Second Nat. Bank of St. Paul v. Howe

• Decision Date: 24 April 1889
• Citation: 40 Minn. 390,42 N.W. 200
• Parties: SECOND NAT. BANK OF ST. PAUL v HOWE ET AL.
• Court: Minnesota Supreme Court

40 Minn. 390

42 N.W. 200

SECOND NAT. BANK OF ST. PAULvHOWE ET AL.

Supreme Court of Minnesota.

April 24, 1889.

(Syllabus by the Court.)

1. An accommodation note has no validity until it has passed into the hands of a third party for value.

2. Until it has been so negotiated, the maker can withdraw from and rescind his engagement upon it.

3. Notice to an active managing officer of an incorporated bank, given during banking hours at the usual place of business, is notice to the bank.

4. If, then, upon receiving adequate notice from the maker of the accommodation note that he rescinds and revokes the act, said officer falsely and fraudulently makes statements in reference to the solvency and financial standing of such payee, of a character calculated to and which actually mislead the maker, and induced him to withdraw his previous revocation and rescission of the contract, and to consent to the negotiation of the note to the bank, the latter can be held responsible for the consequences, in case it subsequently receives the note from the payee; and it is not material that at the time of the notice, and when the false and fraudulent statements were made, the bank was not interested in or connected with the note.

Appeal from district court, Ramsey county; BAXTER, Judge.

Action by the Second National Bank of St. Paul against Howe Bros. on a promissory note. Verdict was directed for plaintiff, and defendants appeal.

Warner & Lawrence, for appellants.

C. D. & T. D. O'Brien, for respondent.

COLLINS, J.

The plaintiff in this action is a corporation engaged in the banking business in the city of St. Paul, while the defendants are dealing in dry goods at the same place. The testimony which we are required to consider tends to establish that the note upon which the action is brought was given the evening before its date, as accommodation paper, to one McLain, to be discounted by him at the plaintiff bank the next day; that it was signed in the firm name by William Howe, one of the defendants, without the knowledge or consent of James Howe, his partner; that, upon being informed of the transaction, James promptly objected to the use of the firm name for McLain's benefit, and, at the opening of the bank next morning, was upon hand to notify its officers that the firm rescinded the engagement evidenced by the note. To the vice-president of the corporation, who was one of its managing officers, Howe stated that his firm was not indebted to McLain; that the note was given for accommodation solely; that the firm did not want it to go into the bank; that the firm would not be responsible for McLain's debt; and other matters of like import. It is quite clear, from the language used by Howe, that it amounted to notice that his firm revoked the act, but it nowhere appears that the bank was notified that the use of the firm name by one of the partners was repudiated by the other because it was unauthorized, and not within the scope of the partnership business, or otherwise. The testimony also indicates that the officer to whom this language was addressed assumed to know McLain's financial standing, assuring Howe that he need not be afraid of him, and that he was rich and responsible. Whereupon, and solely upon the strength of these assurances, Howe modified his rescission and revocation by authorizing the bank to take the paper if the vice-president knew McLain to be responsible. He left the bank with an injunction upon one of its managers not to take the note unless he knew its payee to be good, and immediately thereafter the note was...