139 N.W. 992 | N.D. | 1913
Lead Opinion
Plaintiff brings replevin alleging a special property interest by virtue of a chattel mortgage upon personal property. The debt secured by the mortgage is evidenced by a negotiable promissory note dated November 12, 1908, executed and delivered by defendant as maker to the Farmers & Merchants State Bank of Knox, and due October 1, 1909, bearing interest at 12 per cent, and indorsed, sold, and transferred for full value before maturity to plaintiff.
Defendant for answer admits the execution and delivery of the note by defendant to the bank, “but alleges that the same was given without any consideration whatever being paid him therefor by the said bank, and that the same is wholly void.” That he received no consideration from anyone for the said note, and that no consideration whatever passed therefor from the bank. And as an affirmative defense, “defendant denies that the plaintiff was an innocent purchaser of the said mortgage in due course of business or at all, and alleges the fact to be that plaintiff took the said note, knowing that the same was given without any consideration to said bank, and was wholly void. That plaintiff is an officer of said bank, to wit, president, and had knowledge of the fact that there was no consideration given for the same, and that as such officer of such bank he was bound to know the facts in regard to the execution of said note, and that plaintiff to^k the said note with knowledge of the defenses thereto.”
“For a further and affirmative defense to said complaint” the defendant alleged his ownership of the property replevied, its wrongful taking from him by replevin at this suit of plaintiff, and “that in consequence
On the trial of the main action, plaintiff testified to being a resident of Minneapolis, carrying on the business of real estate and loans; that he purchased the note in question from the cashier, and that “it was indorsed to me the day I bought it, and transferred and delivered to me that day. Paid $2,000 and accrued interest to the date I bought it for the note. Did not know the note had been dishonored, if it had been. I bought it in good faith. Did not know there was anything wrong with it in any way. I never saw it till the day I bought it. I was in the bank when I bought it. I was not acquainted with Kepreta, the maker. I bought some other notes at the same time, one or two I believe. I mean when I say that I bought that note in good faith that I bought it just the same as I bought every other note that I ever bought in my life, and that everything was straight about it, the note and mortgage, and I went entirely by that and the recommendation of the •cashier that the paper and security was good, and that it was a first mortgage. That was the extent of the information I got when I say I purchased it in good faith. I kept the note in my possession until I ■sent it out for collection in September, 1909. At the time I bought this paper from the bank I had no knowledge or notice of any kind of
In line with tbe answer, tbe defendant called plaintiff for cross-examination under tbe statute, and be testified that be was president of tbe bank in question; that tbe bank bad been organized three years, and that be was and bad been president of it at all times since its organization; that one Tuff and one Minckler were tbe other officers of tbe bank; that Minckler was casbier at tbe time Kepreta gave tbe bank tbis note; that be did not make any examination of the records of tbe bank with reference to tbe consideration for which tbe note was given. Tbe defendant in bis own behalf was called and asked the question : “State what transaction or what conversation you bad with Minck-ler as casbier of tbe Farmers & Merchants State Bank of Knox at tbe time tbis note was given, and what it was given for.” Counsel for plaintiff then interposed tbe objection that tbe answer sought was “incompetent, irrelevant, and immaterial,-no longer an issue in tbis case; tbe evidence itself, both for tbe defendant and plaintiff, now showing tbe note to have been taken in good faith, and without any notice of any infirmity therein, or any defect in tbe title of tbe bank thereto, or any lack of consideration; and it appearing legal upon its face, and that McCarty became tbe bolder of it before it was overdue and without any notice that it bad been dishonored, if it bad been, and defendant is conclusively estopped from showing anything further.” Before ruling upon tbe objection on inquiry from tbe court, defendant’s counsel stated, with reference to tbis offer of proof, that tbe defendant bad finished bis evidence with reference to showing that McCarty did not purchase tbis note in good faith and in due course; and that tbe evidence offered would be with “reference to failure of consideration or lack of consideration for tbe note,” and that otherwise the case so far as tbe defense was concerned was complete. Tbe court then ruled
The main case resolves into the determination of a single proposition of law. Plaintiff, while president of a state bank, and by virtue thereof one of the directors of said corporation, bought from his bank this note before its maturity, paying full value for it to the bank, who indorsed! it by its cashier to the president as his individual property. Plaintiff knew of no infirmity in the negotiable instrument he thus in good faith' purchased. Under the answer and issues joined and the offers of proof on trial thereunder, the maker, the defendant and appellant, received no consideration for the note from the bank or any other person. An offer to prove such want of consideration was on objection excluded on the ground that plaintiff as a holder in due course of such negotiable
