Farmers' Sav. Bank of New Albin v. Bunge

• Decision Date: 23 June 1930
• Docket Number: 40021
• Citation: Farmers' Sav. Bank of New Albin v. Bunge, 211 Iowa 1357, 231 N.W. 651 (Iowa 1930)
• Parties: FARMERS SAVINGS BANK OF NEW ALBIN, Appellee, v. E. H. BUNGE et al., Appellants
• Court: Iowa Supreme Court

231 N.W. 651

211 Iowa 1357

FARMERS SAVINGS BANK OF NEW ALBIN, Appellee, v. E. H. BUNGE et al., Appellants

No. 40021

Supreme Court of Iowa, Des Moines

June 23, 1930

REHEARING DENIED APRIL 10, 1931.

Appeal from Allamakee District Court.--H. E. TAYLOR, Judge.

Suit on a promissory note. The court directed a verdict in favor of the plaintiff, and the defendants appeal.

Affirmed.

Hurd Lenehan, Smith & O'Connor and H. Haehlen, for appellants.

Duxbury & Duxbury, A. E. Sheridan, J. W. Dempsey, W. S. Hart, and Geiser & Donohue, for appellee.

FAVILLE J. MORLING, C. J., and STEVENS, ALBERT, and WAGNER, JJ., concur.

OPINION

FAVILLE, J.

At all times mentioned herein, the appellants were stockholders in the appellee bank, and they, together with two other parties, constituted the board of directors of said bank. On the 11th day of December, 1923, the appellants, except the appellant Von der Ohe, had signed a written contract, jointly and severally guaranteeing the payment, on or before two years from said date, of certain bills receivable held by said bank. On November 14, 1924, the appellee bank was under examination, and a meeting of the board of directors was then held. All or a large portion of the bills receivable which had been guaranteed by the written instrument of December 11, 1923, still remained among the assets of said bank. The bank examiner making the examination insisted to said board of directors that some further and additional arrangement be made in regard to securing the payment of said assets of said bank, and insisted that, unless this was done, the bank would not be opened on the following day. After much discussion, it was finally arranged that the appellants, together with said two other directors, should execute their promissory notes to said bank in the total sum of $ 40,000, two of said notes to be for $ 10,000 each, and one for $ 20,000. It was also arranged at said time that an assessment of 20 per cent should be levied at said date upon all of the stock in said bank. Said assessment was so levied and paid into said bank, in the sum of $ 20,000. At said time there was also executed the following written instrument:

"Agreement.

"Whereas The Farmers Savings Bank of New Albin, Iowa, has recently been examined by the Banking Department of the State and it has been found by representatives of that Department that certain assets of the said Bank are of doubtful value and unfit for the said Bank to rely upon for the repayment of its depositors, and

"Whereas the said representatives of the Banking Department has requested that certain lines of credit set out in 'Exhibit A,' amounting to $ 40,013.00 attached hereto and forming a part of this contract, now carried in assets of this Bank, be charged off, and

"Whereas when said items set out in 'Exhibit A' are charged off, the capital of said Bank will appear to be impaired and the profit and loss account to be overdrawn:

"Now therefore, for the purpose of increasing the Profit and Loss account to meet said items when charged off and to prevent an impairment of the capital of the said Bank, we the undersigned stockholders of said Bank hereby agree to subscribe and pay into the said account of the Farmers Savings Bank of New Albin, Iowa, the sum of $ 40,013.00 subject to the final approval of the Superintendent of Bank.

"The said Farmers Savings Bank on its part agree to credit the amount so paid in to the Profit and Loss account on the books of said bank and to charge against said account the items set out in 'Exhibit A' in the amount of $ 40,013.00.

"It is further agreed by and between the said stockholders and said Bank that the funds so paid in may be used by the bank on the vote of Directors for the purpose of taking out of the assets of the said bank any doubtful or bad paper.

"And the said bank further agrees and binds itself under and by authority of action taken by its board of directors to reimburse the stockholders, subscribers hereto for the amounts paid in by them with interest at five per cent per annum, from time to time, in part or in whole, when and only when the earnings of said bank, over and above operating expenses, are sufficient to make such repayment. Such repayments may be made pro rata partial payments or in total by the direction of the Board of directors and with the approval of the State Banking Department. And it is understood and agreed that the stockholders, subscribers, hereto, shall be reimbursed for the amount so paid in with interest, in full, before further dividends shall be declared or paid out of the undivided profits.

