Farmers' State Bank of Worland v. Nicholson

• Citation: 254 P. 134,36 Wyo. 221
• Decision Date: 19 March 1927
• Docket Number: 1304
• Parties: FARMERS' STATE BANK OF WORLAND v. NICHOLSON [*]
• Court: Wyoming Supreme Court

254 P. 134

36 Wyo. 221

FARMERS' STATE BANK OF WORLAND v. NICHOLSON ^[*]

No. 1304

Supreme Court of Wyoming

March 19, 1927

Rehearing Denied May 28, 1927.

APPEAL from District Court, Fremont County; ROBERT R. ROSE, Judge.

Action by the Farmers' State Bank of Worland against Oscar W Nicholson. Judgment for defendant, and plaintiff appeals.

Affirmed.

H. C Brome, for appellant.

The agreement of appellee to pay the notes held by appellant is an independent covenant upon which plaintiff was entitled to recover; 13 C. J. 567; Pacific Mill Co. v. Inman Co., 80 P. 424. The contention of defendant that Investor's Guaranty Corporation agreed to guarantee the payment of notes held by the bank, and that its failure to do so damaged defendant, is without merit under our statutes relating to set-off and counterclaims; 5660-5664 C. S. The facts stated do not constitute the defense of recoupment as known to the common law; Krausse v. Greenfield, Ann. Cas. 1914 B, 119. A claim against a third person cannot be interposed as a defense in a suit of this nature; Tweeddale v. Tweeddale, 93 N.W. 440, 61 L. R. A. 509.

A. C. Allen and O. N. Gibson, for respondent.

In an action upon an independent covenant, the breach of another independent covenant of the same contract may be urged in defense; Daniels v. Englehart, (Ida.) 111 P. 3; Fresno Canal Co. v. Perrin, (Cal.) 149 P. 805; Wyoming Irrigation Co. v. La Porte, 26 Wyo. 249; Cook v. Soule, 56 N.Y. 420; Block v. Ebner, 54 Ind. 544; Benedict v. Hunt, 32 Ia. 27. The rule is that a bad pleading is sufficient, if that which it undertakes to answer is bad; hence, when a demurrer to the answer is put in, and the declaration is insufficient, judgment will be for defendant; 21 R. C. L. 517. A consideration formed on mutual promises will not support an action unless plaintiff shows performance; 13 C. J. 627-571; Jones v. Perott, (Colo.) 34 P. 728; 28 C. J. 969-1019. Our code does not require that new matter in an answer must come within the classification of a set-off or counterclaim; 5659, 5660, 5580 C. S. See also 5667 C. S.; 34 Cyc. 664; Peter v. Co., 42 N.E. 690. Appellant's contention, that where an action is brought for one for whose benefit the contract was made, failure of consideration is no defense, is unsupported by the authorities; 1 Beach Contract, Sec. 210; 2 Page on Contracts, Sec. 1308; Dunning v. Leavitt, 85 N.Y. 30; Osborne v. Cabell, 77 Va. 462; Fish v. Bank, 150 F. 527; Hargadine Co. v. Co., (Kan.) 70 P. 583. Ellis v. Harrison, (Mo.) 16 S.W. 198; Alexander Co. v. Co., 214 Ill.App. 526.

Before KIMBALL, Justice, and TIDBALL and BURGESS, District Judges. KIMBALL, J., and BURGESS, Dist. J., concur.

OPINION

TIDBALL, District Judge.

This was an action to recover the sum of $ 22,727.73 claimed to be due from defendant on four promissory notes, the payment of which defendant had guaranteed. After a reply had been filed to defendant's amended answer, it was stipulated in open court that the reply should be withdrawn and that plaintiff should file a demurrer to defendant's amended answer, and that, after due consideration by the trial court, should that court come to the conclusion that the answer failed to state a defense, judgment should be rendered for the plaintiff, and that in case the trial court should determine that the defense set forth in said amended answer was good, judgment should be entered for defendant. Accordingly, the District Court of Fremont County overruled the demurrer to defendant's amended answer, entered judgment for defendant, and the case is now here on appeal, the plaintiff claiming that the trial court erred in overruling the demurrer to defendant's amended answer and entering judgment for defendant.

