Utah Nat. Bank of Salt Lake City v. Nelson

• Decision Date: 27 August 1910
• Docket Number: 2102
• Citation: 38 Utah 169,111 P. 907
• Court: Utah Supreme Court
• Parties: UTAH NATIONAL BANK OF SALT LAKE CITY v. NELSON

111 P. 907

38 Utah 169

UTAH NATIONAL BANK OF SALT LAKE CITY v. NELSON

No. 2102

Supreme Court of Utah

August 27, 1910

Rehearing Denied November 22, 1910.

APPEAL from District Court, Third District; Hon. Geo. G. Armstrong Judge.

Action by the Utah National Bank of Salt Lake City, Utah, against Joseph Nelson.

Judgment for plaintiff. Defendant appeals.

AFFIRMED.

Young &amp Snow for appellant.

Van Cott, Allison & Riter for respondent.

McCARTY J. FRICK, J., concurring. STRAUP, C. J., dissenting.

OPINION

STATEMENT OF FACTS.

Plaintiff, a corporation organized and existing under the laws of Congress, brought this action to recover from defendant upon a promissory note. The complaint alleges, in substance: That the defendant, on January 22, 1908, at Salt Lake City, Utah, for value received, executed and delivered to plaintiff his certain promissory note, and thereby promised, on thirty days' demand after date, to pay to the order of plaintiff thirteen thousand, two hundred and fifty dollars, with interest at six per cent. per annum from date until paid, and to pay ten per cent. additional as attorney's fee if the note should be placed in the hands of an attorney for collection; that payment of the note was demanded September 11, 1908, but the defendant refused to pay the same, or any part thereof; that the note was placed in the hands of attorneys for collection. The answer admitted each allegation in the complaint, with the exception that it denied that the note was given "for value received." The answer also contained the following affirmative allegation, namely: "That the promissory note signed by the defendant and delivered by him to the plaintiff, as alleged in said complaint, was without consideration, and that no consideration whatever passed or was given for the said promissory note; . . . that neither the plaintiff nor any other person ever paid any sum of money or any other thing, or ever suffered or received any detriment as a consideration for the signing and delivery of the said promissory note; and that said note was wholly without consideration." The case was tried to the court without a jury. The facts, circumstances, and conditions under which defendant executed the note, as disclosed by the record, are as follows:

