Mechanics & Metals Nat. Bank of City of New York v. Pingree

• Decision Date: 11 December 1924
• Citation: 40 Idaho 118,232 P. 5
• Parties: THE MECHANICS AND METALS NATIONAL BANK OF THE CITY OF NEW YORK, a Corporation, Appellant, v. D. R. PINGREE, JOHN BROCKIE, L. W. PINGREE, J. H. PETERSON, E. J. MERRILL, RICHARD DOUGLAS, W. H. HILLMAN and FRED G. CALDWELL, Respondents
• Court: Idaho Supreme Court

232 P. 5

40 Idaho 118

THE MECHANICS AND METALS NATIONAL BANK OF THE CITY OF NEW YORK, a Corporation, Appellant, v. D. R. PINGREE, JOHN BROCKIE, L. W. PINGREE, J. H. PETERSON, E. J. MERRILL, RICHARD DOUGLAS, W. H. HILLMAN and FRED G. CALDWELL, Respondents

Supreme Court of Idaho

December 11, 1924

BILLS AND NOTES-SALE OF PLEDGED COLLATERAL-CONVERSION-WHEN GUARANTORS RELEASED.

1. Where a pledge agreement provides that notes pledged as collateral may be sold either at public or private sale and without advertising the same or giving notice, the waiver of notice applies only when the collateral is sold at private sale; if the pledgee elects to sell at public sale it must give the notice required by law for the sale of a pledge at public auction.

2. Where a pledgee of promissory notes held as collateral has sold the same at public sale in another state and brings an action in this state against the guarantors of the original note to recover the deficiency after the application of the proceeds of the sale of the pledged property, it must be alleged and proved that such collateral was sold in accordance with the requirements of law where such pledged property was sold, and upon failure to do so it will be presumed that the law relating to the sale of pledges at public auction is the same as the law of this state, and any substantial departure from the method prescribed by law for the sale of pledges will render the sale a conversion of the pledge to the extent of the difference between its value and what it was sold for.

3. A sale at public auction of promissory notes pledged as collateral without substantial compliance with requirements of law relating to the sale of pledges amounts to a conversion of such collateral.

4. Where a creditor holds a guaranty for the payment of an obligation and also collateral notes pledged for its payment if it converts such collateral without the consent of the guarantors, such guaranty is released to the extent of the value of the collateral so converted, and in the absence of any evidence as to the value of such collateral it will be presumed to be worth its face value.

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Action on contract of guaranty. From judgment for defendants plaintiff appeals. Affirmed.

Judgment affirmed, with costs to respondents.

Stevens & Downing, for Appellant.

The contract of guaranty in question is a continuing guaranty of payment, and the payment of the note in question in this case was covered by the guaranty. (Scovill Mfg. Co. v Cassidy, 275 Ill. 462, 114 N.E. 181; First Nat. Bank of Litchfield, Conn., v. Jones, 219 N.Y. 312, 114 N.E. 349; Utica City Nat. Bank v. Gunn, 222 N.Y. 204, 118 N.E. 607; Peoria Savings, Loan & Trust Co. v. Elder, 165 Ill. 55, 45 N.E. 1083; Conduitt v. Ryan, 3 Ind.App. 1, 29 N.E. 160; Benton Co. Sav. Bank v. Boddicker, 105 Iowa 548, 67 Am. St. 310, 75 N.W. 632, 45 L. R. A. 321; First Nat. Bank of Antigo v. Wunderlich, 145 Wis. 193, 130 N.W. 98.)

Exhibits numbered 1 to 34, and 36 to 40, 42A, 43 to 47, inclusive, denied by the court, were admissible to show transactions leading up to the guaranty and the giving of the note, to show that credit was given on the strength of such guaranty and the circumstances under which said guaranty was given. (Worcester Coal Co. v. Utley, 167 Mass. 558, 46 N.E. 114; Dunning & Smith v. Roberts, 35 Barb. (N. Y.) 463; Douglass v. Reynolds Byrne Co., 7 Pet. (U.S.) 113, 8 L.Ed. 626; Bell v. Bruen, 1 How. (U.S.) 169, 11 L.Ed. 89.)

The sale of collateral in the city of New York was valid and was authorized by the note contract between the plaintiff and the Stockgrowers Bank and Trust Company. (In re Markell, 276 F. 313; 8 C. J., sec. 149, p. 89; Irving Nat. Bank v. Ellis, 74 N.J.L. 42, 64 A. 1071; Williams v. Parker, 30 Cal.App. 71, 157 P. 550; Hudgens v. Chamberlain, 161 Cal. 710, 120 P. 422; Dibert v. Wernicke, 214 F. 673, 131 C. C. A. 109; Citizens Bank & Trust Co. v. Thornton, 174 F. 752, 98 C. C. A. 478.)

It was not necessary to notify different guarantors, defendants herein, of the time or place of the sale of collateral under the note contract between the plaintiff and the Stockgrowers Bank and Trust Company. (Withers v. Bousfield, 42 Cal.App. 304, 183 P. 855; Williams v. Hahn, 113 Cal. 475, 45 P. 815.)

The defendants, as directors, officers and stockholders of the Stockgrowers Bank and Trust Company, were estopped from questioning the return of collateral to the Stockgrowers Bank and Trust Company. (Pruden v. Liebler, 22 N.D. 587, 135 N.W. 186.)

