Fidelity Bank & Trust Co. v. Fitzimons
Decision Date | 18 November 1977 |
Docket Number | No. 47259,47259 |
Citation | 261 N.W.2d 586 |
Parties | FIDELITY BANK AND TRUST COMPANY, Appellant, v. John R. FITZIMONS, Respondent. |
Court | Minnesota Supreme Court |
Syllabus by the Court
1. In a suit brought by a bank against defendant who executed a guaranty contract, where the plaintiff bank establishes a prima facie case by introduction of the documents evidencing the loan, including business records of the bank, defendant has an obligation to rebut said testimony.
2. In absence of evidence of any kind on the part of defendant, defendant has failed to prove its affirmative defense, failed to rebut plaintiff's prima facie case, and the plaintiff is entitled to judgment.
Carlsen, Greiner & Law and Thomas K. Berg, Minneapolis, for appellant.
Zimmerman & Bix and Milton H. Bix, Minneapolis, for respondent.
Heard before SHERAN, C. J., and PETERSON and YETKA, JJ., and considered and decided by the court en banc.
Appeal from an order of the Hennepin County District Court denying plaintiff's alternative motion for amended and supplemental findings of fact, conclusions of law and order for judgment, or a new trial. Plaintiff sought recovery on a guaranty contract signed by defendant. The trial court sitting without a jury held that defendant was not liable on the contract because plaintiff failed to prove the primary obligation on which the guaranty depended. We reverse.
The trial evidence consisted of the testimony of one witness, David M. Gilman, plaintiff's executive vice president, and three exhibits introduced by plaintiff. Defendant rested without putting in any evidence. His motion for a "directed verdict" was denied. 1
Gilman's testimony was uncontradicted and unobjected to for the most part; cross-examination showed that his memory was unclear as to certain details of the transaction and parties involved. He testified that a loan was made by plaintiff to Klad-Ezee, Inc. (hereafter Klad-Ezee). The loan was for $23,000 and was evidenced by a bank money order for that amount. The bank money order showed Klad-Ezee as remitter and Creative Marketing Executives, Inc. (hereafter Creative Marketing) as payee. The loan was made on January 17, 1972, and on the same date defendant, John R. Fitzimons, an officer of Klad-Ezee, signed a document entitled "Contract of Guarantee." Gilman testified that the bank money order was payable to Creative Marketing which held an account receivable from Klad-Ezee. Creative Marketing had assigned the Klad-Ezee receivable to Southwest Fidelity State Bank (hereafter Southwest) to secure a loan. Defendant had directed the money order be made out to Creative Marketing.
Gilman testified that a corporate promissory note had been signed by defendant on January 17, 1972, but that after it was subsequently renewed, the note was returned to the borrower; no copy was kept. 2 The bank's commercial loan ledger was introduced into evidence as a business record. It showed a $23,000 loan to Klad-Ezee made on January 17, 1972, renewed on November 9, 1972, and never repaid. Gilman testified that the original debt was unsecured, but that collateral was obtained in November 1972, apparently when the note was renewed. Gilman testified that the loan was made in reliance on the defendant's personal guaranty and on a credit check of Klad-Ezee.
On cross-examination defendant attempted to elicit testimony showing that Klad-Ezee and Creative Marketing received no benefit from the loan. The endorsement on the money order was a standard endorsement used by a bank when there is no specific endorsement by the payee. It stated that it was credited to the account of the payee. Gilman was not certain whether the money was deposited to Creative Marketing's account at Southwest. 3
Gilman admitted that it was possible that the bank had contacted defendant about the loan; that plaintiff and Southwest had "similar ownership;" that no written loan application was ever made; that neither Klad-Ezee nor Creative Marketing had done business at plaintiff bank; that no account was ever opened for Klad-Ezee; and that Klad-Ezee never received the money directly. Gilman testified that the loan was made according to standard banking procedures. The trial court found that no money was ever received by Klad-Ezee or Creative Marketing, but that there was a direct, interbank transfer by means of the "check" payable to the order of Creative Marketing. A demand was made by plaintiff on Klad-Ezee and defendant, but the loan was not repaid.
