First National Bank v. Burdick

200 N.W. 44, 51 N.D. 508, 1923 N.D. LEXIS 8

• Court: North Dakota Supreme Court
• Decided: August 14, 1923
• Status: Published

Opinions

Johnson, J.

Tbis is an appeal from a judgment of the District Court of Williams County, in favor of tbe defendant and entered upon the verdict of a jury. Motions for a directed verdict and for judgment non obstante were denied.

Tbe suit was brought by the plaintiff against the defendant upon a promissory note in the usual form. The note is dated June 2, 1921, in the sum of $2,900.00, due December 2, 1921. The complaint is in the usual form. The defendant answered, admitting the execution of the note, hut alleging, in effect, that it was an accommodation note and that the defendant received no consideration therefor. The defendant further alleged that, after the taking of this note, which was a second renewal of an original note for $5,000.00, elated January 13, 1020, due in ten days, again renewed December 2, 1920, in the sum of $2,-TG6.00, payable on demand, one U. L. Burdick, tbe person for whose accommodation the note was executed, delivered to the plaintiff to-wit, on or about the middle of May, 1920, several thousand dollars worth of promissory notes, with the intention and upon the express agreement between the parties, that is, IT. L. Burdick and the plaintiff, that such notes would be accepted by the plaintiff in satisfaction and payment of the original note for $5,000.00, dated January 13, 1920. On this transaction the defendant bases her claim of accord and satisfaction. By stipulation of the parties, at the conclusion of the trial, the only question submitted to the jury was whether IT. L. Burdick and the plaintiff entered into an agreement as alleged in the'answer, to the effect that the $5,000.00 note be discharged and the defendant released from liability thereon, and whether the promissory notes hereinbefore referred to were delivered and received pursuant to such agreement.

The only issue in the case, therefore, is an issue of fact, and the only question for this court to determine is whether there is substantial evidence in the record from which the jury would be warranted iu finding that an agreement was, in, fact, entered into as alleged in the answer, resulting in the discharge of the defendant from liability on the note in suit.

At the threshold of the case, we are confronted with a question of practice. Respondent strenuously contends that, this being an appeal from the judgment, and no motion for a new trial having been made, this court cannot review the sufficiency of the evidence to support the verdict. This contention cannot be sustained. A motion for a directed verdict was made, seasonably followed by a motion non obstante on the same grounds, one of which was the sufficiency of the evidence to support a verdict for defendant. This matter was fully considered in the case of Rokusek v. National Union F. Ins. Co. 50 N. D. 123, 195 N. W. 300, recently decided by this court, where we arrived at a conclusion contrary to respondent’s contention.

The defendant is primarily liable on the instrument, although, at the time the instrument was taken, it was known to the payee that it was for the accommodation of U. L. Burdick. Comp. Laws, 1913, § 6914 (29),.

A negotiable instrument may be discharged in the manner prescribed in § 7004, Oomp. Laws, 1913 (119) : (1) by payment in due course by or on behalf of the principal debtor: (2) by payment by the party accommodated, where the instrument is made or accepted for accommodation: (3) by the intentional cancellation thereof by the holder: (4) by any other act which will discharge a simple contract for the payment of money: and (5) by the principal debtor becoming the holder of the instrument after maturity in his own right. It is not contended that the plaintiff renounced its rights under the instrument against the maker, defendant herein, within the provisions of § 7007 (122). It would seem, therefore, that the defendant, under the facts in this case and the theory on which it was submitted to the jury, in order to escape liability on the note, must show that the instrument has been discharged within the provisions of § 7004, Comp. Laws. 1913 (119).

