First Nat. Bank v. Reins

• Decision Date: 06 July 1926
• Citation: 248 P. 9,42 Idaho 720
• Parties: FIRST NATIONAL BANK OF IDAHO, a Corporation, Respondent, v. HENRY REINS, Appellant
• Court: Idaho Supreme Court

248 P. 9

42 Idaho 720

FIRST NATIONAL BANK OF IDAHO, a Corporation, Respondent, v. HENRY REINS, Appellant

Supreme Court of Idaho

July 6, 1926

BILLS AND NOTES-DEFENSES TO NON-NEGOTIABLE NOTE-BANKS AND BANKING-EVIDENCE-WANT OF CONSIDERATION-OFFSET OF DEPOSITS IN INSOLVENT BANK.

1. Non-negotiable note after assignment as security for indebtedness is subject to same equities and defenses as though in hands of original payee.

2. Where borrower, after requesting $1,000 loan, agreed to take $5,000 on bank's agreeing to give certificate of deposit for $4,000, note and certificate so executed must be construed together as forming one contract.

3. Several instruments made at same time having relation to same matter must be taken as parts of one transaction and construed together to show true contract.

4. Purpose for which written instrument was delivered as between parties and as to those having notice, may be shown by parol.

5. Where bank on making $5,000 loan agreed to give borrower certificate of deposit for $4,000 and cancel $4,000 of note with certificate, bank's failure to comply with contract terminated it in that respect.

6. Delivery of $5,000 note to bank, $4,000 of which was conditional and for accommodation of bank, held without consideration as to $4,000, precluding liability thereon to bank.

7. Portion of note given bank under agreement that bank would issue certificate of deposit for part of amount, which was to be used to cancel note, held not to come within Laws 1921 chap. 42, as to offset of deposits in insolvent banks; there being no bona fide deposit.

8. Voluntary payment to commissioner of finance of notes which cashier had failed to pay from deposit as directed previous to insolvency cannot be subsequently offset or recovered.

9. Under Laws 1921, chap. 42, deposits made subsequent to giving of note in bank which later became insolvent cannot be offset against note, though depositor did not know note had been assigned.

APPEAL from the District Court of the Seventh Judicial District, for Payette County. Hon. Bertram S. Varian, Judge.

Action on promissory note. Judgment for plaintiff. Reversed and remanded.

Reversed and remanded. Costs awarded to appellant.

Freehafer & McClure and Hays, Martin, Cameron & Hays, for Appellant.

The defendant was entitled to avail himself against plaintiff of all set-offs, equities and defenses which existed in his favor and against the Fruitland State Bank at the time he first had notice of the assignment of his note to plaintiff. (C. S., secs. 6635, 6695, subd. 2; McCabe v. Grey, 20 Cal. 509; St. Louis Nat. Bank v. Gay, 101 Cal 286, 35 P. 876; First Nat. Bank v. Nye County, 38 Nev. 123, Ann. Cas. 1917C, 1195, 145 P. 932; Puget Sound State Bank v. Washington Paving Co., 94 Wash. 504, 162 P. 870; McKenny v. Ellsworth, 165 Cal. 326, 132 P. 75.)

As a general rule a depositor who is indebted to the bank is entitled to set off the amount of his credit against his indebtedness, even though the bank is insolvent. (7 C. J 652.)

Chapter 42 of the Laws of 1921 changed the foregoing rule in regard to set-off only; all other defenses and equities were left untouched and might be asserted by defendant. The receiver of a bank and the creditors stand on no higher plane than the bank. (Massey v. Fisher, 62 F. 958; Chicago Title and Trust Co. v. Brady, 165 Mo. 197, 65 S.W. 303; Montgomery Bank etc. Co. v. Walker, 181 Ala. 368, 61 So. 951; Westwater v. Lyons, 193 F. 817, 113 C. C. A. 617; Ward v. Oklahoma State Bank, 51 Okla. 193, 151 P. 852.)

A failure to perform a promise that was part of the consideration for the giving of the note at bar is a failure of consideration. (2 Williston on Contracts, p. 1561; Bray v. Lowery, 163 Cal. 256, 124 P. 1004; 12 C. J. 525.) Where a right is created solely by statute, and is dependent upon the statute alone, and such right is still inchoate, and not reduced to possession or perfected by final judgment, the repeal of the statute destroys the right and the remedy, unless the repealing statute contains a saving clause. (Moss v. Smith, 171 Cal. 777, 155 P. 90; People v. Bank of San Luis Obispo, 159 Cal. 65, Ann. Cas. 1912B, 1148, 112 P. 866, 37 L. R. A., N. S., 934; Sutherland on Stat. Construction, secs. 162, 163; Endlich on Interpretation of Statutes, sec. 478; Napa State Hospital v. Flaherty, 134 Cal. 315, 66 P. 322; Flanigan v. County of Sierra, 196 U.S. 553, 25 S.Ct. 314, 49 L.Ed. 597.)

