Simpson v. First Nat. Bank of Roseburg

Decision Date25 November 1919
Citation94 Or. 147,185 P. 913
CourtOregon Supreme Court

Department 2.

Appeal from Circuit Court, Douglas County; J. W. Hamilton, Judge.

Action by Grace Simpson against the First National Bank of Roseburg Or. Judgment for defendant, and plaintiff appeals. Modified and remanded.

The plaintiff is attempting to recover from the defendant the amount due on a promissory note on the theory that the bank is liable as an indorser to her, notwithstanding the fact that when she received the note from the bank the instrument contained an unfilled blank for a payee and the name of the bank did not appear in or on the note. The court sustained a demurrer to the amended complaint. The plaintiff refused to plead further, and thereupon a judgment was entered against her for the defendant's costs and disbursements. The plaintiff appealed.

Assuming as we must, that the facts are as stated in the amended complaint, the history of the note sued upon is as follows On August 15, 1907, the defendant, a corporation engaged in the banking business, loaned $1,000 to Mrs. M. Josephson, and she gave to the bank her promissory note, a copy of which follows:


Roseburg Or., Aug. 15, 1907.

"Demand after date, without grace, for value received, I promise to pay to ______ or order one thousand dollars, with interest from date at the rate of 8 per cent. per annum until paid principal and interest payable in U.S. gold coin of the present standard value; and in case suit be instituted to collect this note, or any portion thereof, I promise to pay such additional lawful sum as the court may adjudge reasonable, as attorney's fees.

"Mrs. M. Josephson."

At the time of making the note, the name of the payee was left blank; but, in the language of the complaint, "it was intended, and authority was given therefor, to insert the name of the defendant herein."

On September 19, 1907, the plaintiff had about $1,200 on deposit to her credit in the bank, and at that time the defendant through its officers suggested to her that she allow the bank to loan $1,000--

"of said money on deposit and represented to the plaintiff that it would be loaned by them to absolutely responsible parties, and for such time that should plaintiff have use for said money that the same would be available to her at any time after 30 days.

"That thereupon the defendant, through its officers aforesaid, appropriated $1,000 of said deposits belonging to plaintiff herein and negotiated, set over and assigned to the plaintiff the said promissory note of said Mrs. M. Josephson. That neither said bank nor its officers had notified the plaintiff herein as to how they had so invested said $1,000 for plaintiff until on or about the 1st of March, 1908, when plaintiff's bank book was balanced and a voucher returned to her being the memorandum check made by said defendant bank showing that plaintiff was charged with said note of Mrs. M. Josephson."

The bank continued to hold the note for the plaintiff and "to attend to the collection of the same and of the interest thereon" until January, 1914, when the bank delivered the note to the plaintiff with the information that the instrument belonged to her; and it is proper to state, too, that the plaintiff never saw the note prior to January, 1914, the time when she received the instrument from the bank, although, as already stated, she was informed by the memorandum check returned to her as a voucher on March 1, 1908, that the bank had invested $1,000 for her in the note of Mrs. M. Josephson.

Within a reasonable time after receiving the note from the bank, the plaintiff "filled in the name of defendant as payee of said note." While the bank had possession of the instrument as the agent of plaintiff, defendant presented it, from time to time, to the maker for payment; but no part of the principal was paid, and only a portion of the interest was paid.

The maker of the note was adjudicated a bankrupt at some time prior to January, 1914, and while the defendant had possession of the note "as agent of said plaintiff." We infer from the complaint that the plaintiff presented the note to the trustee in bankruptcy, and it is affirmatively stated in the amended complaint that the claim "was duly allowed and said bankrupt estate paid as dividends to plaintiff on account of said note the sum of $27.07 and no more." The plaintiff brought this action to recover $1,356.44, the balance due after deducting payments of interest received from the maker of the note and the dividends paid by the bankrupt estate.

Albert Abraham, of Roseburg, for appellant.

O. P. Coshow, of Roseburg, for respondent.

HARRIS, J. (after stating the facts as above).

