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, 132 Minn. 404, 157 N. W. 643.

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. 475; West Coast Co. v. Bradley, 111 Minn. 343, 127 N. W. 6; 1 Daniel, Neg. Inst. (6th ed.) § 185; 1 Randolph, Com. Paper (2d ed.) § 446; Tiedeman, Com. Paper, § 170.

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 Co. 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 duty to fix the liability of prior parties according to the commercial law by presentation for payment and due notice in case of nonpayment, the obligation thus imposed is a sufficient consideration to make the transferee a holder for value. See also Turle v. Sargent, 63 Minn. 211, 217, 65 N. W. 349, 56 Am. St. 475. Without either approving or disapproving this principle, we prefer to place our decision on other...