Barnes v. Century Savings Bank
| Decision Date | 13 December 1913 |
| Citation | 144 N.W. 367,165 Iowa 141 |
| Parties | J. K. BARNES and M. H. SCHUSSLER, Plaintiffs, M. H. SCHUSSLER, Appellant, v. CENTURY SAVINGS BANK ET AL., Appellee |
| Court | Iowa Supreme Court |
Appeal from Polk District Court.--HON. LAWRENCE DE GRAFF, Judge.
ACTION by the maker and guarantor of two promissory notes to cancel the same. Defendants answered, denying the allegations of the petition, and filed counterclaims, in which they asked judgments on the notes. On the issues joined, the case was tried to the court, resulting in a decree dismissing plaintiff's petition, and giving the bank judgment on its notes, but refusing relief to the bank on the accounting. Plaintiff Schussler and the bank both appeal; but as Schussler first perfected his appeal, he will be called appellant.
Affirmed.
Parker Parrish & Miller, for appellant.
Dale & Harvison, Clifford V. Cox, and Robert J. Bannister, for appellee.
One branch of this case was considered on a former appeal, the opinion being found in 147 Iowa 267, and the present case was also before us on some interlocutory orders and an opinion filed, which will be found in 149 Iowa 367. These cases, and especially the last one, state the issues with great fullness, and reference is made thereto for a detailed statement thereof. It is sufficient to say that after the case went back to the lower court for trial, the defendant bank filed a rejoinder or reply to plaintiff's reply, in which it denied the allegations of divisions 1 and 2 of the reply, pleaded a ratification by Schussler of the matters set up by him as amounting to a discharge, and also an estoppel on his part to rely upon any of his defenses because of his election to abide by the contracts complained of, and his ratification of all the actions of the bank and its officers. The right to an accounting by Schussler was admitted, and the bank also asked for such an accounting, and for a judgment against him. The notes in controversy are for $ 5,000 each bearing date December 1, 1906, and due in seven and eight months, respectively. They were made payable to the Century Savings Bank, signed by J. K. Barnes and indorsed as follows: The bank, in its counterclaim, asked judgment on these notes. Schussler, who is the real party in interest on this appeal, admitted the execution and delivery of the notes and of the contract of guaranty, but pleaded in defense that his signature to the guaranty was obtained by false and fraudulent representations of the bank and its officers as to the amount of Barnes' indebtedness, and to concealment of the fact that as a part of the transaction Barnes was to pay a bonus of something over $ 5,000 for obtaining the loan. This was denied by the bank. As a partial defense, Schussler pleaded that the bank had assisted in diverting certain funds, which it was agreed should be applied on the notes in controversy to his, Schussler's, damage. This, too, is denied by the bank. And the bank also pleaded ratification of the alleged fraud and diversion of funds and an estoppel on the part of Schussler to rely on either defense to the notes. These, very shortly stated, are the issues in the case.
The record is very voluminous and the testimony somewhat contradictory, although as to many of the facts there is no dispute. It appears that Schussler, for many years, was a resident of Minnesota, and was there engaged in buying and selling timber and products of the forest. In the year 1904 he became acquainted with J. K. Barnes, his co-plaintiff, who was a member of the firm of Casebeer & Barnes, also doing business in the same state. Schussler had considerable business with this firm for some years prior to the year 1906, when the firm dissolved, Barnes assuming the indebtedness of his firm, and among other items, was an account due Schussler of something like $ 5,000. Barnes had no financial resources, but Schussler seemed to have confidence in him, and undertook to finance him in a gunstock business at Des Moines, part of the indebtedness being about $ 2,000, advanced by Schussler to Barnes to enable him to establish the business. Barnes ran along in a small way with his enterprise in Des Moines, but did not seem to be making much headway, and Schussler was interested in him because of his indebtedness. Schussler realized that if he received any part thereof from Barnes, it would be as a result of his business enterprises. Looking about, Barnes discovered a tract of walnut timber in Missouri, and, such timber being practically exhausted in Iowa he went to Schussler and told him of the Missouri timber, and that it would cost $ 20,000. He, Barnes, represented to Schussler that he could get the money to purchase it from the Century Savings Bank (which we shall hereafter for sake of brevity call the Bank), provided he