This case presents the following issue:
Was the trial court's finding that no credit was extended by plaintiff to Klad-Ezee clearly erroneous? 4
If the trial court had found that a loan was made, it is clear from the trial court's memorandum that the defendant would have been held liable. In effect, the trial court concluded that plaintiff's evidence was insufficient to create a prima facie case, although it could withstand a motion to dismiss. 5
The findings of a trial court may not be set aside unless they are clearly erroneous. Rule 52.01, Rules of Civil Procedure. A finding is clearly erroneous if
"* * * 'the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " In re Estate of Balafas, 293 Minn. 94, 96, 198 N.W.2d 260, 261 (1972).
Due regard must also be given to the trial court's opportunity to observe the witnesses and assess their credibility. Werner v. Miller, 248 Minn. 75, 78 N.W.2d 63 (1956). Rule 52.01, Rules of Civil Procedure.
In In re Trust Known as Great Northern Iron Ore Properties, 308 Minn. 221, 225, 243 N.W.2d 302, 305, certiorari denied sub nom. Arms v. Watson, 429 U.S. 1001, 97 S.Ct. 530, 50 L.Ed.2d 612 (1976), this court reaffirmed the holding of In re Estate of Balafas and set out standards by which an appellate court could determine whether it should defer to a trial court's assessment of the evidence. This court, following Orvis v. Higgins, 180 F.2d 537, 539 (2 Cir. 1950), held:
" "
In the present case the disputed findings are based in part on oral testimony and in part on written evidence. If we examine the documentary evidence and find that it compels the conclusion that credit was extended by plaintiff to Klad-Ezee and that evidence is consistent with the uncontradicted, unimpeached oral testimony, then the trial court's determination should be reversed.
The written evidence that a loan was made and that the proceeds were deposited to the account of Creative Marketing is uncontradicted. Plaintiff introduced a bank money order with Klad-Ezee as remitter and Creative Marketing as payee. In general terms
Bailey, Brady on Bank Checks (4 ed.) § 1.7, p. 11, note 37. 6
Thus the naming of Klad-Ezee on the instrument as remitter is evidence that the instrument was issued on behalf of Klad-Ezee. The payee named on the instrument was Creative Marketing and the endorsement stamped by Southwest states in part:
Even if Gilman's testimony is construed most favorably to defendant on this point, he merely had no knowledge of whether the account was in fact credited. There is nothing in the record to contradict the plain meaning of the stamped endorsement. 7
The guaranty contract itself contains the following language:
"FOR VALUE RECEIVED and to enable Klad-Ezee, Inc., Watertown, Minnesota, hereinafter designated as 'Debtor,' to obtain credit, from time to time, of the FIDELITY BANK AND TRUST COMPANY OF MINNEAPOLIS, MINNESOTA * * *." (Italics supplied.)
The language of the guaranty contract clearly states that it is to enable Klad-Ezee to obtain credit. It is not signed in a corporate capacity. The "Contract of Guarantee" is not directly connected to the loan. It is apparently a standard form guaranty which refers to credit to be extended. The evidence of its connection with the money order and the loan ledger is primarily circumstantial, i. e., the same date and amount. The direct evidence linking the three documents is the testimony of Gilman which the trial court had to discount to reach the result which it did.
Finally, the ledger account introduced by plaintiff as a business record, and ultimately without objection, shows an unpaid account balance of $23,000 plus interest. It further shows that a loan was made on January 17, 1972, the same date as the money order was issued and the same date as is found on the guaranty contract. There is nothing in the record to show that the account ledger is a fabrication or is incorrect. However, the foundation laid for the admission of the records was minimal. Gilman testified generally and in conclusory terms to the accuracy of the...
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