Sec. Nat. Bank of Fargo v. Andrews

• Decision Date: 02 November 1925
• Docket Number: No. 4979.,4979.
• Citation: 205 N.W. 732,53 N.D. 328
• Parties: SECURITY NAT. BANK OF FARGO v. ANDREWS et al.
• Court: North Dakota Supreme Court

53 N.D. 328

205 N.W. 732

SECURITY NAT. BANK OF FARGO

v.ANDREWS et al.

No. 4979.

Supreme Court of North Dakota.

Nov. 2, 1925.

Syllabus by the Court.

A written guaranty is not effective unless and until it is delivered.

Where guarantors, who have signed a written guaranty deliver the writing to the principal conditionally, and he, though the condition is not complied with, delivers the same to the obligee, who has no knowledge or notice of the condition, and who acts on the security of the guaranty, the guarantors are bound thereby, notwithstanding the noncompliance with the condition.

Where an applicant applies to a bank for a loan, and the bank advises him that it will make the loan only upon his securing a guaranty of payment satisfactory to it, and the applicant thereafter induces guarantors to sign a guaranty satisfactory to the bank, and on the security of which the loan is made, he is not the agent of the bank in the transaction.

Appeal from District Court, Cass County; M. J. Englert, Judge.

Action by the Security National Bank of Fargo against John Andrews and another, doing business under the firm name and style of the Progressive, and others. From a judgment for plaintiff, defendants J. O. Lium and others appeal. Affirmed.Lemke & Weaver, of Fargo, for appellants.

J. J. Mulready, of Fargo, for respondent.

NUESSLE, J.

This case is here on appeal from a judgment of the district court of Cass county, entered in favor of the plaintiff. The action was brought on a promissory note and a written guaranty of payment of the same.

The plaintiff is a banking corporation engaged in business at Fargo, North Dakota. The defendants Andrews and Aarhus were engaged in the newspaper business. They wanted to buy a linotype, and applied to the plaintiff bank for a loan of $1,500 wherewith to get it. The bank refused to lend them the money unless they procured a written guaranty of payment of the loan satisfactory to it. They obtained from the bank the form of guaranty required, and set forth to secure guarantors. The bank did not specify whom they should get, nor how many guarantors. Andrews and Aarhus went to the various other defendants and told them that they wanted to buy a linotype; that they needed $1,500 for that purpose; that they could not borrow that amount unless they had satisfactory guarantors; and requested the defendants to sign the guaranty which they produced. This guaranty had been typewritten by them on plain paper, following the form secured from the bank. The defendants signed the guaranty and delivered it to Andrews and Aarhus, with the condition, however, that such guaranty should not be used until fourteen or fifteen other guarantors had likewise signed. Andrews and Aarhus procured but nine guarantors to sign; then they went to the plaintiff bank and presented the guaranty thus signed. The bank had no notice of any condition imposed by the signers as to the number of signatures to be obtained. The guaranty as presented was satisfactory, and on the strength of the guaranty it loaned Andrews and Aarhus $1,500. The indebtedness was not paid when due; thereupon this action was brought. The plaintiff in its complaint set out the making of the loan to Andrews and Aarhus, its reliance in doing so upon the guaranty of the other defendants, default in payment of the note evidencing the indebtedness, notice thereof to all of the defendants, and asked judgment for the amount of the note with interest. The defendants Lium, Hagen, and Skarvold answered, the others defaulting. They admitted the making of the guaranty sued upon, but alleged that their signatures were procured by fraud, deceit, and misrepresentation on the part of the plaintiff, and that said guaranty was delivered conditionally to Andrews and Aarhus, upon the understanding and agreement that they would procure at least fourteen or fifteen farmers as signers thereto, and that the condition was not complied with. Upon the issues as thus made, the cause was tried to a jury. The court in charging the jury charged that there were but two questions for their consideration (that is, whether the bank had notice of the conditional delivery of the guaranty, and whether the defendants Andrews and Aarhus were the agents of the bank in procuring the signatures to such guaranty); that if the bank had no notice, and Andrews and Aarhus were not its agents, they must find for the plaintiff. The jury returned a verdict for the plaintiff. Judgment was entered thereupon. From such judgment so entered the defendants Lium, Hagen and Skarvold perfected the instant appeal.

The defendants rest this appeal upon two propositions: First, that the guaranty was delivered conditionally, the condition was never complied with and therefore the guarantors were, regardless of lack of notice to, or knowledge by, the plaintiff, not bound thereby. Second, that the principals under the guaranty, Andrews and Aarhus, were the agents of the bank in securing the signatures thereto, and therefore the bank was chargeable with notice of all the facts and circumstances in connection with the transaction, and, since the delivery of the guaranty was only conditional, the guarantors could not be chargeable thereunder.

[1][2] A written guaranty has no legal effect until it...