221 N.W. 845 | Iowa | 1928
I. The fact situation is not seriously in dispute.
The Miller-Toher Auto Company was a local dealer in automobiles. For convenience, this concern will be referred to hereinafter as "The Company."
Early in the year 1924, The Company was in financial difficulties. They had outstanding indebtedness to the bank of about $5,000, secured by a chattel mortgage on secondhand automobiles. They also were unable to meet their local bills, such as rent, light, heat, water, telephone, etc. They were local representatives of the Chandler-Cleveland Motor Corporation, manufacturers of automobiles. This latter concern had forwarded to The Company a carload of automobiles, for which they were *1132 unable to pay. The representative of the manufacturer came to investigate the financial condition of The Company, and took the matter up with the bank, proposing that the bank should loan to The Company $1,000, which the bank agreed to do, provided that security was procured on the note therefor. At this point, there is a dispute in the evidence; but we are satisfied that the preponderance of the evidence shows that, at the time these plaintiffs, Lindquist and Davidson, signed said note with The Company, it was understood by all the parties, including the bank, that the $1,000 represented by the note was to be used by The Company in payment of incidental indebtedness, and it was specifically agreed that the bank was not to use any of this money to apply on the indebtedness then owed by The Company to the bank. Plaintiffs signed the note for $1,000 to the bank, as surety for The Company, and the bank promptly used $500 thereof in payment of the indebtedness then owed to the bank. The note was also signed by a Mrs. Ryan, as surety with the plaintiffs. The note was executed on May 1, 1924, and when it became due, in October following, a new note was executed by The Company, signed by Lindquist and Davidson, as sureties; and all parties, including the bank, agreed that it was also to be signed by Mrs. Ryan. The parties dispute the question as to who was to secure Mrs. Ryan's signature, but suffice it to say, Mrs. Ryan never signed the note. One of the officers of the bank testified that the bank finally decided to accept the second note without Mrs. Ryan's signature. This, however, is specifically denied by both Lindquist and Davidson. Later, the bank was in financial distress, and these sureties insisted that it should not hold both notes; whereupon the bank returned the first note referred to, and testified that it considered the same paid. It, however, took a receipt from the sureties for such note, and in its counterclaim in this action, sets up both notes, and asks judgment for $1,000 and interest, etc.
The court, under the evidence, would have been warranted in finding that the second note was not in law delivered, or was not a completed instrument, because of the lack of Mrs. Ryan's signature; but even though it held otherwise, the fact alone that it was a renewal of the earlier indebtedness, in the absence of a new and independent consideration, still left the matter open to all defenses which might be used as against the original note. *1133
As between the original parties, all defenses are available.Anthon State Bank v. Bernard,
II. We then have left the question whether or not, under the facts recited, the plaintiffs, Lindquist and Davidson, were released as sureties.
In Crossley v. Stanley,
"That a surety may stipulate for the particular use of a note as a condition to signing it is settled by the decisions. This condition may be material or immaterial, and no person who takes it with knowledge can acquire title as against him in violation of the terms imposed. The surety may insist on the strict terms of his agreement; and, if material alteration is made without his consent, notwithstanding it inure to his benefit, he will be discharged. Stillman v. Wickham,
Following the rule specified above, we are satisfied that the bank, by misapplication or misappropriation of this fund which it had specifically agreed was to be used for purposes other than the payment of its own pre-existing indebtedness, released the sureties, and the district court should have so held. —Reversed.
STEVENS, C.J., and De GRAFF, MORLING, and WAGNER, JJ., concur.