Citation Numbers: 191 Iowa 106
Judges: Arthur, Evans, Faville, Steven
Filed Date: 7/6/1920
Status: Precedential
Modified Date: 7/24/2022
I. The notes involved in this controversy were executed by four joint makers. All business relating thereto, however, so far as it affects this controversy, was conducted *by the plaintiff F. L. Arthaud alone. For convenience in discussion, we shall, therefore, refer to him as though he were sole plaintiff. The controlling facts in this case are comparatively few and simple, when once extricated from the complication and confusion of the collateral facts incidental thereto.
The notes upon which a credit is claimed by the- plaintiff were executed in September, 1912. At that time, Arthaud executed and delivered to Ed Klopfenstein, as payee, a series of promissory notes falling due on successive dates, and amounting to a sum total of about $7,500. At the same time, and perhaps in the same transaction, he executed and delivered to Dan Klop-fenstein a series of notes of like amounts and of the same total. Ed and Dan Klopfenstein were brothers, residing at Washington, Iowa. Arthaud resided at Chillieothe, Missouri. We infer from
The reason why Ed failed to give credit upon the notes B, C, and D was that they had all been previously pledged by him to the same bank, this defendant, as collateral security for his indebtedness to such bank. He was a stockholder and director of the bank, and was its debtor to the amount of over $8,000. The Arthaud notes, B, C, and D, were pledged by him as collateral for all his said indebtedness. Ed could not, therefore, apply the $2,000 of proceeds of the loan upon the notes B, C, and D, without first paying such proceeds to the bank, to be applied upon his own indebtedness. This latter he failed to do, except in part. Dan was not a debtor to the bank at the time of the transaction in question, nor was he jointly liable for Ed’s iñdebtedness nor jointly interested in Ed’s collateral, the notes B, O, and D.
The broad contention for appellant Arthaud is that the arrangement entered into between Arthaud and the Klopfensteins was made known fully to the bank, and that it assented thereto and was bound thereby. This contention involves a finding of fact upon rather indefinite and unsatisfactory evidence.
It does appear that the first discussion of their plan by Ar-thaud and the Klopfensteins was tentative, and-dependent upon their obtaining the consent of the bank to make the proposed loan of $3,000. If the bank had declined to make such loan, the notes G' and H and the mortgage would never have been
Upon the evidence, therefore, we do not find that any such agreement was entered into with the defendant bank, whereby it could have controlled Ed in the disposition of the proceeds of the loan distributed to him in any other sense than that, as a creditor, it might have resorted to legal process for the purpose of seizing any assets which it could find. Ed was in failing circumstances, and became insolvent shortly thereafter. At the time of the distribution of such proceeds of the loan, however, when the $2,000 was placed to Ed’s credit in his cheeking account, none of the notes representing his indebtedness to the bank were then actually due. The bank could not, therefore, charge off the notes against his checking account. Ed testified, it is true, that he told the bank officials, at the time these proceeds were distributed to him, that they were to be applied upon
Under the evidence, as we find the weight of it to be, no liability of the bank arose to allow a credit upon the collateral, B, C, and D, except for such amount* as was actually paid to it by Ed upon the indebtedness for which the collateral was pledged.
This brings us to the second alternative in the case. Ed did deliver to the bank his check for $1,000 of this fund, and it was applied upon his indebtedness. No credit was made upon the collateral. It is contended, therefore, for Arthaud that he is at least entitled to a credit for this amount upon his notes B, C, and D. As against this, the bank contends that Ed gave no instructions as to the application of this payment, and that it had, therefore, a right to apply it as it saw fit. It did, in fact, apply it upon the indebtedness for which the collateral was held. The source from which the money came was actually known to the bank. It appears, also, that these collateral notes were pledged to the defendant bank in 1914, and that, since that time, several partial payments had been made thereon, amounting to a sum total of $4,500. Each of these payments had been collected by Ed from Arthaud, and had been by him applied upon his debt, and by the bank credited both upon the debt and upon the collateral. It appears from the testimony of the bank officers, as witnesses, in substance that Ed was authorized to make 'these collections, provided only that he applied the same upon his indebtedness to the bank. His statement to the bank as to the source of the collection had always been credited, in making indorsements upon the collateral. Inasmuch as this course of dealing had been established between them, and inasmuch as the bank knew the source of the fund with which payment was made, and necessarily knew that Arthaud, as payer
We reach the conclusion that the plaintiff is entitled to a credit of $1,000 upon his notes, as of the date that payment by check was made by Ed, and that this is the full extent of relief to which plaintiff is entitled.
II. It is made to appear that, before the beginning of this suit, Arthaud paid to the defendant bank the sum of $2,000 upon the notes B, C, and D. This was done under protest, and upon a stipulation between the parties that such payment should be without prejudice to the legal right of either party in the later litigation which was then in contemplation. The purpose of such payment was to obtain release of certain securities, without awaiting the outcome of this litigation. The result of such payment was to leave Arthaud indebted to the defendant bank for a balance due of $1,000, in the event that he should fail to establish his right to any credit; and on the other hand, if he did establish his right to a credit of $2,000, then the bank would have received from him an overpayment to the amount of $1,000, and would be liable for its return. The bank set up its counterclaim for $1,000 as a balance due. Inasmuch as we hold that the plaintiff is not entitled to a credit for $2,000, but is entitled to a credit of $1,000, this finding amounts to an offset as against the defendant’s counterclaim, and to nothing more.
The decree entered below will be modified, as herein indicated. The case may be remanded for decree to the district court, or, upon motion of either party, a decree may be entered here. Each party will pay one half of the costs in this court.— Modified and affirmed.