First Nat. Bank of Towner v. Reed

• Decision Date: 08 March 1921
• Citation: 173 Wis. 499,181 N.W. 737
• Parties: FIRST NAT. BANK OF TOWNER, N. D., v. REED.
• Court: Wisconsin Supreme Court

173 Wis. 499

181 N.W. 737

FIRST NAT. BANK OF TOWNER, N. D.,

v.REED.

Supreme Court of Wisconsin.

March 8, 1921.

Appeal from Circuit Court, Waupaca County; Byron B. Park, Judge.

Action by the First National Bank of Towner, N. D., against Joseph Reed. Judgment for defendant, and plaintiff appeals. Affirmed.

Action to recover on a promissory note. On the 31st day of August, 1916, the defendant entered into a contract with the Alfalfa Valley Land Company of North Dakota to purchase certain lands in that state. The contract provided for a cash payment of $800, which defendant paid by executing his note for that amount due in 30 days. It was agreed that the note should not be negotiated. He was to pay $35 per acre for the land, which was incumbered to the extent of $25 per acre. It was provided that if the title was not made merchantable by the vendor the agreement should be void, and all payments made pursuant to the contract should be returned to the defendant. On the 2d day of September, 1916, the land company deposited said $800 note with the plaintiff as collateral security for its note for $2,000 then held by plaintiff. The $800 note became due October 1, 1916. The note of the land company, to secure which the $800 note was deposited as collateral, became due November 5, 1916.

The R. C. Kittel & Co., was a corporation organized under the laws of the state of North Dakota, composed of the same stockholders as the Alfalfa Valley Land Company. The R. C. Kittel & Co., held a mortgage on all the lands of the land company, and was to receive a profit from the sale of its lands. One R. C. Kittel was president of both companies.

On the 20th day of November, 1916, the cashier of the plaintiff bank called on the said R. C. Kittel with a view of securing payment or further security of the said $2,000 note of the land company. The following transaction was the result of the interview: A new note of the Alfalfa Valley Land Company was executed to the bank in the sum of $2,500 to cover the $2,000 note and its overdraft of $500. The R. C. Kittel & Co., also executed its note to the bank for the sum of $2,500, and all of the collateral security then held by the bank to secure the $3,000 note was retained by the bank. A written pledge of security was also executed by the R. C. Kittel & Co., reciting:

“Whereas, the undersigned, R. C. Kittel & Co., a corporation, is indebted to the First National Bank of Towner, North Dakota, in the sum of $2,500, due October 1, 1917: This is to certify that the said R. C. Kittel & Co., a corporation, has deposited with the obligations evidencing such indebtedness to the First National Bank of Towner, as collateral security, the following described notes and bonds, to wit: [Here follows a description of the collateral security, which describes, among others, ‘note of Joseph Reed for $800; note of Alfalfa Valley Land Company for $2,500, together with all mortgages securing said notes,’ etc.]”

The trial court held that at the time plaintiff first took defendant's $800 note, to wit, the 2d day of September, 1916, it knew that it was an earnest-money note and subject to the clause in defendant's land contract to be refunded in case of the inability of the land company to give a good title to the land; that the land company was unable to give a good merchantable title to the land covered by said contract, and that the said lands were not conveyed to the defendant Joseph Reed; that said contract had been...