Bank of Monroe v. Gifford

44 N.W. 558, 79 Iowa 300, 1890 Iowa Sup. LEXIS 62
Supreme Court of Iowa·Decided February 3, 1890·Published·Cited by 13 cases

Opinion

Beck, J.

I. The questions arising in the case will be considered in the order of the argument, as far as practicable. The facts will be stated, as their consideration becomes necessary in the discussion of the questions determined.

The evidence shows that one R. C. Anderson was the cashier of plaintiff, and at the same time was the president and general manager of a corporation engaged in mining coal, called the “Anderson Bros. Mining & Railway Company.” He appropriated the funds of the bank to the use of the corporation, and, his improper practice in this regard being discovered, he was required to secure and make good the amount of his defalcation to the bank. He induced defendant to unite with the Anderson Bros. Mining and Railway Company in executing a note to the president of the bank, to be used in adjusting the claim of plaintiff for the indebtedness arising from the defalcation. He induced two other persons to execute, with the mining and railway company, two other separate notes, for like amounts, to be used for the same purpose. The note [303]*303signed by defendant was delivered to the president of the bank, and by him transferred to the plaintiff. As a defense to the action, the defendant pleaded that, at the’ time the note was executed and transferred to the bank, it held certain bonds of the principal of the note, the mining and railway company, of value greatly in excess of the amount of the note executed by defendant as surety, which were, without defendant’s knowledge or consent, released from the claim held by plaintiff thereon, and delivered to the mining and railway company, which was then, and ever since has remained, insolvent. By this unauthorized and unjust act defendant sustained damage exceeding the amount claimed upon the note.

The defense set up by this answer>presents all questions árising on this appeal, the court below so ruling as to withdraw other defenses pleaded from the jury. The jury found a general verdict for defendant, and found specially that the defendant signed the note as surety of the Anderson Bros. Mining and Railway Company; that the note was not taken in absolute payment of the debt of the company to the plaintiff, but only as a change of form thereof; that plaintiff held at the time, as security for the Anderson debt, the bonds of the mining and railway company; that these bonds, at a date five months or more subsequent to the execution of the note and its delivery to plaintiff, were surrendered to the Andersons or the mining and railway company; that the market value of the bonds was a sum largely in excess of the note in suit; that when the bonds were surrendered the debt for which they were held as security had not been paid, and that when plaintiff surrendered the bonds it received therefor an amount in excess of the sum due upon the note. The jury also specially found that Anderson, in taking the bonds as security for the debts of the company, acted for both the bank and the company; that after the officers of- the plaintiff learned of the deposit of the bonds, they retained and controlled them; that the [304]*304bonds were secured by mortgage; that about five months after the delivery of the bonds to the plaintiff it consented that Anderson should take them; that at the time plaintiff knew that defendant was surety on the note in suit; that at the time they were of the face value of fifteen thousand dollars, and of the market value of six thousand dollars; that, a few days before the bonds were surrendered by plaintiff, it received a sum thereon, stated in the subsequent findings as exceeding 'the amount due at the time upon the note in suit, and that the mining and railway company was at the time, and still is, insolvent.

The foregoing statement of the findings of the jury rendei’s unnecessary a further statement of facts in this proceeding. As applicable to the issues and facts involved in the defense submitted to the jury, the court below gave the following instructions :

“3. If you find from the evidence that prior to the execution of the note in suit the principal maker, Anderson Bros. Mining & Railway Company, was indebted to the plaintiff, on account, in about the sum of thirteen thousand, seven hundred and eighty-four dollars; that the note in suit was given, not in part absolute payment of such indebtedness, but to change its form, or the evidence of it, or as additional security to the extent of the note; that the defendant Gifford was only surety on said note; that at the time of taking said note the plaintiff controlled any alleged mortgage bonds, or bonds secured by mortgage on property, no matter by whom the bonds were made or signed, as security for the pre-existing debt, if such bonds were of any value as such security; and if the plaintiff knew that Gifford was only surety on the note, it had no right to release or surrender its control of the bonds without the consent of the defendant Gifford; and, if you find that it did so without receiving in their stead something else of equal value as security, he is released from liability on the note to the extent of the loss resulting from such surrender, which is to be determined by the value of the security, as such, at the time [305]*305it was surrendered. If such bonds were those of the principal maker of the Gilford note, Anderson Bros. Mining & Railway Company, and were not secured, their release or surrender would not work Gifford’s release to any extent whatever; and although they may have been secured by mortgage on property of some value, and may have been in a box in plaintiff’s safe, if they had not been accepted, or in some manner been brought under the control of the plaintiff as security for the debt mentioned, it was not bound to hold them.
“4. By the word ‘payment,’ as it is used in paragraph three of these instructions, is meant absolute payment; such payment as finally ended the part of debt or debt paid. In .the absence of any agreement between the debtor and the creditor, a note, even though signed by another as surety for the principal debtor and the principal, which is given for a pre-existing debt, is no more than a conditional payment, and the creditor holds both ; but if they at the time so agree, or the creditor so accepted the note, the new evidence of debt puts an end to the old, and works and is absolute payment of it; and in such case the creditor is not under obligations to hold, for the benefit of the surety, any security which the creditor may have held for the payment of the debt in its old form, while in the first, or the case of a conditional payment, the creditor is under such obligation. The plaintiff in this case has the burden to show that the note in suit was taken and accepted by it in absolute payment of so much of the Anderson Bros. Mining & Railway Company’s pre-existing debt, but, if it does this by the preponderance of the evidence, your verdict will be for the plaintiff for the full amount of the note ; as, if the defendant’s (Gilford’s) note worked an absolute payment to its extent of the old debt, any security held by the plaintiff remained as such for the payment of the unpaid portion, and not for the benefit of the defendant. If, however, the defendant’s note worked no more than conditional payment of so muich of the old debt, and the plaintiff [306]

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Bank of Monroe v. Gifford, 44 N.W. 558, 79 Iowa 300, 1890 Iowa Sup. LEXIS 62 (iowa 1890).

44 N.W. 558 (Bank of Monroe v. Gifford) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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