A holder in due course is by this section defined to be “a holder who has taken the instrument under the following conditions: (1) That it is complete and regular upon its face. (2) That he became the holder of it before it was overdue and without notice that it had been previously dishonored, if such was the fact. (3) That he took it in good faith and for value. (4) That, at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.” As to the first three of these subdivisions, granting the purchase for value and in good faith, no question arises. It is on the fourth subdivision, as to notice to the bank who negotiated it to him, of the infirmity of the instrument, construed with ■§ 6358, defining notice of infirmity, that the questions for solution arise. Section 6358 defines notice of infirmity in negotiable instruments necessary to defeat recovery and render a purchaser not a holder in due course, by the following provision: “To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must, have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” Is it necessary that this director and president of the defrauding institution shall have had “actual knowledge of the infirmity, or knowledge of such facts that his action in taking the instrument amounted to bad faith,” or otherwise be held to be a holder in due course, and as such be entitled to recover when the bank could not? Does plaintiff’s relationship to the bank, as a director and president of it, charge him with presumed notice of the fraudulent character of the paper he claims to hold as a holder in good faith, so as to defeat such
Our negotiable instruments act unquestionably declares the law on all matters covered by it and in all instances wherein it applies. It was enacted as a part of a nation-wide movement to secure uniformity of law concerning negotiable instruments and liabilities arising therefrom. About thirty of the states have an act identical with our negotiable instruments act, codifying the law merchant in such states. But the act necessarily must be construed with statutory provisions or general laws regulating the relationship of the parties. See Schlesinger v. Lehmaier, 191 N. Y. 69, 16 L.R.A.(N.S.) 626, 123 Am. St. Rep. 591, 83 N. E. 657, where the sections here under consideration were held to be applied, subject to the state banking law, and to be construed therewith where that applies; also Crawford, Anno. Neg. Inst. Law, § 72. And here the law governing notice imputed or presumed as between the payee and the president and director of this bank as in-dorsee of its paper must be considered with the statute as to negotiable instruments. The statute defines negotiable instruments, and also defines the rights of this holder governed by the negotiable instruments act, unless the law governing relations of bank and bank president prevent plaintiff from being a holder in due course under the act.
Under our law regulating state banking institutions, § 4639, Bev. Codes 1905, the president must be chosen from among the bank directors, who in turn must be stockholders, and as such financially interested in the income and welfare of the institution. The board of directors
Section 137 of Morse on Banks & Banking answers the crucial inquiry involved. After speaking of the subject of imputed notice to the bank of matters brought to the notice of bank directors and bank officials, the authority says: “The converse of the doctrine just discussed is much more simple. Whatever knowledge a director has or ought to have officially, he has or will be conclusively presumed at law to have as a private individual.” “Thus, a director is affected with notice of the condition and transactions of the hank, of its legal rights, and of the action of its directoral board on any subject. If the bank is insolvent, or if it offers him for purchase notes which could only be legally sold by authority of a directoral vote, which has never been given, he is affected with knowledge 'of the insolvency and of the illegality of the notes. He cannot collect upon them from the bank, on the ground of presumed regularity as a bona fide outside purchaser of them without notice and for value could do.” “If a director of a bank is surety on a note, or if a director is a partner in a firm which is surety on a note, held by the bank, the surety will be affected with knowledge of the payment or nonpayment of the note without regard to any statement made by the cashier. A director is chargeable with this amount of knowledge of the affairs of the bank, whether in fact he has it or not, and cannot escape
Lyman v. Bank of United States cited, is nearly on all fours with the instant case. Lyman and associates organized a state banking corporation (see facts fully stated in 20 Vt. 666, Fed. Cas. No. 924), and purchased a branch institution at Burlington, Vermont, of the Bank of the United States, executing notes therefor and taking over the business of the branch institution. Lyman and one other associate had been directors of the branch bank purchased, which bank, before the purchase, had compromised and agreed to accept one-half face of certain bills receivable. Lyman and associates, on suit for the final instalment note, undertook to counterclaim or compel the allowance to them of that portion of such claims previously discounted, claiming want of actual notice, and that therefore the branch bank had sold for face value claims it had previously compromised and reduced one half. On the trial, in line with the contention of plaintiff in the instant case and here urged, the defendants there, quoting from the opinion, “asked the court to instruct the jury that it was a question of fact for them to find whether the defendants, or either of them, had knowledge of the condition of these debts, or whether at the time of the purchase said debts or either of them had been compromised and discharged; and if they should find that Wyllys Lyman and John Peck, or either of them, had knowledge of the condition of said debts, and that they had been compromised and discharged, or either of them, at the time of the purchase, and that they derived such knowledge while acting in their official capacity as directors or as committee of said branch bank at Burlington, that such knowledge would not affect the other defendants, or defeat or affect the
In the words of Hauser v. Tate, 85 N. C. 81, 39 Am. Rep. 689, “the president of a bank is chargeable with constructive notice of the management of its affairs by the cashier and other subordinate officers.”
