First National Bank of Henning v. Olson, 36630

• Decision Date: 16 December 1955
• Docket Number: No. 36630,36630
• Citation: 74 N.W.2d 123,246 Minn. 28
• Court: Minnesota Supreme Court
• Parties: FIRST NATIONAL BANK OF HENNING, Minnesota, Respondent, v. E. C. OLSON, sole trader, d/b/a Henning Seed & Grain Company, Appellant, McCabe Brothers Company, Respondent.

Page 123

74 N.W.2d 123

246 Minn. 28

FIRST NATIONAL BANK OF HENNING, Minnesota, Respondent, v. E. C. OLSON, sole trader, d/b/a Henning Seed & Grain

Company, Appellant,

McCabe Brothers Company, Respondent.

No. 36630.

Supreme Court of Minnesota.

Dec. 16, 1955.

Syllabus by the Court.

1. Court's function here is to determine whether complaint sufficiently states a claim showing that plaintiff is entitled to relief against defendant Olson as prescribed by Rules of Civil Procedure, Rule 8.01(1); and whether evidence received thereunder was irrelevant in establishing any such claim.

2. All essential elements of a cause of action for breach of contract as required under former code procedure are set forth in challenged complaint herein.

3. Under code procedure averment 'for a good and valuable consideration' is averment of ultimate fact sufficient to permit proof of actual consideration supporting an agreement involved in litigation.

4. Under new rules of civil procedure old code distinctions between allegation of 'facts' and 'legal conclusions' have been eliminated. Thereunder, events may now be pleaded by way of broad conclusions rather than ultimate facts.

5. Under new rules of civil procedure pleadings are to be more liberally construed than under code. Where essential requirements of code have been met in pleading cause of action, it would follow that, under more liberal construction applicable to the new rule, such pleading would also be sufficient thereunder.

6. Where defendant, through his counsel, admitted that he had no defense to an action for breach of agreement whereunder third party was to pay to plaintiff draft drawn upon such thrid party so as to reimburse plaintiff for money advanced by plaintiff to such defendant other than that such third party should have paid such draft, Held trial court properly directed verdict for plaintiff against such defendant.

Clifford G. Nelson, New York Mills, for appellant.

Owen V. Thompson, Fergus Falls, for First National Bank of Henning.

Faegre & Benson, Geo. D. McClintock, Jr., Minneapolis, for McCabe Brothers Co.

THOMAS GALLAGHER, Justice.

Plaintiff, First National Bank of Henning, instituted this action against E. C. Olson, doing business as Henning Seed & Grain Company of Henning, and McCabe Brothers Company of Minneapolis to recover the sum of $1,030.85 advanced by plaintiff to Henning Seed & Grain Company on checks drawn by the latter against plaintiff. Such advances comprised items for which a bill of exchange or sight draft was subsequently drawn by plaintiff, as agent for Henning Seed & Grain Company, upon defendant McCabe Brothers Company, pursuant to previous instructions of Olson, which bill of exchange or draft McCabe Brothers Company refused to pay upon presentation.

The essential allegations of the complaint are as follows:

'I.

'That on the 19th day of November, 1953, for a good and valuable consideration defendant E. C. Olson drew and delivered to plaintiff his bill of exchange directed to the defendant McCabe Bros. Co., whereby defendant E. C. Olson ordered said defendant McCabe Bros. Co. to pay to the order of plaintiff the sum of $1030.85 on sight.

'II.

'That on November 20, 1953, defendant McCabe Bros. Co. wilfully and wrongfully refused payment on said bill of exchange.

'III.

'That the plaintiff is still the owner and holder of said bill of exchange often called a sight draft in that no part thereof has been paid.'

In its answer McCabe Brothers Company admitted that the bill of exchange or draft had been presented to it and that it had refused payment thereon but denied liability to plaintiff under M.S.A. § 335.491 which provides:

'A bill (of exchange) * * * does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same.'

In his answer for a first defense Olson denied that the bill of exchange or draft had been drawn by him; for a second defense he alleged that the complaint did not state a cause of action against him; and for a third defense he alleged that McCabe Brothers Company had debited his account for the amount of the bill of exchange or draft described in the action and therefore that the same had been paid.

