Todd v. State Bank of Edgewood

• Decision Date: 20 December 1917
• Docket Number: 30471
• Citation: 165 N.W. 593,182 Iowa 276
• Parties: LEVI M. TODD, Appellant, v. STATE BANK OF EDGEWOOD, Appellee
• Court: Iowa Supreme Court

165 N.W. 593

182 Iowa 276

LEVI M. TODD, Appellant, v. STATE BANK OF EDGEWOOD, Appellee

No. 30471

Supreme Court of Iowa, Des Moines

December 20, 1917

Appeal from Delaware District Court.--C. W. MULLAN, Judge.

ACTION to enforce an agreement, whereby it is claimed that defendant received a sum of money originally deposited with the Delaware County State Bank, and afterwards taken over by defendant upon an agreement to return the same to plaintiff on demand, if plaintiff did not receive title to certain land in the state of Texas, which plaintiff had purchased from the American & Canadian Land Company. It is alleged that this money was deposited in the banks as a tender of the amount due on certain notes given for the Texas land, with a demand for the fulfillment of the contract, which was never met; and the suit was primarily to recover the amount of the tender and deposit from the bank. Defendant bank admitted the tender and deposit, said it was made to stop interest on the notes and also pleaded a counterclaim upon the notes. It also alleged that plaintiff was a nonresident, and it sued out a writ of attachment, which was levied upon the fund. To this plaintiff replied by alleging that the consideration for the notes had failed, and that defendant was not a bonafide holder thereof, but had notice, when it purchased, that the notes were given for the purchase price of lands, title to which thereafter entirely failed. Defendant averred that it was a bona-fide holder, without notice of any infirmities and also pleaded an estoppel on plaintiff to deny the validity of the notes. Other issues were tendered, which will be noticed in the body of the opinion.

The case was tried as in equity, resulting in a decree dismissing plaintiff's petition, finding for the defendant on its counterclaim, and sustaining the attachment. Plaintiff appeals.

Reversed.

Yoran & Yoran, and J. W. Arbuckle, for appellant.

W. H. Norris, and Grimm & Trewin, for appellee.

WEAVER, J. GAYNOR, C. J., LADD, EVANS, PRESTON, and STEVENS, JJ., concur. SALINGER, J. (dissenting).

OPINION

WEAVER, J.

I.

In March of the year 1909, plaintiff and one F. B. Peet separately entered into written contracts with the American & Canadian Land Company, of Tipton, Iowa, for the purchase of certain Texas lands. Plaintiff, Todd, agreed to pay $ 3,600 for his tract, $ 800 of which he paid in cash, and the balance, $ 2,800, was represented by two negotiable promissory notes, in the sum of $ 1,400 each, maturing March 18, 1912. Peet agreed to pay $ 7,200 for his land, $ 3,200 of which was paid by a transfer of land to the company, and the remainder was represented by negotiable notes, in the sum of $ 1,000 due March 18, 1912, $ 1,000 due March 18, 1913, $ 1,000 due March 18, 1914, and a note for the same amount due March 11, 1911, which was paid by Peet. The five notes above described are made the subject of counterclaim against the plaintiff, he having taken over the Peet contract and assumed and agreed to pay the notes. The American & Canadian Land Company executed contracts with the purchasers of the land, wherein it was agreed, among other things:

"In consideration of the payments above mentioned the vendor agrees to convey to purchaser in fee simple, free and clear of all incumbrances the following described real estate, to wit: Southeast Quarter of Section No. 5 in Block 6, Randall County, State of Texas, U.S. A.

"It is further agreed that on the date of the last payment mentioned herein in case same shall have been fully paid purchaser shall have a warranty deed to the above described property, together with an abstract of title showing title free and clear from all incumbrances in vendor. Said abstract to be approved by Gustavus, Bowman & Jackson of Amarillo, Texas, and when so approved to be final and conclusive upon the purchaser and his money shall be due and payable.

"All money paid under this contract to be returned if warranty deed and abstract are not furnished as herein provided."