In Gillet v. Phillips, 13 N. Y. 114, a purchase of a promissory note at a discount by a director from a bank acting through its cashier was held invalid; the court says: “Want of notice is not available as a defense to a vendee who, at the time of the purchase, was a director in the corporation whose property was the subject of the sale. By accepting that office, he assumed a duty to the stockholders and creditors of the bank to inform himself of what would appear by an inspection of the books of the institution of which he was one of the ostensible managers; and he cannot urge a want of notice arising from a neglect of duty, in justification of a transaction in his own case which the law presumes unauthorized and illegal. In this instance the transfer was made by one director in behalf of the corporation to another, and both were chargeable with knowledge that the contract which assumed to devest
And this leads to the inquiry bearing on the question of the legality of the sale of the note by this corporation, acting by its cashier, to its president. Under the offer of proof as between the bank payee and defendant maker, this instrument was without consideration and a fictitious purported asset upon the books under the banking laws and regulations of the banking board of this state. As director and president of the bank, as between it and its president and director, plaintiff was charged with that knowledge; and in the payment of the face of the note, with interest, to the bank, he was but performing a duty devolving upon him as a director, and discharging a liability to the bank as well, arising from the bank having such worthless paper in its assets. Under the facts if defendant’s contention be true, as it must be taken to be under the offer of proof, that said note evidenced no valid consideration, that upon the order of the banking board the duty to charge off this claim, and if called upon to do so to make it good, would have devolved upon the bank and its directors and managing officers. And with notice of this contingent liability, conditional though it may have been, the bank president, this plaintiff, was charged. The law governing banking, and defining the liability of directors and managing officers in such institutions, conclusively negatives the claim that such managing officer can be, as between himself and the bank, or between himself and third persons, a holder in due course when his bank was not or could not have been such holder.
Then, again, while the note remained with the bank unnegotiated, no liability other than to cancel it as given without consideration rested upon the bank as concerned its liability to this defendant. Immediately upon its negotiation to this plaintiff, if it be assumed that such negotiation bound the bank ánd constituted plaintiff as a holder in due course, a new liability for the full face of the note and interest thereupon would be created by the bank to this defendant; it receiving plaintiff’s money virtually as a trustee in said amount for the defendant by virtue of its own wrongful act or fraud in negotiating paper for which it had given no consideration. In this connection if fraud is to be imputed to the bank, as under such facts we believe it should be, its
Under plaintiff’s contention, granting plaintiff a holder in due course, he would recover of this defendant, while as a bank official he might be personally responsible in law to- defendant for his own negligence in failing to know that the bank was obtaining accommodation or fraudulent paper of defendant, and indorsing it to its president, that he might recover as a good-faith holder in due course for value. In the one case his negligence in failing to know the facts and prevent the fraud would render plaintiff personally liable, while at the same time he would be in a position to recover as a good-faith purchaser, because of his negligent failure to know the facts on which his liability for negligence arose. If we permit plaintiff as an individual to assert that he does not know what he as a bank official must in law have known, we must approve and declare possible the above inconsistent and ridiculous, but nevertheless logical, result of holding § 6358 applicable, and requiring actual knowledge of infirmity in the instrument necessary to defeat recovery by a bank president purchasing the bank’s accommodation paper. For the mere purpose of uniformity in the law concerning negotiable instruments, it was never intended that its provisions requiring actual notice of the infirmity in the instrument should apply to cases such as this, to the modification or exclusion of the rules of law well established and governing the liability of directors and heads of banking corporations to the bank or its creditors.