It is clear that the instrument has not been discharged by any act that comes within Subdivisions Three or Five of Section 7004 (119). Here the party accommodated was U. L. Burdick. It is alleged in the answer that Mr. Burdick delivered to the plaintiff, and that the plaintiff accepted, certain promissory notes under, an agreement to discharge the original note, of which the note in suit is the second renewal, and that thereby the defendant and the instrument itself were discharged. The theory is that the evidence brings the defendant within one or all of subdivisions 1, 2 and 4 of the foregoing section. The case, therefore, turns entirely upon the testimony with reference to the nature of the agreement between Mr. Burdick and the plaintiff, involving the delivery and receipt of certain promissory notes and the effect of that transaction upon the original $5,000.00 note. If there be any substantial evidence in the record sufficient to support a finding by the jury that there was an agreement to accept the promissory notes delivered by Mr. Burdick, in payment of the original $5,000.00 note, and an acceptance of such notes in fact pursuant to such agreement in payment thereof, or if that transaction was such as to give rise to an agreement of accord and satisfaction in behalf of the defendant, a third party, and enforceable by her, then the judgment should not be disturbed and the verdict must stand. This brings us to a considera tion of the testimony in the record bearing upon this, as we deem it, the crucial question in the case.

The witness U. L. Burdick testified that in the fore part of May, or the last part of April, 1920, Mr. Davidson, who was vice president of the plaintiff bank, told him that if witness would bring his collateral paper, he would select from it a sufficient amount of the paper to substitute and take up the note of the defendant and the same could be delivered back to her. “In accordance with that conversation, I brought, as I have stated, a note pouch with several thousand dollars worth of paper to the bank and spread the notes out on the desk of Mr. Davidson. He made some inquiries about the notes and I am able to state at this time that the following notes were in that bunch of collateral : (here follows a list of the notes, aggregating upon their face about $7,400.00.) I talked the matter over with Mr. Davidson about the notes. lie gave me no credit on the note of Mrs. Burdick or on any other note, hut he gathered up the notes and said those might as well he held as collateral and stated that I owed- all of it anyhow and it didn’t make any difference. I think within the next two or three days, or it might have been a week, I received a list of that collateral. The agreement, before I took the paper down there, was that he would do it and then, when I got there, he took the paper. I figured that when they took it (the paper) that they did just as they said they would do. 1 considered that that was an agreement on the part of the bank to take that paper and release Mrs. Burdick and an acceptance of that kind would be a payment of Mrs. Burdick’s paper. This settlement that I añade in May with Mr. Davidson pretended to release Mrs. Burdick from her obligation because that is the agreement I entered into with Davidson before I delivered the paper; or I would never have delivered it.”

Tlie witness further testified that he was, at the time of the trial, under the impression that he paid $1,878.00 in cash on the original note of $5,000.00, which was the subject of discussion between himself and Mr. Davidson, a day or two after the collateral or notes were delivered, according to his prior conversation with Mr. Davidson, heretofore set. out. Witness further testified that the $5,000.00 note was hot 'to be released or surrendered without payment or without other arrangements by him with a- certain bank in-St. Paul. Witness further tost Hi od that he “gave the defendant a mortgage in July, 1920, after the alleged settlement with Mr. Davidson, to secure Mrs. Burdick on account of this particular note.” He testified that he was, at the time ho gave this mortgage, absolutely satisfied that the bank had not released Mrs. Burdick from liability on her note. He paid Mrs. Bur-dick about $400.00 in cash and gave her notes, for about $1,000.00, still in her possession at the time of the trial, in order to protect her under this note. All this happened after the alleged transaction which it is claimed resulted in a discharge of the instrument and of the defendant thereunder. This witness further said: “I considered all of Hi ose notes, if they wanted to figure it that way, collateral to what T owed (he hank. But I owed the bank not only the $9,000.00, but her (defendant’s) note of $5,000.00. If you want to figure it collateral, I agree; that is all right. I don’t know as T figured it that way, but T was forced fo figure that they held all of this collateral as collateral to my indebtedness, but in this indebtedness I included Mrs. Burdick’s indebtedness.”