could secure an indorser upon his paper. The matter seemed to appeal to Schussler, doubtless for the reason that he hoped in this way to receive the money due him from Barnes. As a result, Barnes and Schussler went to Des Moines, and there met an experienced timber man, or cruiser, who had been over the Missouri land and made an estimate of the amount of lumber which might be derived from the tract. Schussler was convinced that the deal was a good one and the property worth the price asked. At the same time he asked Barnes for a statement of his financial affairs, and Barnes directed his bookkeeper to make out such statement, which was done from the books of Casebeer & Barnes, and not of Barnes alone. The parties then went to the Bank, and there met the cashier, Whinery, and the statement as to Barnes' affairs was exhibited to Whinery, who stated to both Schussler and Barnes that it was correct. The cashier also stated that Barnes did not owe the Bank more than the statement disclosed. After some further consultation, it was arranged that the Bank would furnish the $ 20,000, provided the debt was evidenced by four promissory notes in the sum of $ 5,000 each, two of which were to be guaranteed or indorsed by Schussler and paid after the other two, not so indorsed, were discharged. Barnes, at that time, had two separate gunstock contracts, one of which was with the United States government, and the others were with different makers of firearms, and as a part of the loan transaction, the following agreement was entered into:
November 23, 1906. In consideration of the indorsements on two notes for $ 5,000.00 each, signed by J. K. Barnes and payable to the Century Savings Bank of Des Moines, Iowa payable in seven and eight months after December 1, 1906, such indorsements made by M. H. Schussler of Floodwood, Minn. It is understood and hereby agreed by and between J. K. Barnes of Des Moines, Iowa the Century Savings Bank of Des Moines, Iowa and M. H. Schussler of Floodwood, Minn., that said Barnes agrees to turn over all proceeds derived from the sale of gun stocks to the U.S. government (cut from certain land purchased from the Merimac Spring Park Co. in Crawford and Phelps counties, state of Missouri) to the Century Savings Bank and said Century Savings Bank hereby agrees to apply all the moneys so received on the indebtedness of said J. K. Barnes for the purchase of the timber above referred to as follows: The first $ 10,000.00 so received to apply on and to pay notes given to Century Savings Bank by said J. K. Barnes dated December 1, 1906, and not indorsed by M. H. Schussler. The balance of all moneys so received by said Century Savings Bank to apply on and to pay certain notes dated December 1, 1906 and indorsed by M. H. Schussler until said notes are fully paid. And the next $ 5,000.00 to be paid to M. H. Schussler to apply and to pay certain indebtedness of that amount contracted by Casebeer & Barnes with Coolidge-Schussler which indebtedness has been assumed by said Barnes. It is mutually understood and agreed by and between all parties hereto that in no event without the written consent of all parties hereto, shall any funds, coming from the sale of any gunstocks to the U.S. government cut from above mentioned lands to be used for any other purpose than to liquidate the indebtedness herein referred to. J. K. Barnes. M. H. Schussler. Century Savings Bank. H. M. Whinery, Cashier. D. A. Byers, Witness. This contract was drawn by Schussler, and will become important to one issue in the case. After the execution of this contract, the four notes were signed, and two of them bore the indorsements already quoted. The enterprise either because of the panic of 1907 or mismanagement, was not a success; and it would have failed very shortly but for further aid given Barnes by both the Bank and Schussler. Schussler finally quit making advancements, but the Bank kept on doing so to some extent, and it was finally agreed that the business, or a part of it, should be turned over to an experienced timber man, and this was done. Here the Bank concluded to quit financing the scheme, and in December of the year 1907, the Bank, Schussler, and Barnes had a meeting in Des Moines at which they entered into another agreement as follows:
Whereas the undersigned, J. K. Barnes, M. H. Schussler, and the Century Savings Bank, entered into a certain contract in writing under date of November 23d, 1906; and, whereas, the said Barnes, at the date of said contract had entered into a contract with the United States for the sale of gunstocks to said United States, the proceeds arising from which were to be applied as in said contract stated; and, whereas, said contract between the said Barnes and the United States has been heretofore canceled by the United States because of the...
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