Moore v. First Nat. Bank of Ouray

• Decision Date: 03 December 1906
• Citation: 38 Colo. 336,88 P. 385
• Parties: MOORE, Treasurer of City of Ouray, v. FIRST NAT. BANK OF OURAY et al.
• Court: Colorado Supreme Court

88 P. 385

38 Colo. 336

MOORE, Treasurer of City of Ouray, v. FIRST NAT. BANK OF OURAY et al.

Supreme Court of Colorado

December 3, 1906

Rehearing Denied Jan. 7, 1907.

Appeal from District Court, Ouray County; John T. Shumate, Judge.

Action by Isabel L. Moore, as treasurer of the city of Ouray, Colo against the First National Bank of Ouray, Colo., and others. From a judgment in favor of defendants, plaintiff appeals. Reversed and remanded.

Thomas Y. Bradshaw and T. W. Emerson, for appellant.

Story &amp Story, for appellees.

CAMPBELL J.

Action by an indorsee against an indorser of a promissory note. The Milwaukee Mining Company executed its promissory note for $5,000, payable to the order of J. A. Hinsey, which was afterwards indorsed and delivered by the payee to the First National Bank of Ouray. Thereafter the bank indorsed and delivered it to L. L. Bailey, its president, presumably for the purpose of collection. Bailey brought suit on the note against the maker, and caused a writ of attachment to be issued and levied upon its property.

There was no defense to the action, but before judgment was taken negotiations were begun between Bailey, representing the bank, and the officers of the city of Ouray for a trade or exchange of the note by the bank for certain of its certificates of deposit which the city held aggregating about $5,000; these certificates representing funds which the city had on deposit with the bank. The exchange was consummated the city giving up its certificates to the bank in exchange for the note with the bank's indorsement remaining thereon; the complaint alleging that the bank as a part of the consideration, agreed with the city that the bank's indorsement theretofore placed upon the note should constitute, and be in lieu of, a new and present indorsement, and that the bank would be liable to the city as an indorser without other or further indorsement being made by it, and the city, relying and acting upon the strength of such agreement of indorsement, parted with its securities. Bailey took judgment upon the note against the maker, and assigned this judgment to the city. Execution was issued and returned unsatisfied, owing to the fact that a prior attachment in another suit in another court was issued and levied upon the property of the maker, and all of its property was thereafter levied upon thereunder and sold to satisfy the prior lien. The judgment secured by Bailey was worthless, and the mining company, the maker, insolvent. The indorsements upon the note at the time it came into possession of the city and when this action was begun thus appear in the order as made:

'Pay to the order of the First National Bank of Ouray, Colorado, demand, notice and protest waived. J. A. Hinsey.

'Pay to the order of L. L. Bailey. First National Bank of Ouray, by A. G. Siddons, Cashier.

'Pay to the order of The First National Bank of Ouray without recourse on me. L. L. Bailey.'

After the transfer of the note to the city the bank became insolvent and ceased to be a going concern, whereupon the defendants McClure, Hurlburt, and Stevens submitted to it a proposition in writing, which was accepted, whereby they agreed to assume and pay all its liabilities as a consideration for the transfer to them of all its assets.

This action was brought by Moore, as treasurer of the city of Ouray, the successor of Charles F. Jordan, to whom, in his official capacity, the note in controversy and judgment had previously been assigned, against the First National Bank of Ouray and against McClure, Hurlburt, and Stevens upon their assumption of its liabilities. To an amended complaint setting up substantially the foregoing facts, the defendants severally filed demurrers upon two grounds: First, that the amended complaint was a departure from the original; and, second, it did not state facts sufficient to constitute a cause of action against any of the defendants. As Stevens, one of the defendants, was the judge of the court in which the action was brought, Judge Stimson, judge of another district, was called in to hear the demurrer, and he overruled it as to both grounds. The defendants then filed their answer to the amended complaint, putting in issue some of its averments, to which a replication was filed. The answer and replication become immaterial upon this review, as do the rulings on the demurrer, because, after the issues were made up and Judge Shumate, judge of another district, had been called in to try the cause upon the merits, he sustained the objections of defendants to the introduction of any evidence by plaintiff in support of the amended complaint, upon the ground that therein no cause of action was stated as against any of the defendants in the action. Afterwards the plaintiff made specific and detailed offers of proof in its support, which were likewise refused.

The question upon this appeal is as to the sufficiency of the amended complaint. It would seem from the foregoing statement of its averments, confessed by the demurrer, that the plaintiff ought to recover. The maker of the note was insolvent, and after maturity, and while it was in possession of the First National Bank, or of its president, legal attempt to enforce payment resulted in failure. As a consideration for the note, the city delivered up certificates of deposit aggregating about $5,000. If it fails to recover in this action, that amount of public money is lost. A consideration of the specific objections which defendants make to the amended complaint is probably the best way to dispose of the appeal. There are two branches to the case: First, the question as to the liability of the bank second, as to the liability of the defendants McClure, Stevens, and Hurlburt. All of the transactions occurred while the statute enacted in 1865, entitled 'Bonds, bills, and promissory notes,' was in force. Mills' Ann. St. § 244 et seq. The defendants' contentions in support of the ruling of the court refusing the offer of proof and entering judgment for defendants are thus stated by them: (1) That the legal effect of the indorsement as made by Bailey, for the purpose of retransferring the note to the bank, was to cancel both the bank's and Bailey's indorsements thereon, and, if this be not true, it limited the payment of the note to an order made by...