Northern National Bank v. Douglas
| Decision Date | 08 December 1916 |
| Docket Number | 20,137 - (81) |
| Citation | 160 N.W. 193,135 Minn. 81 |
| Parties | NORTHERN NATIONAL BANK v. H. N. DOUGLAS AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Anoka county against H. N. Douglas J. J. Anderson, F. R. Patterson and H. G. Anderson to recover $285.75 upon defendants' written guaranty which is quoted at the beginning of the opinion. The answer, among other matters, alleged that in January, 1911, the lumber company made a settlement in full with plaintiff for the sum of $10,000, for which two notes, due on March 4, 1911, were made and delivered to plaintiff, and that upon maturity both notes were paid in full. The case was tried before Quinn, J., who made the findings given in the first paragraph of the opinion and ordered judgment in favor of defendant Anderson. From an order denying its motion for a new trial, plaintiff appealed. Affirmed.
Guaranty -- consideration -- evidence admissible when recital is vague.
1. A recital of a consideration in a guaranty which does not state by whom or to whom paid, permits proof from the guarantor that he did not receive any, and that as to him the instrument is without consideration.
Guaranty -- construed to be an offer requiring notice of acceptance.
2. The evidence sustains the finding that respondent signed the guaranty without consideration. It was not signed by him at the request of the guarantee; nor was it delivered to the latter by the former; nor was it made contemporaneous with the extension of credit to the party guaranteed; nor does it appear that it could apply to any but future loans to such party. Hence the guaranty was in legal effect a proposal needing a notice of acceptance from the guarantee to the guarantor to make it a binding contract as to him.
Evidence insufficient to permit recovery.
3. Irrespective of consideration and of the legal effect of the instrument signed by respondent, there can be no recovery under the facts found.
Knox & Faber, for appellant.
E. H Nicholas, for respondent.
Respondent and three of the officers of the Douglas Lumber Company, a corporation, signed a guaranty dated January 30, 1909, addressed to appellant. The parts thereof deemed material on this appeal read as follows: In the fall of 1909 the Douglas Lumber Company entered upon an extensive logging enterprise requiring a credit of $20,000, or more. Under the law regulating the business of national banks, appellant was not permitted to loan to any one party more than $6,000. An arrangement was therefore made to obtain the money needed from certain other banks. The notes of the Douglas Lumber Company were made to appellant and immediately indorsed to the other banks. One of these notes, or a renewal, dated August 22, 1910, for $3,000, upon which there is unpaid the sum of $1,285.75 and some interest, is the basis for this action upon the guaranty. Under the issues made by the pleadings the court found, in addition to the facts already stated, that, at the special instance and request of the three officers of the Douglas Lumber Company who had signed the guaranty, the respondent signed the same without consideration and without knowledge that appellant or any of its officers had knowledge of the existence of such contract, and left the same in a law office with the managers of the lumber company; that at the time of signing the guaranty respondent was a stranger in the city of Bemidji and had no knowledge of the dealings of the Douglas Lumber Company with appellant, other than a general knowledge that it did its banking business with and at times borrowed money of appellant; that appellant never notified respondent of its acceptance of the guaranty; that, on August 22, 1910, the Douglas Lumber Company executed the note mentioned, payable on demand, to appellant; that this note was never carried as an asset of appellant until in January, 1915, but during said time was owned and held by a Crookston bank; that on October 6, 1910, the signers of the guaranty other than respondent sold their stock in the lumber company to H. H. Berge, and the latter, in company with respondent, went to appellant and settled all of the indebtedness of the lumber company to appellant by giving three notes, each for $5,000, one of which was executed by Berge, one by the company, and one by respondent, which said notes were paid, and that respondent had no knowledge then of the existence of the note in suit nor was he informed at any time prior to October, 1912, of its existence. As conclusions of law the court found that the guaranty was a conditional undertaking, that because of want of notice of acceptance respondent is not liable, and that appellant was not entitled to recover.
The only findings of fact challenged by the assignments of error are: That the court erred in finding that respondent signed the guaranty without consideration and without any knowledge on his part that the appellant or any of its officers had any notice or knowledge of the guaranty, and in finding that appellant never notified respondent of its acceptance of the guaranty. In appellant's brief it is conceded that no notice of acceptance was given to respondent. And the evidence sustains the finding that respondent signed without any knowledge on his part that the appellant or any of its officers had any notice or knowledge of the guaranty. Therefore the only finding of fact to examine, with a view to determine whether it is supported by sufficient evidence, is the one that respondent signed the guaranty without consideration. That is, without a legal consideration moving from the bank to him.
The guaranty purports to be for a consideration, but, since it does not show by whom or to whom paid, it was open to proof. Davis Sewing Machine Co. v. Richards, 115 U.S. 524, 6 S.Ct. 173, 29 L.Ed. 480; Clinton Bank v. Goldstein, 86 Mo.App. 516. The proof was that respondent received no consideration at the time he signed. The only consideration that could be claimed is that he was a stockholder in the lumber company, and hence would be benefited by the credit extended to it. We understand that appellant now makes that contention. It was apparently thought little of at the trial, and but for a question put to respondent by his own counsel, on rebuttal, to establish that respondent's relation to the lumber company and to the bank was not changed at the time of the alleged settlement of October 6, 1910, it would not have appeared with any certainty that respondent had an interest in the lumber company when he signed the guaranty. But we think the benefit to accrue to respondent as a stockholder in the company from an extension of credit to it was not a consideration operating at the time the guaranty was signed, so as to make the same absolute in virtue of a consideration received. No advantage could flow to respondent as stockholder until appellant chose to make a loan to the lumber company. There is no evidence that any was made contemporaneously with the signing or delivery of the guaranty. The possible advantage to respondent as a stockholder does not seem to come within the definition of adequate consideration to make a guaranty binding given in the leading case of Davis v. Wells, 104 U.S. 159, 26 L.Ed. 686, where the court, in speaking of what makes a guaranty absolute, says: "It must be so wherever there is a valuable consideration, other than the expected advances to be made to the principal debtor, which, at the time the undertaking is given, passes from the guarantee to the guarantor."
But irrespective of consideration, appellant claims the guaranty absolute, requiring no notice of acceptance. It is plain that respondent's undertaking was not original but collateral or conditional upon the lumber company's defaulting in the payment of loans made to it. The law is that a guaranty, although without consideration, is absolute when it is signed by the guarantor at the request of the guarantee, or where it is delivered by the former to the latter, or its execution is contemporaneous with the extension of credit to the principal. The findings negative the existence of any matter which, under the rules stated, would go to make this guaranty absolute, or which would avoid the necessity of notice of acceptance. We must also assume that it relates to future loans and credits, for there is no evidence of any indebtedness of the lumber company to the bank in January or February, 1909. Therefore, Winnebago Paper Mills...
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