Randolph State Bank v. Osborn

• Decision Date: 12 February 1929
• Docket Number: 39066
• Citation: 223 N.W. 493,207 Iowa 729
• Parties: RANDOLPH STATE BANK, Appellee, v. GAIL W. OSBORN et al., Appellees; JOHN ARTERBURN, Appellant
• Court: Iowa Supreme Court

223 N.W. 493

207 Iowa 729

RANDOLPH STATE BANK, Appellee, v. GAIL W. OSBORN et al., Appellees;

JOHN ARTERBURN, Appellant

No. 39066

Supreme Court of Iowa, Des Moines

February 12, 1929

Appeal from Fremont District Court.--EARL PETERS, Judge.

Action on a promissory note. There was no service of notice on the defendant Gail W. Osborn, who, in fact, was the maker of said note, but the cause was prosecuted as to the defendants John and Dena Arterburn, husband and wife, who were sureties on said note. The court directed a verdict against John Arterburn, and dismissed the cause as to Dena Arterburn. John Arterburn appeals.

Reversed.

Cook & Cook and Thornell, Thornell & Adams, for appellant.

Genung & Genung, for appellee.

DE GRAFF, J. ALBERT, C. J., and FAVILLE, MORLING, and WAGNER JJ., concur.

OPINION

DE GRAFF, J.

The note in suit is a renewal note, in the sum of $ 575, dated October 16, 1924, and payable to plaintiff-bank. The original note signed by these defendants was executed September 4 1922. John Arterburn did not personally sign the renewal note, but his name was signed by his wife, Dena. By amendments to the answer it is alleged that, at the time of the execution of the original note, it was orally agreed by and between the signers and the payee-bank that Osborn, the principal, was to sell his house, and that all money received from the sale in excess of the mortgage should be applied by the bank on the indebtedness evidenced by the note; that Osborn did sell his house, and the net proceeds were in an amount more than sufficient to pay the indebtedness in question, but that it was applied on other indebtedness owed by Osborn to the bank; that the renewal note was executed in ignorance of plaintiff's receipt and wrongful application of this money; and that plaintiff's receipt and wrongful application of the money operated as a release of the answering defendants, sureties on said note.

The plaintiff, in reply, denies the alleged agreement, and alleges that, if it was made, defendants waived it by the execution of the renewal note with knowledge that the property had been sold and the proceeds applied on other indebtedness of Osborn to plaintiff.

The defendant John Arterburn testified with reference to the signing of the first note to plaintiff-bank in 1922, and stated that at that time there were present the bank cashier Mr. Cruse, Osborn, the maker, Arterburn's wife, Dena, and himself. This note was signed at Arterburn's home. He further testified that, prior to the time the first note was signed, in the presence of all parties, Osborn said that, as soon as he sold his house, he would turn over to the bank the proceeds of the sale to be applied on the note. Cruse was present, and stated that such arrangement was "all right." Arterburn relied upon the promise of Osborn and upon the assent of Cashier Cruse on behalf of the bank to the statement of Osborn, and by reason of said agreement, signed the note. Mrs. Dena Arterburn testified, in substance, to the same facts, and these matters are not contradicted or denied in the evidence of plaintiff.

At the time of the signing of the second or renewal note, as heretofore stated, John Arterburn was not present, and did not himself sign the note. Mrs. Arterburn testified that she signed the second note at the plaintiff-bank, and that she was there by reason of other business with the bank. While she was there, the bank cashier, Cruse, presented her with the note in question, and told her that Mr. Arterburn had requested her to sign her husband's name. Assuming that such a direction and request had been made by her husband to Cruse, she did sign her husband's name. Two or three weeks later, she spoke to her husband about the matter, and at once Mr. Arterburn said: "I never told him so."

Arterburn first learned that the Osborn property had been sold, and for more than the amount of the mortgage, "along in August, 1925." He testified further:

"When I learned that, I went and asked Billie Cruse, the cashier, what he had done with it, and he said he paid it on another note [of Osborn's]. When Osborn told me what he put in the bank, I went and told Cruse that Osborn said he paid that on the note [in suit], and Cruse said, 'He did,' but he [Cruse] put it on another note. * * * I had learned that the house and lot had been sold, prior to October 16, 1924 [date of renewal note], and had a conversation prior to that time in regard to the money received. I asked Cruse if he paid off that note, and he said, 'No,' and I said, 'Why didn't you?' and he said he got about $ 100 above the mortgage on the premises. He didn't tell me at that time what he had done with it, but it was after Osborn told me about paying it in there that I went to Cruse and asked him about it, and then he said, 'He did;' and I asked him why he did not pay it on the note, and he said he [Osborn] had another note there that he paid it on. I did not know, at the time this renewal note was given, on October 16, 1924, that this six hundred sixty some dollars from the sale of the house had been placed in the bank at Randolph."

Cruse as a witness for plaintiff, testified that the deposit of the proceeds of the house, $ 693.55, was made April 29, 1923, to the account of Osborn, and applied in part on an overdraft, and on another and later note than the original Osborn and Arterburn note, by Osborn's direction, and the balance was left in Osborn's account. John Arterburn, according to his testimony, first learned that there were six hundred sixty some dollars over and above the mortgage placed in the plaintiff-bank, after the date of the renewal note, and he was then told that it had been applied on another note. There were some contradictions...