Continental Illinois Nat. Bank & Trust Co. of Chicago v. Security State Bank, Algona

• Decision Date: 15 December 1970
• Docket Number: No. 54276,54276
• Citation: 182 N.W.2d 116
• Parties: 8 UCC Rep.Serv. 876 The CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Plaintiff-Appellee, v. The SECURITY STATE BANK, ALGONA, Iowa, Hawkeye Loan Company, Inc., Maurice E. Thompson, W. B. Lundberg, Defendants, Gunvald Sande and Edna P. Sande, Defendants-Appellants.
• Court: Iowa Supreme Court

Page 116

182 N.W.2d 116

8 UCC Rep.Serv. 876

The CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Plaintiff-Appellee, v. The SECURITY STATE BANK, ALGONA, Iowa, Hawkeye Loan Company, Inc., Maurice E. Thompson, W. B. Lundberg, Defendants, Gunvald Sande and Edna P. Sande, Defendants-Appellants.

No. 54276.

Supreme Court of Iowa.

Dec. 15, 1970.

John J. Murray, of Mitchell, Mitchell, Murray & Goode, Fort Dodge, for appellants.

L. E. Linnan, of Linnan & Lynch, Algona, for appellee.

RAWLINGS, Justice.

Trial court sustained plaintiff's motion for summary judgment in its action on a promissory note, and guaranty agreement. Defendants Gunvald and Edna P. Sande appeal from judgment entry accordingly ordered. We reverse and remand.

By Count I of its petition, plaintiff seeks judgment against The Security State Bank, Algona, Iowa; Hawkeye Loan Company, Inc.; Maurice E. Thompson; W. B. Lundberg; and Gunvald Sande.

Allegations in support thereof are: defendants Thompson and Lundberg, officers of Security State Bank, secured Gunvald Sande's signature to the instant note upon representations to the effect that on approval of the loan $80,000, face sum of the instrument, would be deposited in Gunvald's account, subject to his withdrawal; Edna P. Sande had previously executed a guaranty of Gunvald's loans; the note was secured from Gunvald as part of a scheme or device by all defendants, except Edna, to obtain funds for defendant Hawkeye Loan Company; and plaintiff was induced by defendant bank to accept a 100 per cent participation in the loan, being thereby defrauded.

Count II of the petition asserts the note, now past due, was assigned by defendant bank to plaintiff. Judgment is thereupon sought against Gunvald.

Under Count III plaintiff seeks judgment against Edna P. Sande upon a separate guaranty, previously executed by her.

Defendants Sande filed answer which, as amended, admits execution of the note by Gunvald, and guaranty by Edna. It is thereby alleged, however, Gunvald was a victim of the claimed fraudulent scheme, not a participant; the note, obtained by fraudulent representations and deceit, was conditionally delivered; it was past due when assigned to plaintiff; the correspondent relationship between plaintiff and defendant bank, with attendant full participation by the former in the instant transaction, was knowingly in violation of loan limit banking laws; absence of consideration to Gunvald for the note given; and fraud in the inception. The Sandes also cross-petitioned against The Security State Bank.

Plaintiff's summary judgment motion seeks relief as against Mr. and Mrs. Sande alone on Counts II and III of the petition.

Counsel for these defendants filed resistance and amendments thereto. It is thus asserted, in effect, issues of both fact and law are involved; the note was obtained by fraud in the inception barring recovery by plaintiff; absence of consideration; Edna P. Sande did not undertake to pay any obligating instrument executed by Gunvald as a result of fraud and deceit; and the note was conditionally given, that condition having been breached.

In connection with the summary judgment hearing, plaintiff read into the record a discovery deposition obtained by it from Gunvald Sande, which recited in some detail the circumstances attendant upon execution of the note by Gunvald.

The sole question to be determined on this review is whether trial court erred in summarily entering judgment against Gunvald Sande and Edna P. Sande.

I. At the outset it is evident Iowa R. Civ.P. 237, as amended by the 62nd General Assembly, chapter 475, is applicable.

Under that rule revision any trial court, when confronted with a summary judgment motion, must examine the entire record before it and thereupon determine whether ultimate evidentiary facts are presented which, if decided in favor of defendant, would amount to a good defense. Northwestern Nat. Bank of Sioux City v. Steinbeck, 179 N.W.2d 471, 476 (Iowa); Hanna v. State Liquor Control Commission, 179 N.W.2d 374, 375 (Iowa).

Touching on that subject we also held in Sherwood v. Nissen, 179 N.W.2d 336, 339 (Iowa), the burden is upon a summary judgment movant to show absence of any genuine fact issue. And in determining that matter all material properly before the court must be viewed in a light most favorable to the opposing party. See generally United States v. Tholen (N.D.Ia.), 186 F.Supp. 346, 357--362.

II. Neither in the petition nor answer by defendants is there any specific allegation that plaintiff is or is not a holder in due course. See The Code 1966, Section 554.3307(2), (3). But such alone is not determinative.

Plaintiff bank is not required to plead, or in the first instance prove its status as a holder in due course. Peoples Bank of Aurora v. Haar, 421 P.2d 817, 820 (Okl.); 10 C.J.S. Bills and Notes § 605; 12 Am.Jur.2d, Bills and Notes, § 1117. See The Code 1966, Section 554.3307(2).

On the other hand a party defendant on the basis plaintiff is not a due course holder must allege ultimate supportive facts. 10 C.J.S. Bills and Notes § 624; 12 Am.Jur.2d, Bills and Notes, § 1128. See also The Code 1966, Section 554.3307(3); Iowa R.Civ.P. 237(e); Sherwood v. Nissen, Supra, 179 N.W.2d at 338--339.

III. Furthermore, where an action upon a negotiable instrument is brought and defendant effectively asserts any recognized legal defense thereto it is generally understood the determination as to whether plaintiff qualifies as a holder in due course is then ordinarily a fact issue. See Commercial Investment Corp. v. Cornelius, 255 Iowa 1012, 1019, 125 N.W.2d 257; Nor...