Grisim v. Live Stock State Bank
| Decision Date | 16 April 1926 |
| Docket Number | No. 25100.,25100. |
| Citation | 208 N.W. 805,167 Minn. 93 |
| Parties | GRISIM v. LIVE STOCK STATE BANK OF SOUTH ST. PAUL et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Dakota County; Albert Johnson, Judge.
Suit by Maggie Grisim against the Live Stock State Bank of South St. Paul and others to cancel and annul a note and mortgage. From a judgment for the plaintiff, defendant Drovers' State Bank of South St. Paul appeals. Affirmed.
Converse & Converse, of South St. Paul, for appellant.
O'Malley & O'Malley, of St. Paul, for respondent.
Plaintiff brought this action to have a note and mortgage dated January 9, 1922, payable 5 years after date, for the sum of $4,500, executed by her to defendant Live Stock State Bank and transferred by that bank to defendant Drovers' State Bank, canceled and annulled. The trial resulted in a judgment annulling them. All three defendants took part in the trial, but only the Drovers' State Bank appealed from the judgment.
The banks were located in South St. Paul. W. A. Samels was president and Edward J. Vogel cashier of the Live Stock Bank. Both were friends of plaintiff and her daughter Margaret, and Vogel boarded with them. In the latter part of 1921, the state banking department required the Live Stock Bank to charge off a quantity of worthless paper carried among its assets and replace it with cash or good paper. Samels and Vogel called plaintiff and her daughter to the bank and persuaded plaintiff to execute the note and mortgage as a favor and accommodation to them, to be put in the bank temporarily in place of a part of the worthless paper charged off. The court found that she received no consideration whatever for executing them, and this fact is undisputed. The court also found, in substance, that Samels and Vogel represented and promised that she would never be called upon to make any payment on them, that they would be released, canceled, and surrendered at any time that she so requested, that in any event they would be held only until an assessment about to be made upon the stockholders was made, and that this arrangement was both lawful and satisfactory to the banking department; and further found that plaintiff believing these representations to be true and in reliance upon them executed the note and mortgage for the sole purpose of being held until the assessment was made.
Plaintiff desired something to show that she was not to be liable on the note and mortgage, and on the same date on which they were executed Vogel as cashier, with the concurrence of Samels, wrote her a letter in which, after referring to the accommodation to the bank, he said:
The assessment was made in July, 1922, payable within 90 days thereafter. The court found that plaintiff repeatedly demanded the return and satisfaction of the note and mortgage, both before and after the assessment was made, but that the bank refused to return them. The evidence shows that she began worrying about this paper within two or three weeks after it was executed, and thereafter made frequent requests to have it returned to her, and that Samels continually put her off with statements to the effect that he was unable to return it then but would arrange to do so shortly.
The financial difficulties of the Live Stock Bank reached such a point that in February, 1923, it entered into a contract with the Drovers' State Bank, set forth in full in the findings, by which it transferred and conveyed all its property and assets to the Drovers' Bank, and the Drovers' Bank assumed and agreed to pay all the obligations of the Live Stock Bank "on account of deposits" as shown by the books of the latter bank.
This contract contained many provisions not necessary to mention, and was accompanied by a surety bond in the penal sum of $100,000, to secure the Drovers' Bank against loss if the proceeds of the assets turned over to it were not sufficient to pay the obligations assumed. The surety company paid the full amount of the bond, but this did not make up the full amount of the shortage.
The note and mortgage in question were respectively indorsed and assigned to the Drovers' Bank, under and pursuant to the above agreement. The court found that the Drovers' Bank took this paper "with full notice and knowledge of the circumstances attending its making" and "of the special purpose for which it was given." This is the only material fact in the case concerning which the evidence is conflicting. The Drovers' Bank was represented by its president, Otto Schumacher, in the negotiations between the two banks. Before closing the contract, he checked over the paper held by the Live Stock Bank with Samels and Vogel. Samels died in June, 1923, but Vogel testified at the trial that, when plaintiff's paper was reached in the checking, he and Samels informed Schumacher of the situation in respect to that paper, and that it was to be returned to plaintiff, and that Schumacher then placed it in the pile of doubtful and worthless paper. Schumacher denies receiving any such information or placing the paper in the doubtful list. The evidence made the question a question of fact to be determined by the trier of facts, and the finding must stand.
Plaintiff executed the note and mortgage to the Live Stock Bank wholly without consideration and for the sole purpose of permitting the bank to hold them among its assets until the assessment was made upon the stock. She was simply loaning her credit to the bank for a particular purpose and for a specified time. The transaction being without consideration and solely for the accommodation of the bank, it was competent for plaintiff thus to limit her liability. The accommodating party may limit the use to be made to the accommodation paper to a specific purpose and for a specific time, and is not liable thereon if it is used for a different purpose, unless it passes to a holder in due course. The Drovers' Bank, having taken the note and mortgage in question from the Live Stock Bank with knowledge of the purpose for which they were given and of the limitations placed upon the use to be made of them, is not in position to enforce them against plaintiff. Farley National Bank v. Henderson, 24 So. 428, 118 Ala. 441; Gilman v. N. C. & S. Ry. Co., 72 Ala. 566; Lay v. Wallace, 153 S. W. 601, 106 Ark. 458; Boutelle v. Wheaton, 13 Pick. (30 Mass.) 499; Chicopee Bank v. Chapin, 8 Metc. (Mass.) 40; Stoddard v. Kimball, 6 Cush. (60 Mass.) 469; Benjamin v. Rogers, 26 N. E. 970, 126 N. Y. 70; U. S. N. Bank v. Ewing, 30 N. E. 501, 131 N. Y. 506, 27 Am. St. Rep. 615; Clinton Bank v. Ayers, 16 Ohio, 283; Knox Co. Bank v. Lloyd's Adm'r, 18 Ohio St. 353; Lenheim v. Wilmarding, 55 Pa. 73; Stewart v. Moore, 12 Phila. (Pa.) 225; Hickerson v. Raiguel, 2 Heisk. (Tenn.) 329; Smith v. Traders' Bank, 12 S. W. 113, 74 Tex. 457; Bowman v. Van Kuren, 29 Wis. 209, 9 Am. Rep. 554; Moulton v. Posten, 8 N. W. 621, 52 Wis. 169; Burr v. Beckler, 106 N. E. 206, 264 Ill. 230, L. R. A. 1916A, 1049, Ann. Cas. 1915D, 1132; Second Nat. Bank v. Howe, 42 N. W. 200, 40 Minn. 390, 12 Am. St. Rep. 744; National Citizens' Bank v. Bowen, 124 N. W. 241, 109 Minn. 473; Farmers' State Bank v. Skellet, 183 N. W. 831, 149 Minn. 266.
The provisions of the Negotiable Instruments Law applicable to an accommodation maker were considered in Vernon Center State Bank v. Mangelsen, 208 N. W. 186, filed April 1, 1926, and not yet [officially] reported; and it was pointed out that under that act an accommodation maker does not occupy the...
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