Sometime in April, 1909, one W. R. Jameson, acting as agent for the Land Company, entered into negotiations with the defendant bank to sell it the Todd and Peet notes; and, not later than April 19, 1909, defendant purchased all these notes, which were duly indorsed to it by the original payee. It paid cash for the notes, and took assignments of the land contracts for security. There is some dispute in the record as to the exact date when the bank took over the contracts; but, notwithstanding the claims of some of the bank officers that the contracts were not received until after the purchase of the notes, the record as a whole shows, beyond reasonable doubt, that they are mistaken in this respect, and that the contracts were, in fact, assigned and delivered to the bank, together with the notes. March 18, 1912, plaintiff made a tender of the full amount called for in his notes, and also the ones executed by Peet, and demanded a deed to the land covered by the contracts. This demand was made of the appellee bank, but it could not make the title; and the money so tendered was deposited in the Delaware State Bank, and afterwards, by written agreement, transferred to the appellee bank. The tender covered the amount due and to become due on the notes at the time it was made. It is stipulated in the agreement under which the tender and deposit were made, as follows:

"Both the State Bank of Edgewood and Levi M. Todd are desirous of avoiding any loss to anyone of the interest on the amount still remaining unpaid on said notes and contracts, and it is therefore agreed between the said State Bank of Edgewood and the said Levi M. Todd, that the amount above stated, offered to be paid by the said Levi M. Todd and by him tendered, which is now on deposit, as above stated, with the Delaware County State Bank, shall be deposited by him with the State Bank of Edgewood under the following agreement and understanding, that is to say:

"That so long as the same is left by the said Levi M. Todd with said bank, the said deposit shall have the same force and effect with relation to the tender and offer of payment above made, as though the same had remained on deposit in the Delaware County State Bank, and the said State Bank of Edgewood agrees to thus accept the same as a deposit by the said Levi M. Todd for the purpose stated, and agrees that so long as the same is left on deposit with said bank, there shall be no interest due or to be collected on the said notes of F. B. Peet and Levi M. Todd, now held by said bank, and to pay which the said amount was offered in payment and so tendered, and each party further agrees that the making of this agreement to deposit said money with the State Bank of Edgewood, the depositing of the same, and none of the negotiations with reference to this agreement or deposit shall be considered or held to in any way influence or change the rights or interests of either party in the ultimate determination of any question to be determined with reference to the obligations of said Levi M. Todd on said notes, or his rights under said contracts, or his right to demand and receive deed with perfect title to the property purchased under said contract before the delivery and payment of the amount to be paid as evidenced by said notes.

"It is understood that in the final settlement with the American and Canadian Land Company, said company will pay all interest from the time of tender, and it is agreed that such interest when paid shall be for the time the deposit is kept in the State Bank of Edgewood to be by it paid to Levi M. Todd.

"And it is further specifically agreed that the said Levi M. Todd shall have the right to withdraw said deposit at any time that he sees fit to do so, and the said State Bank of Edgewood agrees to pay the same to him on demand at the Delaware County State Bank in Manchester, Iowa."

This action is bottomed primarily on the last paragraph of this stipulation. The agreement was entered into September 23 1912, and on September 13, 1913, plaintiff demanded the return of his money, which was refused. It appears that the Land Company had title to the Texas land it had agreed to convey to plaintiff and Peet, at the time they negotiated for the same, but it was incumbered by vendor's liens. Todd, however, took up the vendor's liens, so far as they affected the land purchased by him. There is evidence that the Land Company which issued these contracts and sold these notes was solvent and doing business until February, 1912; but we think it clear that, long before these notes became due, if not, indeed, at the time they were negotiated, the concern was in financial straits, and that, if it remained for some time a so-called "going concern," it was due to the law of nature which keeps a paper balloon afloat until some puncture allows the hot air to escape. When the notes became due, March 18, 1912, and the company was called upon to perform its contracts, it confessed its inability to do so, or to convey the lands free from incumbrance; and whatever title it had to the property has since been lost by foreclosure of prior liens. Before buying the notes, one of the bank officers met the plaintiff, and asked him whether he had any objections to their making the purchase, and he replied that it would be satisfactory to him. Later, on one or two occasions, one of the men representing the bank testifies, he spoke to plaintiff of the advisability of obtaining a conveyance of the land, and says he told him that, if he would make his own notes for the amount direct to the bank, it would turn over to him the notes he had given for the land, and thereby enable him to fix the matter up with the company; but the witness further says that the plaintiff...