Exhibit “C” is a list of collateral dated May 13, 1920, and pre-1 snmablv is the list or statement to which the witness Burdick made reference. Upon this list appear all the notes which he enumerates in his testimony as having been brought by him pursuant to a prior arrangement with Mr. Davidson, and delivered to the bank. These notes aggregate $1,451.00. The other notes on the list aggregate $4,036.50. It therefore appears, according to this exhibit, that the total amount of collateral held by the bank on May 13, 1920, was $11,481.50, securing an indebtedness due from the witness Burdick of over $9,000.00, to which we may add the $5,000.00 note, which he claims was his own indebtedness, making a total indebtedness of over $14,000.00. Exhibit “C” contains upon it the following notation: “Received of U. L. Burdick the following described notes, pledged as collateral to any or all of his indebtedness with the First National Bank of Williston, North Dakota.” Their follows a list of notes, with the address of the maker, the date when made, the date when due, the rate of interest, the amount and the names of indorsers, if any. This is signed “First National Bank of Williston.” Mr. Burdick testifies with reference to this exhibit: “I presume this was the list I received a few days later with that notation on top of it. They had a chance to put the notation there if they wanted to.” Mr. Burdick further says that he knew, as early as July, 1920, that the bank had not released Mrs. Burdick.

Mr. Davidson testified, both on cross-examination under the statute and as a witness for the plaintiff, to the effect that there was no agreement such as is alleged in the answer to release the defendant from liability on the note or to discharge the instrument, his position being, in substance, that promissory notes, on the occasion referred to by Mr. Burdick and on other occasions, were delivered as collateral to the indebtedness of the witness to the bank, which amounted, at the time, to about $9,000.00.

The foregoing is substantially all of the testimony in the record with refei’ence to the transactioxx that took place between the vice president of the baxxk axxd Mr. Burdick. It is upon this testimony that the case turns. Is this testimony, taken as true, as a matter of law, sufficiexxt to suppoxd a fixxding by the jury that the xxote was in fact paid and discharged by the delivery and receipt of the notes as alleged in the answer and testified to by Mr. Bxxrdick ?

Thei’e is no claim that the note was paid in money, according to its terms; if paid in another medium, it must have been by agreement of Mr. Burdick to give, and of the bank to accept, such medium in satisfaction of the debt; and that other medium must have been actually given and received. Hayden v. Lauffenburger, 157 Mo. 88, 57 S. W. 722. “An executory parol agreement to receive property in payment will not discharge a bill or note.” 8 C. J. 574, 575.

Mr. Burdick’s testimony indicates that he had a conversation with Mr. Davidson, the vice president of the. bank, about the note executed by the defendant for his aecommodation, at which time, according to his testimony, Mr. Davidson agreed to select from notes to be brought to the bank later, a sufficient amount to pay the $5,000.00 note, at that time long past due, thereby releasing and discharging the defendant from liability thereunder. This executory parol agreement could not have been enforced against the bank in extinguishment of a written contract, had Mr. Davidson refused to go further and make a selection of collateral. Comp. Laws, 1913, § 5938; Wynn v. Coonen, 31 N. D. 160, 153 N. W. 980; Fletcher Bros. v. Nelson, 6 N. D. 94, 103, 69 N. W. 53. It appears that thereafter Mr. Burdick brought to the bank notes aggregating about $7,400.00 upon tbeir face; that, after looking them over, asking questions about them, and some, discussion, Mr. Davidson gathered up all of these notes, gave no credit upon the $5,000.00 note of Mrs. Burdick, and said that they might as well be held as collateral and that Mr. Burdick owed all of it anyhow. A few days later, Exhibit “C,” being a list of collateral, was received by the witness Burdick, and apparently no protest against the situation as existing, was made by him. We do not believe that this transaction can possibly be construed as a contract whereby the bank held these so-called collateral notes and accepted them in payment or discharge of the $5,000.00 note of the defendant. The statement of the representative of the plaintiff bank, made at the time the notes were delivered, clearly indicates a contrary intention on the part of plaintiff, and against this, apparently no protest was made at the time, and Mr. Burdick did not insist that the notes be returned to him or attempt to take them with him when he left the bank. It seems clear that all the transaction amounted to was delivery of notes to the plaintiff bank to be held as collateral security to all of the indebtedness of the witness Burdick, including in such indebtedness the $5,000.00 note of the defendant. It should not be overlooked that the theory of the defense is absolute payment and discharge of the instrument, but not that the plaintiff converted collateral deposited with it for the protection of the defendant under the $5,000.00 note.

