Waldref v. Dow, 26047.

• Decision Date: 01 July 1927
• Docket Number: No. 26047.,26047.
• Citation: Waldref v. Dow, 172 Minn. 52, 214 N.W. 767 (Minn. 1927)
• Parties: WALDREF v. DOW.
• Court: Minnesota Supreme Court

214 N.W. 767

172 Minn. 52

WALDREF v. DOW.

No. 26047.

Supreme Court of Minnesota.

July 1, 1927.

Appeal from District Court, Ramsey County; Grier M. Orr, Judge.

Action by Grant Waldref against Louis F. Dow. Judgment for plaintiff. From on order denying defendant's motion for a new trial, he appeals. Affirmed.

Morphy, Bradford, Cummins, Cummins & Lipschultz, of St. Paul, for appellant.

Daggett, Pew & Redlund, of St. Paul, for respondent.

LEES, C.

On September 20, 1921, the Waldref Manufacturing Company gave its note of $5,000 to the Produce Exchange Bank of St. Paul, payable 90 days after date. At the time of its execution and delivery it was jointly indorsed by plaintiff and defendant for the accommodation of the company. The note was not paid, and, at the request of the defendant, the bank sued and recovered a judgment against the company. In June, 1922, plaintiff paid the judgment and took an assignment from the bank. In March, 1925, the company was placed in the hands of a receiver. Plaintiff requested defendant to pay one-half of the amount he had paid to the bank. Defendant refused to do so and this suit was brought to compel contribution. The trial court gave plaintiff judgment, and defendant has appealed from an order denying his motion for a new trial.

The evidence showed that before the note was given defendant was a stockholder and director of the Charles A. Stickney Company and an officer of the bank. That company was the maker of a note to the bank, upon which the defendant was an indorser. In June, 1921, the articles of incorporation of the Stickney Company were amended and the name of the corporation changed to the Waldref Manufacturing Company. Plaintiff and defendant became directors of this corporation and plaintiff its president.

Defendant requested plaintiff to go to the bank with him and join in the indorsement of the note. The note was executed at the bank and indorsed by plaintiff and defendant at the same time; plaintiff's name being written above defendant's. When the note fell due the bank sent it, at defendant's request, to the law firm of Morphy, Bradford & Cummins for collection, defendant agreeing to bear the expense incurred by the bank in making collection, and agreeing that, if the bank complied with his request, it should not have the effect of releasing him from liability on his indorsement. The attorneys notified the Waldref Company that suit would be brought on the note unless it was paid. On receiving this notice, the plaintiff wrote to the bank, saying, among other things:

"There can be nothing gained whatever in starting suit, unless I find it necessary to permit of suit in order to hold my coindorser to his part of the responsibility. * * * The purpose I have had in allowing this note to pass its due date is to hold Mr. Dow as an indorser."

When the bank recovered judgment, it had an execution issued to the sheriff of Ramsey county, who returned it unsatisfied. An application was then made for the appointment of a receiver. While the application was pending, Mr. Daggett, as attorney for the company, notified the bank's attorneys that plaintiff would pay the amount due the bank and requested an assignment of the judgment. The bank insisted that the judgment should be satisfied by the Waldref Company, and was then notified that plaintiff had a legal right to pay the debt and have the judgment assigned to him as security, and that, if the bank persisted in its course of action, the company would claim damages for the injury to its credit. Payment from plaintiff was then accepted and the judgment assigned to him.

The evidence shows that from time to time the plaintiff made loans to the company, which amount in the aggregate to more than $20,000, and that other stockholders made loans aggregating over $6,000, and that this was necessary to enable the company to continue in business.

Defendant assails the findings as unwarranted by the evidence, and the conclusions of law as erroneous. He maintains that the Waldref Company was solvent when the bank recovered its judgment and for two or three years thereafter; that plaintiff, as president, controlled the management of the company's affairs, and should have directed that the note be paid out of the company's funds; that he had no right to allow the bank to take judgment, or to purchase the judgment, thus prolonging defendant's possible liability as an indorser.

The evidence would justify a finding that the company was solvent at the time the note was given and for some time thereafter, in that the value of the assets exceeded the amount of the liabilities. But the company was always a borrower, and it is a fair inference that at all times its working capital was insufficient. The sheriff's return of the execution unsatisfied, and the application for the appointment of a receiver, point to the conclusion that in the spring of 1922 the company had become financially embarrassed, and there is no convincing evidence of any subsequent improvement. The assets consisted largely of real estate, machinery, patents, good will, and the value of experimental work which had been done. It appears from a financial statement made to the securities commission of this state in 1921 that the company had only about $5,900 in cash and accounts receivable, while its accounts and bills payable aggregated something over $21,000. On the whole, the evidence falls short of showing conclusively that the company should or could have paid the note when it fell due, or that plaintiff manipulated the company's affairs in such a manner as to...