Where there is any evidence at all supporting the plaintiff's cause of action it is the court's duty to submit the same to the jury. (Utica City Nat. Bank v. Gunn, 222 N.Y. 204, 118 N.E. 607.)

Budge & Merrill and Peterson & Coffin, for Respondents.

"Where a creditor holds a guaranty for payment of an obligation and also collateral security, if he surrenders the collateral to the debtor without the consent of the guarantor the guarantor is released to the extent of the value of the collateral so surrendered." (Brandt on Suretyship & Guaranty, secs. 480-482; Central State Bank v. Ford, 181 Iowa 319, 164 N.W. 754; Scandinavian American Bank v. Westby, 41 N.D. 276, 172 N.W. 666; Foerderer v. Moors, 91 F. 476, 33 C. C. A. 641; Allen v. O'Donald, 23 F. 573; Gotzian & Co. v. Heine, 87 Minn. 429, 92 N.W. 398.)

"Where the collateral surrendered to the debtor by a creditor without consent of the guarantor consists of promissory notes, such notes, in the absence of other proof, are prima facie worth their face value." (Revert v. Hessee, 184 Cal. 295, 193 P. 943; Peerless Fire Ins. Co. v. Barcus (Tex. Civ.), 227 S.W. 368; Brandt on Suretyship & Guaranty, sec. 480.)

"In the absence of proof to the contrary, the law of another state is presumed to be the same as the law of this state." (Moore v. Pooley, 17 Idaho 57, 104 P. 898; Maloney v. Winston Bros. Co., 18 Idaho 757, 111 P. 1086.)

"Although a pledge agreement provides that collateral may be sold at public or private sale and without advertising the same or giving notice, the waiver of notice applies only when the collateral is sold at private sale. If the pledgee elects to sell at public sale he must give the notice required by statute." (Union Merc. Co. v. Harnwell, 158 Ark. 295, 250 S.W. 321; Foote v. Utah-Commercial & Savings Bank, 17 Utah 283, 54 P. 104; Dulin v. National City Bank (Ind. App.), 130 N.E. 426; Amarillo National Bank v. Harrington, 62 Tex. Civ. 179, 131 S.W. 231; Bendel v. Crystal Ice Co., 82 Cal. 199, 22 P. 1112.)

"A sale of pledged collateral in disregard of the statute amounts to a conversion." (31 Cyc. 839; Wigham v. Fountain, 132 Ga. 277, 63 S.E. 1115; Feige v. Burt, 118 Mich. 243, 74 Am. St. Rep. 390, 77 N.W. 928; King v. Boerne State Bank (Tex. Civ.), 159 S.W. 433.)

"The measure of damages for conversion of promissory notes is prima facie the face value of the notes sold." (Revert v. Hessee, supra; Peerless Fire Ins. Co. v. Barcus, supra; Hazzard v. Duke, 64 Ind. 221; Davies v. Stevenson, 59 Kan. 648, 54 P. 679.)

"Conversion of pledged collateral to an amount equal to the debt whereby the debt is discharged, releases the guarantors." (28 Corpus Juris, 993, sec. 152; Glassell v. Coleman, 94 Cal. 260, 29 P. 508; State Bank v. Edwards, 45 N.D. 341, 177 N.W. 677; Central State Bank v. Ford, 181 Iowa 319, 164 N.W. 754.)

WILLIAM A. LEE, J. T. Bailey Lee, District Judge, concurs, WM. E. LEE, J., MCCARTHY, C. J., Concurring Specially. Budge, J., did not sit. Dunn, J., dissents.

OPINION

WILLIAM A. LEE, J.

--Appellant, Mechanics & Metals National Bank of New York City, is a corporation, under the national banking laws of the United States, with its principal place of business in New York. The Stockgrowers Bank & Trust Company, which will hereinafter be referred to as the Stockgrowers Bank, was a banking corporation with its principal place of business in Pocatello, Idaho. With the exception of L. W. Pingree, who was its assistant cashier, and Richard Douglas who was a stockholder, the remaining respondents were directors of the Stockgrowers Bank. It executed its note to appellant dated July 29, 1920, for fifty thousand dollars payable in ninety days. July 7th preceding the giving of this note, respondents, with John Brockie, a codefendant who defaulted and thereafter made no further appearance, executed an instrument and delivered the same to appellant which, omitting the signatures, reads as follows:

"July 7, 1920.

"For and in consideration of the sum of One Dollar ($ 1.00), and other good and valuable consideration, the undersigned guarantee the prompt payment at maturity of all notes, drafts, bills of exchange, acceptances and renewals of the same, that may be at any time discounted or purchased by the Mechanics and Metals National Bank of New York for the account, benefit, or use of the Stockgrowers Bank & Trust Company, of Pocatello, Idaho, or whereon the name of the said Bank appears as maker, drawer, acceptor or endorser, hereby waiving presentment for payment, demand, protest and notice of protest for the non-payment of any such instrument, or the renewal of same.

"This guarantee shall remain in force until written notice of its discontinuance shall be received by the Mechanics and Metals National Bank of New York and until all indebtedness or liability accepted or incurred before receiving notice of the revocation of this guarantee shall have been fully paid. The undersigned shall be severally and jointly liable on this guarantee.

"In Witness Whereof, We have hereunto set our hands and seals at Pocatello, Idaho, this day of June, 1920."

This suit is upon this instrument, based upon...