The capital stock of plaintiff bank consisted of two thousand shares of the par value of one hundred dollars per share. W. S. McCornick, the president of the bank, was the owner of one thousand shares, and Joseph Nelson (defendant), cashier, was the owner of fifty shares of the capital stock of the bank. On or about January 12, 1908, it was discovered that one hundred and six thousand, two hundred and fifty dollars in some manner unknown had been abstracted, taken, or stolen from the vault of the bank, a large amount of which, if not all, constituted the legal reserve fund of the bank. Soon after the loss was discovered, McCornick and Nelson had several conferences, in which they discussed the probable effect the loss would have on the institution in case its depositors and the public generally should be advised of the situation before the loss to the bank was made good, and they came to the conclusion that, as they were in the midst of a financial panic, unless some immediate action was taken to repair the loss, a "run" would be made on the bank which would be very disastrous to the institution. Moreover, they knew that it would be a matter of a short time only before the United States Bank Examiner would make an examination of the bank and check up its assets and liabilities, and unless the loss was made good before the examination took place it would result in the Comptroller of the Currency closing the doors of the bank and winding up its affairs. So critical, in their opinion, was the situation, that they were afraid to inform the board of directors of the loss, because, as stated by Mr. McCornick in his testimony, "it would be very dangerous to allow so large a body as the board of directors to know what had happened, . . . as some of them might leak, and it would become common property." Therefore, in order to avoid the ruin with which the bank was threatened, it was agreed between them that McCornick should put up fifty thousand dollars and Nelson thirteen thousand, two hundred and fifty dollars toward making good the loss. In pursuance of this agreement, McCornick paid into the bank fifty thousand dollars and Nelson executed the note in question. There is an apparent conflict in the evidence respecting the conditions as fixed by themselves under which the money and note were delivered to the bank. According to Nelson's version of what was said and done on that occasion, Mr. McCornick insisted that Nelson should put up thirteen thousand, two hundred and fifty dollars, and Nelson claimed that he should be required to pay only a sum equal to what his assessment would be in case the outstanding capital stock were assessed to make good the loss; that they agreed to and did leave the decision of the controversy to Thomas R. Cutler, vice president of the bank; that he decided that, as McCornick was putting up fifty thousand dollars, Nelson should pay into the bank thirteen thousand, two hundred and fifty dollars, that these sums, with forty-three thousand dollars taken from the surplus fund of the bank, made up the entire loss. Nelson further testified that at the time he signed the note it was agreed between himself, McCornick, and Cutler that later on the matter should be brought before the board of directors, and the board would be asked to devise means to refund the money put up by himself and McCornick, and in case the board acted favorably on the matter, or the bank should succeed in recovering the stolen money, or any part thereof, that he (Nelson) should be paid one-half of the amount put up by him before McCornick should receive any part of the fifty thousand dollars, paid by him. McCornick testified that he insisted that Nelson was responsible for the entire loss because he was the custodian of the bank's funds, and that Nelson protested that he was not liable for the whole of the loss because there was another officer of the bank who knew the combination of the particular vault or chest from which the money was taken and who had equal charge with himself of the funds. McCornick further testified that Nelson at first insisted that each of them should put up pro rata according to the interest he owned in the bank, but finally agreed, upon McCornick's offering to put up fifty thousand dollars, to pay thirteen thousand, two hundred and fifty dollars toward making good the loss; that a controversy then arose between them as to how they should be reimbursed in case the money stolen, or any part of it, should be recovered, or the stockholders of the bank should voluntarily assess themselves in order to refund the money; that they agreed to and did submit the question as to how they should be reimbursed in case of the happening of either of the contingencies mentioned, to Mr. Cutler; that he decided Nelson should be paid one-half of the amount paid in by him before McCornick should receive anything; that he (McCornick) would not have paid any money to the bank if Nelson had not paid the thirteen thousand, two hundred and fifty dollars in question; and that in making the agreement with Nelson he acted for the benefit of the bank. On cross-examination he testified on this point in part as follows: "Q. I understand you were contracting that the bank might have the benefit of your arrangement, is that right? A. Certainly the bank would get the benefit of it. Q. The contract was between you and Mr. Nelson for the benefit of the bank, was that right? A. Benefit of the bank, certainly. Q. In other words, you claim as part of the consideration for this note that you agreed to give a sum provided he gave a sum? A. Yes." And again, an answer to the following, "Were you contracting on behalf of yourself . . . or on behalf of the bank for the money to go into the bank?" he answered, "Well, I was contracting for the bank, of course." And in answer to the following question, "Were you contracting for the bank when you told him you would give fifty thousand dollars?" McCornick answered: "Certainly I was, for the benefit of the bank. . . . Whose benefit would it be?" Thomas R. Cutler testified that when Nelson spoke to him about the matter Nelson did not seem to object so much to the payment of the thirteen thousand, two hundred and fifty dollars, as he did to McCornick's being reimbursed for any part of the money put up by him before he (Nelson) was paid in full, in case any part of the stolen money should be recovered, or an assessment should be levied against the capital stock of the bank; that McCornick and Nelson seemed to have agreed upon the amount that each should pay, namely, McCornick fifty thousand dollars and Nelson thirteen thousand, two hundred and fifty dollars.

The record also shows that the note and money were received by and became a part of the assets of the bank, and that the board of directors met and ratified the transaction.

The court, among other things, found, so far as material here "That, for a valuable consideration received by defendant, he executed and delivered his promissory note (the note in question) to plaintiff; . . . that all of the allegations contained in plaintiff's complaint filed herein are true, and all the denials and allegations of said defendant in his answer are untrue, except as to the admissions therein contained." As a conclusion of law the court found that plaintiff was entitled to judgment against defendant for the principal of the note, thirteen thousand, two hundred and fifty dollars and interest thereon amounting to eleven hundred and four...