The amended complaint was framed upon the theory that the bank was liable as an indorser on the note. The pleading recites that when the note was executed the name of the payee "was left blank," and that the instrument was still in that condition when the plaintiff received it. The pleader tells about writing the name of the defendant in the blank, and then avers that--

The "plaintiff is entitled to the indorsement of the defendant herein upon said note and was at all times so entitled to the same."

Again, we read in the amended complaint an allegation that the defendant had notice of the failure of Mrs. M. Josephson to make payment, "and of the fact that it was liable as indorser and on account of plaintiff being entitled to its said indorsement as of said date of making said transfer to plaintiff." The following brief averment is a concise statement of the theory upon which the pleading was based:

"That on account of said negotiation and sale aforesaid to the plaintiff herein of said note by said defendant as aforesaid, the said defendant is liable thereon as indorser as aforesaid."

The demand for judgment includes, not only the principal and interest due on the note, but also the sum of $100 which the plaintiff alleges is a reasonable sum to be allowed as attorney's fees for the collection of the debt. Obviously, the claim asserted by the plaintiff in her pleading is based on the note, and not on any independent oral promise amounting to a guaranty or an express warranty.

Counsel for the plaintiff now contends, however, that the amended complaint states enough to show that the defendant is liable to the plaintiff, even though it is held that the bank cannot be charged in this proceeding as an indorser. This contention proceeds upon the notion that the representations alleged to have been made by the defendant when its officers suggested that the plaintiff permit the bank to invest her funds for her amounted, either to a guaranty that the bank would itself repay the lender if the borrower did not, or to an express warranty of the solvency of Mrs. Josephson. 5 C.J. 967. It may be conceded that the bank might be held liable upon a contract of guaranty or warranty if it made such a contract. Kiernan v. Kratz, 42 Or. 474, 69 P. 1027, 70 P. 506; Swenson v. Stoltz, 36 Wash. 318, 78 P. 999, 2 Ann. Cas. 504. The sufficiency of the pleading was tested by a demurrer; the plaintiff was content to stand upon her pleading notwithstanding the ruling of the trial court sustaining the demurrer; and consequently in this court, as in the trial court, when examining the amended complaint the language found in it must be construed most strongly against the pleader. Darr v. Guaranty Loan Ass'n, 47 Or. 88, 93, 81 P. 565; Fishburn v. Londershausen, 50 Or. 363, 375, 92 P. 1060, 14 L. R. A. (N. S.) 1234, 15 Ann. Cas. 975.

The amended complaint does not state a cause of action arising out of any oral promise made by the defendant, unless it can be said that the representations attributed to the officers of the bank amount to such a promise. If a bank is authorized by a depositor to loan the latter's money, the bank for that purpose acts as an agent, and if it lends the money in good faith and uses due diligence it is not ordinarily liable for any losses that occur. 7 C.J. 719. We cannot tell from a reading of the amended complaint whether the representations are to be taken merely as limitations upon the authority of the agent, or were intended as a guaranty on the part of the bank to repay if the borrower did not or as a warranty of the solvency of the borrower, or otherwise. If the representations are considered as limitations upon the authority of the agent, the complaint fails to state a cause of action, for the reason that there are no appropriate allegations showing either bad faith or a lack of diligence on the part of the bank. For aught that appears in the pleading, Mrs. M. Josephson may have been solvent on August 15, 1907, as well as in March, 1908, and even for a long time afterwards; and, indeed, it may be that at any time in 1907 or 1908 all persons would have considered the loan a safe and profitable investment. It is true that Mrs. M. Josephson was adjudicated a bankrupt, but it is also true that the pleading does not tell us when she became a bankrupt. The inferences to be drawn from the amended complaint are that the maker of the note was not adjudicated a bankrupt until some time after January, 1913. Manifestly, the pleading does not sufficiently state a cause of action arising out of any bad faith or neglect of the agent. Nor does the amended complaint contain enough to enable us to say that it states a cause of action arising out of any fraud practiced by the bank.

While the word "guaranty" is not essential to create a contract of guaranty, and the word "warrant" is not indispensable for the creation of an express warranty, and while there is no particular form or expression necessary to create a strict guaranty or a pure warranty, still the...

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