First Nat. Bank of Morrison v. Busch

• Court: Supreme Court of Minnesota (US)
• Citation: 102 Minn. 365,113 N.W. 898
• Parties: FIRST NAT. BANK OF MORRISON v. BUSCH et al.
• Decision Date: 22 November 1907

102 Minn. 365

113 N.W. 898

FIRST NAT. BANK OF MORRISON

v.BUSCH et al.

Supreme Court of Minnesota.

Nov. 22, 1907.

Appeal from District Court, Dakota County; F. M. Crosby, Judge.

Action by the First National Bank of Morrison against John Busch and others. Verdict for plaintiff. From an order denying a new trial, defendants appeal. Affirmed.

Syllabus by the Court

In appearing, from the undisputed evidence, that the plaintiff was the transferee of negotiable paper in good faith before its maturity without notice of defenses, as collateral security for an antecedent indebtedness, the court properly excluded evidence tending to show that the execution and delivery of the note had been secured by fraud, and directed a verdict in favor of the plaintiff.

The rule which protects paper thus transferred applies when the antecedent debt is in the form of a contingent liability as indorser of discounted paper. William Hodson, Albert Schaller, and J. C. Zhender, for appellants.

Willis C. Otis, for respondent.

ELLIOTT, J.

In an action on a promissory note the court directed a verdict in favor of the plaintiff, and the defendant appealed from an order denying a motion for a new trial.

It is the settled law of this state that an indorsee of negotiable paper before maturity as collateral security for an antecedent indebtedness, in good faith and without notice of defenses which might have been available between the original parties, holds the same free from such defenses. We have adopted the rule which prevails in the federal courts, and very generally elsewhere, under which it is not necessary that a new consideration, other than such as results from the transaction itself, shall be paid at the time of the transfer. Rosemond v. Graham, 54 Minn. 323, 56 N. W. 38,40 Am. St. Rep. 336;Bank of Montreal v. Richter, 55 Minn. 362, 57 N. W. 61;Haugan v. Sunwall, 60 Minn. 367, 62 N. W. 398;Turle v. Sargent, 63 Minn. 211, 217, 65 N. W. 349,56 Am. St. Rep. 475;St. Paul Gaslight Company v. Village of Sandstone, 73 Minn. 225, 235, 75 N. W. 1050. We are unable to see any distinction, so far as this question is concerned, between an antecedent debt in the form of an absolute liability and the contingent liability of an indorser, and no such distinction appears to have been made in the cases. Miller v. Pollock, 99 Pa. 202;First National Bank v. Stockell, 92 Tenn. 252, 21 S. W. 523,20 L. R. A. 605. It is sufficient if the transferee of the collateral note is in such contract relations with the transferror as renders it advantageous to the transferee to have additional security for the performance of the antecedent obligation.

The note in question for $1,000 was given by the defendants to Champlin Bros. and bore date July 1, 1905. Upon the same date there was indorsed upon the note a payment of $365, which left a balance of $635, which became due according to the terms of the note on July 5, 1905. It appears that Champlin Bros. had previously discounted certain paper with the First National Bank of Morrison, respondent herein, and had agreed to deposit collateral security for their liability upon such...