It is clear from Mr. Burdick’s testimony that there was, at most, an executory parol agreement to discharge a written contract — the original note for $5,000.00, upon which defendant was obligated as accommodation maker — by accepting property instead of money. Until this agreement was executed, however, it would constitute no defense to the note. Comp. Laws, 1913, § 5938, and authorities cited supra; Walker v. Greene, 22 Ala. 679. It was an oral promise, and was unenforcible by anyone until fully performed by the delivery of a number of notes at the bank by Mr. Burdick, and an actual selection and acceptance of notes therefrom by the plaintiff in discharge of the obligation of the defendant. Damon v. De Bar, 83 Mich. 262, 47 N. W. 216; Comp. Laws, 1913, § 5938. A quantity of notes was brought to the bank by Mr. Burdick accordingly, but the testimony shows affirmatively that the bank did not select any notes therefrom. Burdick says that. Mr. Davidson, after some questions and conversation relative to the notes, took them all, gave no credit on defendant’s note, and said they would hold such notes as collateral to Mr. Burdick’s own indebtedness, in which indebtedness both parties apparently included this note for $5,000.00 as, at least, the moral obligation of Mr. Burdick himself, the same having been executed for his accommodation. To this Mr. Burdick apparently made no objection at the time, left the notes in the possession of the plaintiff, and thereafter conducted himself as if defendant were in all respects liable on the note for $5,000.00. Were there no evidence on the subject, the presumption would be that the notes were received as collateral and not in payment. Baker v. Baker, 2 S. D. 261, 267, 39 Am. St. Rep. 776, 49 N. W. 1064. The uncoiltradictod evidence of defendant’s principal and only witness on this point shows that the notes were in fact received as collateral security.

The record clearly shows that whatever the nature of the parol agreement between plaintiff and Mr. Burdick, before the notes wore brought to the bank, with reference to the discharge of defendant, that agreement was changed by the parties thereunder and the notes accepted as collateral to existing indebtedness, and not in payment of defendant’s note. This they had the legal right to do and of this the defendant has no legal right to complain. The plaintiff was under no obligation to defendant to accept anything but money in payment of her note; there was no binding agreement with Mr. Burdick to accept another medium: whether that agreement was broken by one party, or abandoned or modified by mutual understanding, were matters in which she had no interest in contemplation of law, and of which she could neither take advantage nor complain. Comp. Laws, 1913, § 5841; Dixon v. Pace, 63 N. C. 603.

It is true that the witness Burdick states that he considered Mrs. Burdick released and that he would not have delivered the notes but for the fact that he so construed the transaction. These are conclusions. His own subsequent conduct indicates that he did not consider the defendant released from her obligation. In fact, he thereafter made a large payment upon the $5,000.00 note, and executed a mortgage and made a cash payment to the defendant, in order to protect her thereunder.

We are not unmindful of the rule that it is not in our province to weigh the evidence. Where, however, as here, there is no substantial evidence to support the findings of the jury upon controlling questions of fact, and the matter is properly before us, an error of law arises on the record and it is our duty to order the verdict set aside.

The motion of the plaintiff for a judgment notwithstanding the verdict should have been granted. The judgment of the trial court is reversed, accordingly.

Bikdzell, Nuessle, and Christianson, II., concur.