Testimony submitted at the trial indicated the following: In July of 1949 E. C. Olson commenced the operation of a grain elevator under the name of Henning Seed & Grain Company. At that time, he entered into arrangements with McCabe Brothers Company, a grain commission firm in Minneapolis, under which the latter was to act as his agent in disposing of commodities handled by him. At the same time, the entered into an arrangement with plaintiff, whereby the latter was to pay any checks drawn upon it by Henning Seed & Grain Company and in turn, as the latter's agent, prepare a bill of exchange or sight draft for the amount thus advanced, drawn upon McCabe Brothers Company, to be forwarded to the latter with the checks attached for payment. McCabe Brothers Company was then to pay plaintiff the amount of such bill of exchange or draft and in turn charge it to the account of Henning Seed & Grain Company. McCabe Brothers Company was not a party to this agreement, but for a period of four and one-half years prior to the present transaction, the procedure outlined was followed in detail, and all bills or drafts drawn by the bank as agent for the Henning Seed & Grain Company upon McCabe Brothers Company were promptly paid by the latter. No evidence was submitted as to the reasons for the refusal of McCabe Brothers Company to pay the bill or draft here involved, but there was testimony to the effect that Olson had advised the parties of his intention of terminating his business at about that time.

With reference to the transaction here involved, Mr. Guy C. Clement, vice president of plaintiff, testified that on or about November 12, 1953, Henning Seed & Grain Company, through Olson, drew three checks upon plaintiff, totaling $1,030.85 which the latter paid; that at that time, Olson had no funds on deposit with plaintiff; that subsequently on November 19, 1953, plaintiff, as agent for the Henning Seed & Grain Company, prepared the customary bill or draft drawn upon McCabe Brothers Company for the amount thus advanced and forwarded it together with the three checks to McCabe Brothers Company for payment; that the latter had at all times refused payment thereof; and that plaintiff had never been reimbursed for the amount of the checks described.

His testimony, insofar as it related to these checks, was received over objection of Olson's counsel as to its relevancy and materiality under the complaint.

During cross-examination of Clement by Olson's counsel, the former was asked:

'Q. At the time that this business of cashing checks commenced; that is, the checks for Mr. Olson, and you looked to the McCabe Brothers for payment, will you tell us what agreement you had with Mr. Olson?

'Judge Barron: I understood this agreement or arrangement was entered into in July, 1949?

'Judge Barron: Is that the arrangement you're speaking of?

'Q. Yes.

'Judge Barron: What happened at that time by arrangement with defendant Olson, or otherwise?

'A. Well, it was agreed we were to pay these checks to our bank, as they were drawn upon it; and at the end of the day or upon the collection of several of these items, possibly, that they were to be listed on this exhibit; and enclosed in the draft envelope, and sent to McCabe Brothers for payment; which custom continued for over four years; without interruption.

'Q. With whom did you have that arrangement or conversation?

'A. With Mr. Olson.

'Q. And was there anyone there from McCabe Brothers?

'A. No, but he presented the McCabe Brothers envelopes, which I think there's one on exhibit.

'Q. Did you ever have any arrangement with McCabe Brothers, other than this arrangement with Mr. Olson?

'A. I'd say not; not that I can recall.

'Q. Well, you always looked to McCabe Brothers to pay these checks?

'A. Yes, sir.

'Q. Never looked to Mr. Olson?

'A. Well, I suppose had McCabe Brothers not paid them, we would have looked to Olson for payment.'

After plaintiff rested, the following proceedings occurred:

'Mr. Nelson: At this time, your Honor, defendant Olson wishes to renew the motion made prior to the commencement of this trial; which was moved for dismissal, on the grounds the pleadings do not state a cause of action as to him; * * * that the evidence * * * does not prove any liability on the part of defendant * * *; so that the evidence, as presented * * *, is irrelevant to the issue in the pleadings.

'Mr. McClintock: * * * defendant, McCabe Brothers, would like to move for judgment * * * and for a directed verdict, on the ground that the plaintiff has failed to prove any cause of action against McCabe Brothers. The plaintiff merely proved that a draft * * * was not accepted; and yet the plaintiff seeks to recover, on the basis of a custom and practice. The Statutes * * * 335.491 expressly provides that a bill of exchange does not operate as an assignment of funds in the hands of the drawee, and that the drawee is not liable on the draft, unless * * * he accepts the same. * * *

'Mr. Nelson: * * * the complaint in this case was directed, as I read and interpreted the complaint, * * * toward McCabe Brothers. For that reason, I didn't put in any cross-complaint. Now, if there's to be a dismissal of the defendant McCabe Brothers, I'll have to move the Court for the authority to amend * * * my answer.

'Mr. McClintock: * * * if the defendant Olson were the plaintiff in a cross-complaint, * * * we also have a balance due from Olson of almost $5,000.00; and * * * would be obligated to put that off; so that would make quite a different lawsuit out of that. And our understanding * * * with respect to cross-complaints, that can only be done at the time of pleading, * * *.

'Mr....