Karl Paine, Edwin Snow and Dean Driscoll, for Respondent.

The certificate does not constitute an offset to the note as a matter of law, neither is the $ 719.92 balance on open account available as an offset. (C. S., secs. 6063, 6635, 6695, 6697; McGuire v. Lamb, 2 Idaho 346, 378, 17 P. 749; Pomeroy, Code Remedies, sec. 91, p. 130; Stadler v. First Nat. Bank, 22 Mont. 190, 74 Am. St. 582, 56 P. 111.)

The repeal of the 1921 act by chap. 133, 1925 Sess. Laws, does not affect the judgment entered before the repeal. (Fidelity State Bank v. North Fork Highway Dist., 35 Idaho 797, 31 A. L. R. 781, 209 P. 449; Ind. School Dist. v. Porter, 39 Idaho 340, 228 P. 253.)

The voluntary payment of the two small notes cannot be recovered. (Independent School Dist. v. Mittry, 39 Idaho 282, 226 P. 1076.)

The defense of partial failure of consideration, if it exists, is not available for the reason that the maker received and retained part of the consideration. (Daniels v. Englehart, 18 Idaho 548, 111 P. 3, 39 L. R. A., N. S., 938; Pioneer Bank & Trust Co. v. MacNab, 41 Idaho 146, 238 P. 295.)

The defense of fraud was not urged, but at any rate is not available. (Pocatello Security Trust Co. v. Henry, 35 Idaho 321, 206 P. 175, 27 A. L. R. 337; Hoagland v. Garrison, 32 Idaho 746, 188 P. 42.)

The equities of the situation are with the plaintiff. (Meholin v. Carlson, 17 Idaho 742, 134 Am. St. 286, 107 P. 755.)

BUDGE, J. William A. Lee, C. J., and Wm. E. Lee and Givens, JJ., concur. Taylor, J., dissents.

OPINION

BUDGE, J.

Respondent brought this action to recover upon a promissory note executed by appellant in favor of the Fruitland State Bank and by assignment by such bank collateraled to respondent to secure a loan. The trial court directed a verdict for respondent, and from the judgment entered on the verdict and an order denying a motion for new trial this appeal is taken.

The facts are not in dispute, namely, that appellant went to the Fruitland State Bank and asked the cashier, Gardner, if he could borrow $ 1,000, and was told that he could; that the cashier asked him if he could not make it $ 5,000, and appellant replied that he did not want more than $ 1,000; that the cashier stated to appellant that if he would make the loan $ 5,000 it would be a big help to the bank and also to the fruit-growers, and that appellant would be given a certificate of deposit to offset the $ 5,000 note,--the note to draw interest at the rate of eight per cent, as that was the regular rate charged by the bank, and the certificate of deposit to draw five per cent, but that when the certificate of deposit came due the difference in the interest would be allowed. Appellant signed a note for $ 5,000, and within two days thereafter this note was posted as collateral security for a loan from respondent to the Fruitland State Bank.

Appellant, in his answer to the complaint, among other defenses, as an affirmative defense alleged that he "received no consideration for the said note except the sum of $ 1,000 thereof," and the uncontradicted proof is that no benefit accrued to appellant from the signing of the $ 5,000 note except the $ 1,000 which he actually received.

The note was non-negotiable in form; its assignment to respondent was not a sale or transfer of the ownership of the Fruitland State Bank therein, but was a pledge as security for indebtedness. Respondent stands in the same position as if the Fruitland State Bank were suing on the note, the note being subject to the same equities and defenses in the hands of respondent as it would have been in the hands of the original payee. (Radke v. Liberty Ins. Co., 37 Idaho 436, 216 P. 1040.)

By reason of the unusual transaction under which the cashier of the Fruitland State Bank obtained from appellant the $ 5,000 note and gave the latter what purported to be a certificate of deposit, the two papers so executed must be taken and construed together. They formed one contract which, between the original parties to the note and the purported certificate of deposit, could not be enforced until the agreement made by the parties in connection with the transaction was performed. It has been well settled, in this state and elsewhere, that several instruments made at one and the same time, and having relation to the same subject matter, must be taken to be parts of one transaction and construed together for the purpose of showing the true contract between the parties. It is also well settled that if a written instrument is delivered, the purpose for which it was delivered, as between the parties and as to those having notice, may be shown by parol, and the effect of the admission of such testimony is not violative of the rule against the admission of parol evidence to vary the terms of a written instrument, but is to show the intention of the parties and what the agreement was. (Central Bank of Bingham v. Stephens, 58 Utah 358, 199 P. 1018; Beach v. Nevins, 162 F. 129, 89 C. C. A. 129, 18 L. R. A., N. S., 288; Peterson v. Tillinghast, 192 F. 287, 112 C. C. A. 545; ...