German-Amer. F. Corp. v. Merchants', Etc., State Bank
| Citation | 177 Minn. 529,225 N.W. 891 |
| Decision Date | 07 June 1929 |
| Docket Number | No. 27260.,27260. |
| Court | Supreme Court of Minnesota (US) |
| Parties | GERMAN-AMERICAN FINANCE CORPORATION v. MERCHANTS' & MANUFACTURERS' STATE BANK OF MINNEAPOLIS et al. |
Appeal from District Court, Hennepin County; W. W. Bardwell, Judge.
Action by the German-American Finance Corporation against the Merchants' & Manufacturers' State Bank of Minneapolis and others. From an adverse judgment, plaintiff appeals. Affirmed.
Joss & Parker, of Minneapolis, for appellant.
D. F. Nordstrom, of St. Paul, for respondents.
Plaintiff, a Minnesota corporation, appeals from an adverse judgment.
Action to compel A. J. Veigel, commissioner of banks and liquidating agent of the defendant bank (hereinafter referred to as the bank), to carry out certain agreements theretofore made by officers of the bank with plaintiff's predecessor and for the transfer and delivery to plaintiff of certain collateral held by Veigel.
Prior to April 1, 1918, plaintiff's corporate name was German-American Mortgage Corporation. On that date, its name became Traub & Mantz Mortgage Corporation, and on January 1, 1926, the present name was adopted. The corporation will hereinafter be called plaintiff, irrespective of what its name was at the specific times mentioned. On February 15, 1926, the bank was closed and is now in process of liquidation by the commissioner of banks.
During the year 1922 and until February, 1923, one Hoveland was president of the bank; he was succeeded in that capacity by J. H. Meier until February, 1924, when M. D. Smiley was appointed president and thus remained until the bank was closed. All transactions here involved were carried on by Hoveland and Smiley for the bank during the respective periods when each was the bank's president and managing officer and by C. A. Mantz for the plaintiff. Each had full authority to act within the scope and power of his office and had power to bind his principal, limited only by restrictions imposed by law and custom and usage.
Prior to the closing of the bank, plaintiff was a borrower of the bank, and kept its commercial accounts with it. On April 7, 1922, the bank owned certain bonds, known as Holmes Securities Company bonds, in an aggregate sum of $30,000. On that date, these bonds were traded to plaintiff at a discount of 10 per cent., $20,000 in first farm mortgages and $7,000 in second farm mortgages (the latter bearing no interest) being received therefor and becoming the assets of the bank. Collections were made on the second mortgages, reducing the amount to $6,648.61. The second mortgages were criticized by the banking department and ordered to be removed from its assets. Plaintiff was requested by Hoveland to repurchase the second mortgages and to give the bank a note (Exhibit C), dated September 8, 1922, due December 8, 1922, secured by the second mortgages as collateral, for the balance unpaid thereon in the sum of $6,648.61. This was done. At the time of the giving of said note, an arrangement was made in writing by means of letters between Hoveland, in the name of the bank, and Mantz, representing plaintiff, to the effect that the note was given simply as an accommodation to the bank and that plaintiff was at no time to pay the same and that said note was given without consideration and no liability assumed.
This note was in all things regular upon its face, bearing interest at 6 per cent. At that time Mantz and another officer of the plaintiff were liable upon a note dated October 17, 1919, for $14,000, which note was for a loan obtained for the benefit of plaintiff.
On September 8, 1922, plaintiff's indebtedness at the bank on three other notes was $11,200, all well collaterally secured, exclusive of Exhibit C. This main indebtedness was materially reduced, as will hereinafter appear. The bank records disclose that on December 30, 1922, interest upon Exhibit C in the sum of $106.99 was paid and $398.50 was paid upon the principal, reducing the amount of the same to $6,250.11; that a renewal note dated December 8, 1922, due June 8, 1923, for $6,250.11, was then delivered by plaintiff; that on maturity of the last-mentioned note, another note for like amount, due in six months, was given to the bank by plaintiff. An indorsement upon the principal of this note of $36 was made October 4, 1924, reducing the principal to $6,214.11. Renewal of this note was made January 2, 1925, when $14.11 upon the principal was paid and also the accrued interest, reducing the amount to $6,200, and a new note executed therefor due July 2, 1925. All of the notes herein referred to bore interest at the rate of 6 per cent. per annum, and each had upon its face the statement: "Having deposited with said bank as the owner, and as agent for the owner, of this note, and pledged as collateral security for the payment hereof and of all other debts and liabilities to said bank due, or to become due, or that may be contracted hereafter, the following, viz., sundry mortgages now on file." Then followed a lengthy recital relative to the securities as is usually found on such collateral notes.
The second mortgages hereinbefore referred to were held by the bank until January 2, 1925, at which time they were delivered to plaintiff and were never returned to the bank. Although said last-described note was dated January 2, 1925, it was not delivered until January 16, 1925, at which time Smiley wrote a letter, signed in the name of the bank, to the Traub & Mantz Mortgage Corporation, in which it was stated:
In reply to this letter, the Traub & Mantz Mortgage Corporation accepted the terms of the foregoing letter and returned the Hoveland letter. None of the papers evidencing the secret arrangements made by plaintiff with Hoveland and Smiley were kept with the bills receivable and collateral securities of the bank, nor were they intended to be, nor were they ever discovered in the numerous examinations made by the state bank examiners. The note of January 2, 1925, was renewed for six months on July 2, 1925, and it in turn was renewed for a like term on January 2, 1926, and is the note (Exhibit N) involved in this suit.
The dispute arises regarding the collateral to this note and the maturity of the same. Defendants have on hand collateral aggregating $13,682.50, being the specific items listed in plaintiff's complaint, except a proper deduction of $500. Plaintiff's contention is that defendants have no right to hold the collateral as security for the $6,200 note but only for the $3,210.15 remaining unpaid on plaintiff's other indebtedness to the bank. Plaintiff offered to pay the latter amount and demanded return of the collateral.
The defendants contend, and the lower court so found, that the right existed to enforce payment of both amounts and that the collateral secured the same, notwithstanding the provisions in the letters hereinbefore referred to, and that plaintiff was estopped from denying such right. By a proper counterclaim, defendants asked for appropriate relief to enforce that right. The court also found that the plaintiff's Exhibit N, the $6,200 note, became a part of the bank's assets and was represented as part of its assets in the reports called for by the state banking department, a copy of each of which was published according to law, and that plaintiff had knowledge thereof. As conclusions of law, the court held that defendants were entitled to the relief asked for as above indicated and judgment was entered accordingly.
Three propositions are urged by the defendants in support of the judgment here appealed from: (1) That the actions of Hoveland and Smiley,...
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