The plaintiff, The Farmers State Bank of Worland, is a banking corporation situated at Worland, Washakie County, Wyoming. On January 9, 1921, the defendant entered into a written contract with the Investors Guaranty Corporation, which contract provided that, for and in consideration of one dollar and other valuable considerations, "and the further consideration of the covenants and agreements hereinafter contained," the Guaranty Corporation "has this day sold, assigned and delivered" to Nicholson, the defendant, "all of the capital stock of the Farmers State Bank of Riverton, Wyoming, consisting of two hundred fifty (250) shares of stock fully paid, the receipt whereof is hereby acknowledged" by Nicholson. The contract then provides that Nicholson has purchased the two hundred and fifty shares of stock and paid for the same by his note in the sum of $ 5,000 and has sold, assigned and delivered two hundred shares of preferred and fifty shares of common stock of the Guaranty company to that company. And "as a further consideration of the transfer of all of the said capital stock of the said The Farmers State Bank of Riverton," Nicholson assumed and agreed to pay all contingent stockholders' liability, if any, and all outstanding rediscounts of the Riverton bank negotiated by that bank, or its officers, or by the Guaranty company or its officers, for or on behalf of the Riverton bank, according to a schedule marked "Schedule A" and attached to the contract. The contract then stipulates that the Guaranty company agrees to sell and transfer to Nicholson all of the assets of the Riverton bank. It further provides that the Guaranty company "will specifically guarantee the following bills receivable which have been segregated" and which are shown in "Schedule B" attached to the contract.

The "Schedule A" notes which Nicholson agreed to pay are discount notes of the Farmers State Bank of Riverton to various of its correspondent banks which aggregate in face value over $ 80,000. Among these "Schedule A" notes are the following: Note of W. N. Taylor and J. A. Delfelder, dated September 2, 1920, and due November 9, 1920, in the sum of $ 4,000; note of Riverton Construction Company, dated July 10, 1920, due January 1, 1921, in the sum of $ 5,000; note of J. M. Leishman in the sum of $ 10,000, past due. These notes had been discounted by the plaintiff, The Farmers State Bank of Worland, and had not been paid, and the present action is prosecuted for the purpose of enforcing payment thereof from the defendant Nicholson under his agreement to pay the "Schedule A" notes.

The "Schedule B" notes aggregate more than $ 93,000, and are notes belonging to The Farmers State Bank of Riverton, guaranteed in accordance with the above contract by the Investors Guaranty Corporation.

The defendant's amended answer admits the contract set forth in plaintiff's petition, admits that the notes sued on have not been paid, and that the amount claimed is due thereon. The answer then sets up an affirmative defense to the effect that on the 14th day of March, 1922, the Guaranty Corporation wholly repudiated its guarantee of the notes described in "Schedule B," and ever since said date has failed and refused and still wholly fails and refuses to discharge any of its obligations under said agreement, or make good its guarantee of any of said notes. The answer further alleges that on said 14th day of March, 1922, there remained due and owing to the Riverton bank upon certain of the notes described in "Schedule B" various sums itemized in Paragraph 9 of [36 Wyo. 226] the amended answer, and aggregating more than $ 50,000, exclusive of interest, attorneys fees and costs. The question, therefore, involved in this case is whether the fact that the Investors Guaranty Corporation has wholly repudiated that part of the agreement whereby it guaranteed the payment of the "Schedule B" notes is sufficient to bar a recovery by the plaintiff from Nicholson upon his guarantee of the payment of the "Schedule A" notes. The plaintiff claims that the agreement by the Guaranty company to guarantee and pay the "Schedule B" notes is an independent covenant of the contract set forth in the plaintiff's petition and that in case of the Guaranty company's failure to perform its part of the contract, the only remedy which Nicholson has is by a separate action against the Guaranty company, upon the theory that where one party repudiates an independent covenant contained in a contract, this does not absolve the other party from performing his part of the contract, but that he must perform his part of the contract in spite of the violation of such independent covenant, and that his only remedy is a separate action for damages on account of the violation of such independent covenant. Plaintiff also claims that the pleading set forth in defendant's amended answer is not a pleading allowed under our code--that it is not a counter-claim or a set-off, and does not constitute a defense to plaintiff's action.

In the first place, it should be noted that this action is by The Farmers State Bank of Worland, which bank was not a party to the contract set forth in plaintiff's petition. The bank is bringing the action as one for whose benefit the contract was made. The plaintiff bank had rediscounted certain notes of The Farmers State Bank of Riverton, and among these notes are the three included in this action. The rule is stated in 13 C. J. 699, as follows:

"One who seeks to take advantage of a contract made for his benefit by another must take it subject to all legal defenses and inherent equities arising out of the contract, such as the fraud of the party procuring it, the non-performance of conditions, or the right to a set-off, unless the element of estoppel has entered."

This statement of rule is supported by all of the authorities, so far as they have been called to our attention. It would therefore appear that The Farmers State Bank of Worland, the plaintiff in this case, stands in the same position as though the suit...