First Nat. Bank of Storm Lake v. Felt

• Decision Date: 26 January 1897
• Parties: FIRST NAT. BANK OF STORM LAKE v. FELT ET AL. (TWO CASES).
• Court: Iowa Supreme Court

100 Iowa 680

69 N.W. 1057

FIRST NAT. BANK OF STORM LAKE

v.FELT ET AL. (TWO CASES).

Supreme Court of Iowa.

Jan. 26, 1897.

Appeal from district court, Buena Vista county; Lot Thomas, Judge.

Action upon two promissory notes. Jury waived. Trial to the court. Judgment against plaintiff for costs. Plaintiff appeals. Affirmed.Wm. Milchrist, A. D. Bailie, and Carr & Parker, for appellant.

Cummins, Hewitt & Wright and F. H. Helsell, for appellees.

KINNE, C. J.

1. These causes were tried below together, upon the same testimony, and are before us for determination upon one record. The matters for consideration upon this appeal arise upon two counts of the petition. The first is to recover of the defendant Felt upon a note for $1,106 signed by him, and payable to the plaintiff. The second is to recover upon a note for $646.95 signed by the defendant Leyson, payable to Felt, and by him indorsed to the plaintiff. The defense pleaded to the $1,106 note is that it was without consideration, and executed under the following circumstances: Warner Bros. were indebted to the bank in a sum in excess of 10 per cent. of its capital stock. Included in said indebtedness was a note for $2,306, upon which $1,200 had been paid, leaving due thereon $1,106. This was on May 5, 1892. Prior thereto the comptroller of the currency of the United States had objected to the extent of the credit given to Warner Bros., and as the answer alleges: “That at said time it was deemed necessary by the officers and directors of the plaintiff bank to so change the form of said indebtedness from Warner Bros. that a portion of it might appear to be the indebtedness of a third person; and to meet such contingency this defendant did on the day aforesaid execute his note for the amount remaining due upon the said note of Warner Bros., * * * but executed the same wholly for the purpose of protecting the bank from the criticism that would otherwise be made upon the existence of said overloan to the said Warner Bros. That it was known by all the officers and a majority of all the directors of said bank that said note was given without consideration, and for the purpose aforesaid, and was so given with the express agreement and understanding had with the said plaintiff that it created no obligation on the part of this defendant to pay the plaintiff any sum of money whatsoever.” It is also averred that, at a meeting of the board of directors of plaintiff held thereafter, they, with full knowledge of all the facts, ratified all that had been done, and the agreement under which the note had been executed. The other note was given by the defendant Leyson, a bookkeeper in the bank, payable to the order of Felt, and by him indorsed to the bank, and represented an overdraft of Warner Bros. It was executed under the same circumstances, and to accomplish the same purpose, as the note first mentioned. Plaintiff demurred to the count pleading the defenses above set forth, the demurrer was overruled, and thereafter plaintiff replied in denial of the facts relied upon in the answer. This denial pleaded that Warner Bros. were insolvent; that plaintiff held no obligation of Warner Bros. representing the indebtedness evidenced by the note in suit; that the Felt note was given and accepted in lieu of the indebtedness of Warner Bros. to the bank. By agreement, this same reply applied to that count of the answer wherein the defense to the $646.95 note was pleaded. Upon the trial it appeared that the $1,106 note contained a memorandum upon its face that it was given on account of the Warner Bros. indebtedness. It was entered upon the discount register, and thereafter appeared upon the books of the bank. Felt was president of the bank, and all of the bank officers knew of the circumstances attending the execution of these notes. At a meeting of the board of directors of the bank held soon after these notes were executed, the discount register showing their execution was read in the meeting of the board; and, while there is some question as to what was said upon that occasion, we are inclined to the opinion that all the members of the board knew of the execution of the notes, and most, if not all, of them were aware of the purpose for which, and the circumstances under which, the notes had been executed. The $1,106 note which had been given by Warner Bros. still remained the property of the bank, and in its possession. It was not transferred to Felt, and, in view of what happened thereafter, it appears that neither the defendant nor the bank had any thought that the giving of Felt's note for the amount of the Warner note was to operate as a payment or discharge of the latter; for the bank, long afterwards, repeatedly recognized the indebtedness of Warner Bros. on the note to it, and took a mortgage to secure the payment of it, which the bank afterwards foreclosed. In October, 1892, Felt's connection with the bank ceased, and he moved to Denver. The first demand made by the bank upon Felt was by the bringing of this...