Evidence was offered tending to show this loan, for whatever consideration given, was carried on the books of the bank for an amount that would have been in excess of 15 per cent of the capital stock of the bank. In other words, the loan was, on its face, an excess loan. With
Nor is tbe notice imputed to plaintiff, concerning this note and tbe bank’s relation to it if excessive, to be considered as constructive notice. Concerning tbe obtaining of this note, the law imposed upon tbe cashier tbe duty to inform tbe board of directors of tbe fact of want of consideration therefor. Tbe cashier is tbe agent of tbe board and tbe bank, and tbe knowledge of the agent is presumed to have been imparted to tbe principal, and in tbe words of Bolles (Bkg. p. 392), speaking concerning this principle, tbe authority says: “Whenever this great rule has been applied, a bank has been regarded as having bad actual knowledge of that possessed or acquired by its president or cashier concerning tbe pledge of its stock, tbe trust quality, or other peculiarity of stock pledged to tbe bank, tbe existence of a mortgage or other lien, tbe indorsement of notes taken by tbe bank, and character of tbe indorser, tbe nonpayment of an obligation held as owner or collecter, tbe equities between maker and indorser, tbe residence of an indorser, tbe existence of usury; of an agreement or modification thereof to which the bank is a party. ... In many cases tbe presumption is conclusive; tbe principal is presumed to be endowed with tbe agent’s knowledge, and is not permitted to prove the contrary. Tbe fact may be otherwise, but tbe law will not permit him to set aside tbe presumption with evidence, however overwhelming it may be. This position is based on tbe soundest reasons. Tbe rule itself which has served a great purpose might thereby be entirely destroyed. Its application to a particular case may work harshly, but if tbe principal did not know, tbe law says be ought to have known; that be alone was to blame either directly or indirectly if be did not. And therefore be, rather than the public, must suffer, as it certainly would by tbe destruction of tbe rule.” Tbe presumption that tbe bank president and director received tbe knowl
In this connection there is evidence that the plaintiff, while holding the office of president, and necessarily a director of this banking institution, had left its management entirely to others, and principally to the cashier. That plaintiff was a resident of Minneapolis, and gave little attention to the business transacted by the bank. This is offered presumably in explanation of why he did not have actual knowledge of the want of consideration in the transaction between the defendant and the bank, because of which this note was given, to prove himeslf a holder in due course in fact. This is the equivalent of urging his own negligence and dereliction of duty under the banking laws as an excuse to enable him to establish good faith or actual want of knowledge of the infirmity in the paper, when he would have known such facts and possessed actual knowledge thereof had he performed the duties devolving upon him as president of a banking institution. A court can hardly recognize such a plea. Plaintiff cannot lend his name, and thereby the influence of his probity and wealth, to his resultant benefit as a stockholder and bank official, without incurring the duty of fulfilment of the obligations of the office, including those arising from the presumed notice imputed to him by law as a bank official of the bank’s transactions in the ordinary course of its dealings. As the presiding officer of the board of directors, he shoxxld not be heard to say he did not know matters presumed to be within the actual knowledge of the board, as an excuse for failure to perform his official duties to the bank, its depositors, and creditors. In the words of Martin v. Webb, 110 U. S. 7, 28 L. ed. 49, 3 Sup. Ct. Rep. 428, quoted with approval in Magee on Banks & Banking, 2d ed. § 107, it is said: “Directors cannot, in justice to those who deal with the bank, shut their eyes to what is going on around them. It is their duty to use ordinary diligence in ascertaining the condition of its business, and to exercise reasonable control and super
Respondent cites the decision of this court in American Nat. Bank v. Lundy, 21 N. D. 167, 129 N. W. 99, as sustaining his contention, and
Our conclusion is tbat tbis defense is available against tbis plaintiff’s recovery. And defendant, having been precluded from proving bis defense, should be allowed to offer evidence tending to establish tbe same under tbe allegations of bis answer and tbe issues as joined. And tbat upon tbe proof as made, that tbis plaintiff is tbe president of tbis bank and therefore one of its directors, tbe defendant has laid sufficient foundation for the introduction of proof of bis defense of want of consideration, which, if established, is as binding upon tbe plaintiff in tbis action as it would have been upon tbe bank bad tbe bank instead sought recovery.