"It is further understood and agreed that the Board of Directors may at any time, with the approval and proper action of the Banking Department of the State levy an assessment or assessments against the Capital Stock of said Bank for the purpose of raising funds with which to reimburse the said stockholders, subscribers hereto, for the amount so paid in by them with interest and when such assessments are made, if made, the Farmers Savings Bank agrees to reimburse the said stockholders, subscribers hereto, out of the Funds derived from such assessment,--But it is distinctly understood that the Farmers Savings Bank of New Albin, Ia. is not in any way liable to said stockholders, subscribers hereto, for any amount except such as is derived from the profits of said bank and it is understood that such reimbursement, if made, shall not at any time impair the present capital and surplus of said Bank."

This instrument was signed by all of the appellants, the other two directors of said bank, and said bank through its cashier. Attached to said written instrument is a list of notes aggregating $ 40,013. A special meeting of the board of directors was held at said time, and the minutes of said meeting contained the following recital:

"Whereas this bank has been recently examined by the banking department, and certain assets of said bank have been objected to by examiners of said department, and whereas it is now deemed that, as an emergency exists, for the purpose of protecting depositors of said bank and eliminating the assets objected to, it is moved by William Schuldt and seconded by John Miles that the cashier be instructed to enter into a certain contract, copy of which is attached hereto and made a part hereof, whereby the signers of this agreement, as individuals, jointly and severally obligate themselves, with the understanding that part of this contract referring to assessment does not contemplate the elimination of their liability by the use of the assessment this day levied, but it is understood that any future assessment can be levied to liquidate the said liability, and the cashier is hereby authorized, empowered, and instructed to enter into this contract on behalf of this bank. So may it be. Carried."

Notes aggregating $ 40,000 were signed by the appellants and said two directors on said date, and were delivered to the cashier of said bank, who was one of the said board and also one of the signers of said notes. On November 29, 1924, said notes were placed in the assets of the appellee bank, and $ 73,000 of the assets of said bank were charged off. In their answer appellants admit signing the note in question, but deny that the same was legally delivered, and allege that the note was signed in connection with the contract referred to, and that the transaction was subject to the approval of the superintendent of banking, and allege that no such approval was ever given, and that the agreement was executory and without consideration, and that the contract was ultra vires and procured by fraud and misrepresentation. By reply, the appellee pleads estoppel, ratification, and waiver. Appellants attacked the reply by motion, which was overruled. The bank remained open and continued in business and was still operating at the time of the trial.

I. The case was set for trial at a certain date in September. A few days prior to the time so fixed, the appellants filed a substituted answer. Appellee filed reply on the day that the cause was reached for trial. Appellants did not ask for a continuance, but requested that the trial be postponed, for the purpose of preparing a motion attacking said reply. The court granted leave to the appellants to file said motion, which was subsequently done, and ruled upon by the court. There was no reversible error shown at this point. A continuance was not asked, and there was no abuse of discretion on the part of the trial court in refusing to delay the trial for the purpose of permitting the appellants to file a motion attacking the reply, which motion the appellants did subsequently file, and which was ruled upon. See Molyneux & Maher v. Julius, 184 Iowa 816, 169 N.W. 131; Anderson v. Royal Highlanders, 195 Iowa 1252, 193 N.W. 640.

II. Appellants complain of the overruling of their objections to the testimony of a witness to the effect that one of the examiners said to the appellants, at the time of said transaction, that he would report the matter to the department, and "unless we [appellants] were definitely advised, we should include them [the notes] in the assets of the bank." There was no error in admitting this evidence. It was part of the transaction that occurred at the time the notes and the agreement were signed, and was material and proper.

III. Appellants complain of the ruling of the court in admitting the testimony of the witness Colton as to the custom and usage of the banking department in approving such a contract and as to the meaning of certain initials which were indorsed upon said contract. The objection is wholly without merit. The witness who made the indorsement of the initials identified the same, and testified as to the...