First State Bank of Hilger v. Lang
| Decision Date | 09 July 1918 |
| Docket Number | 3922. |
| Parties | FIRST STATE BANK OF HILGER v. LANG. |
| Court | Montana Supreme Court |
Appeal from District Court, Fergus County; Roy E. Ayers, Judge.
Action by the First State Bank of Hilger, a corporation, against H H. Lang. Judgment for plaintiff, and from an order denying new trial defendant appeals. Affirmed.
Belden & De Kalb, of Lewistown, for appellant.
Gunn Rasch & Hall, of Helena, and C.J. Marshall, of Lewistown, for respondent.
In March, 1908, Chas. W. Smith and H. H. Lang executed and delivered to the First State Bank of Kendall their promissory note for $1,900, and, as additional security for the loan Smith delivered to the bank 1,000 shares of the capital stock of the North Moccasin Mining Company. Although the note was not due until January, 1909, as early as April, 1908-the month following its execution-Lang importuned Smith to make payment on it, which Smith declined to do, and the like requests were repeated by Lang thereafter but unsuccessfully. On November 8, 1908, Smith executed and delivered to the bank a new note for $2,695, due in one year, in renewal of the Smith-Lang note and a balance due on another note of Smith's, and the original note was stamped "Paid" and delivered to Smith. This renewal note was not signed by Lang but the collateral which secured the two notes was left with the bank as the only security for the new note. On April 2, 1909, this renewal note was taken up and a third note for $3,612.87, signed by Smith and wife, was given in renewal of that note and for other advancements, and the second note was stamped "Paid" and delivered to Smith. In addition to the collateral which secured the second note, Smith and wife executed and delivered to the bank a mortgage upon some real property in Kendall. On March 12, 1912, suit was instituted to enforce collection of this third note, and thereafter judgment was recovered and execution issued, but nothing was collected.
From the organization of the bank until November, 1912, Henderson was cashier and Lang was president of the bank, and each of them was a director. Plaintiff is the successor of the First State Bank of Kendall. This action was commenced against Lang to enforce payment of the Smith-Lang note for $1,900 and accumulated interest. The defendant pleaded: (1) That he signed the note as accommodation for Smith, and that the bank extended the time of payment without his knowledge or consent; (2) that the bank was guilty of laches in prosecuting its claim against Smith; and (3) that the note was fully paid and discharged. Upon the trial and at the close of the testimony the court directed a verdict for the plaintiff, and defendant has appealed from an order denying him a new trial. There is not any conflict in the evidence except as to matters to which reference will be made hereafter.
Lang was general manager of the North Moccasin Mining Company, and owned considerable of its stock. The expenses of the company far exceeded its income, but notwithstanding this fact the stock had a market value of from $1.90 to $2 per share. Lang sold to Smith the $1,000 shares heretofore mentioned at $1.90 per share. The money with which to pay for the stock was borrowed from the bank and the Smith-Lang note executed and delivered, the money received and immediately passed to Lang's credit, and the certificate of stock delivered to the bank as collateral. On November 1, 1908, the mining company defaulted in the payment of interest on its bonded indebtedness. In April, 1909, mining operations ceased. In September, 1909, a suit to foreclose was brought and prosecuted to decree and sale, and the stock became worthless.
Prior to November, 1912, the board of directors of the bank in disregard of its by-laws held no meetings except to elect officers, made no examinations of the bank's affairs, took no part in making or approving loans, but permitted Henderson to conduct the bank's business. The directors, other than Henderson and Lang, knew nothing of the Smith-Lang loan or of the renewals. In November, 1912, at a meeting of the board at which neither Henderson nor Lang was present, certain of the bank's loans, including the note for $3,612.87 signed by Smith and wife, were approved. In January, 1914, the board discovered that Lang had signed the original note for $1,900, and a demand was made upon him to pay it, and upon his refusal this action was brought.
1. Appellant contends that, having signed the Smith-Lang note as an accommodation party, he was liable only as a surety, and was discharged by the extension of time granted to Smith without his knowledge or consent. With this we do not agree. A surety is only liable secondarily. The note reads:
Section 5844, Revised Codes, provides:
By virtue of this statute Lang was primarily liable, and his primary liability was not affected by the fact that he signed the note for the accommodation of Smith, and that this fact was known to the bank, a holder for value. Section 5877, Revised Codes, defines an accommodation party, and then proceeds:
"Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party."
The foregoing statutory provisions are portions of the Uniform Negotiable Instruments Act. They have been construed frequently, and the consensus of opinion is stated in 3 R. C. L. p. 1276, as follows:
"Under the Negotiable Instruments Law it may be regarded as well settled that the accommodation maker or acceptor is primarily liable, and is not discharged by any extension of time given to the indorser, drawer, or comaker, for whose benefit he became a party to the instrument, without regard to whether the party suing on the instrument is a party thereto as a payee, and had knowledge of the relation subsisting between the accommodation maker and the principal debtor."
2. A promissory note legally imports a promise to pay in money and nothing else. Unless there was an agreement between the bank and Smith that the renewal note of November 8, 1908, was given by Smith and accepted by the bank in payment and discharge of the debt represented by the Smith-Lang note, the effect of the renewal was merely to extend the time of payment, and did not discharge the obligation. First Nat. Bank v. Cottonwood Land Co., 51 Mont. 544, 154 P. 582. The fact that the cashier stamped "Paid" upon the old note, and delivered it to Smith, did not operate to change the rule. Bridge v. Connecticut Mut. Life Ins. Co., 167 Cal. 774, 141 P. 375; Scott v. Gilkey, 153 Ill. 168, 39 N.E. 265; Bank v. White, 60 N. J. Eq. 487, 46 A. 1092; Lowther v. Lowther-Kaufmann Oil & Coal Co., 75 W.Va. 171, 83 S.E. 49; 8 C.J. 572; 1 Michie on Banks and Banking, p. 739.
3. If the evidence is open to...
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