Appellant’s contention being sustained as to tbe merits, necessitating a new trial, it becomes necessary to consider tbe error assigned on tbe trial court’s ruling sustaining tbe demurrer to tbe counterclaims for damages specifically plead. We conclude tbat tbe demurrer to tbe alleged counterclaim asking damages for attorney fees was properly sustained, being covered by the statute authorizing taxing of tbe same as •costs in lieu of attorney fees. Tbe counterclaim for $15 for four days’ lost time in endeavors to regain possession by rebonding is insufficiently pleaded, as it does not sufficiently appear tbat the time alleged to have been so spent was necessarily spent for such purposes. Under proper pleading, and on sufficient proof, we see no reason why defendant should not, if be recovers judgment, be allowed damages for loss of time consumed in regaining possession of his property. As to tbe counterclaim interposed for tbe sum of $15, it does not appear bow tbe expense was incurred, it being impossible to determine from tbe answer whether the matter is a disbursement in suit or is a subject of claim for damages, and the demurrer thereto was properly sustained.
But tbat portion of tbe answer counterclaiming for deprivation of use and possession of said property for a jDeriod of four days, during which time said property was detained by plaintiff after it was taken from defendant under claim and delivery proceedings and before rebonding, and for which period defendant claims to recover damages in tbe sum of $30, tbe trial court erred in overruling tbe demurrer. “Upon tbe rendition of a verdict for tbe defendant, be is entitled to an assessment
Then, again, we regard § 1036, Rev. Codes 1905, as, by necessary construction if not in specific terms, granting the defendant the right to counterclaim for damages for use and deprivation of property. On this demurrer we must, of course, assume to be true the facts set forth in defendant’s counterclaim, and are therefore passing upon the sufficiency of defendant’s claim under the assumption of his recovery on the merits as to right to possession of the property. Such recovery by defendant under the pleadings can only be had if a total want of consideration be established for the note secured by mortgage. If defendant recovers in the main action, the verdict must conform to the provisions of § 1036, to be responsive to the issues. That section defines the verdict to be returned in every instance that may arise in claim and delivery. Subdivision 3 thereof defines the defendant’s rights where the property has been delivered to plaintiff and where defendant recovers, and expressly provides that in such instance, if damages for detention of property are claimed in the answer, the defendant may recover therefor. Subdivision 4 of that section provides that where the property has, pending suit, been retained by the defendant, the jury must find the defendant entitled to such property where they find against the plaintiff. This provision is applicable where the plaintiff has not elected to take the property pending suit. The final provision of subdivision 5 of § 7036 is in our opinion intended to here apply. It reads: “Whenever the jury are so instructed they must find the value of specific portions of the property in controversy, or of the interest of either party therein, if less than its full value at the time of the taking, and shall also assess the damages if any are claimed by the party in whose favor they find sustained by reason of.the taking and detention of such property.” In other words, the party claiming damages through the taking and detention of replevied property, if entitled to recover therefor and with recovery for such damages not specifically provided for in the preceding.
One remaining matter deserves extended discussion. After the record on appeal was in this court for submission on the merits, appellant’s attorney filed in this court affidavits of said attorney and the defendant, accompanied by an affidavit of Minekler, who had been cashier of this bank at all times in issue. With these affidavits was filed a written application to have the record here on appeal remanded to the district court of Benson county, that defendant might, on the record and said affidavits, “move for a new trial on the grounds of newly discovered evidence in this actionand pursuant to said application, to determine whether to remand for such purposes, an order to show cause was issued by this court, summoning respondent “to show cause why an order of this court should not remove the record and files in said cause back to the district court of the second judicial district within and for Benson county, and the said district court be instructed to entertain an application by the defendant for an extension of time within which to move for a new trial of said action on the ground of newly discovered evidence, if the time for making said motion has expired.” On the return day respondent filed a motion, supported by affidavits, asking the court “to quash the order to show cause.” This motion is supported by the affidavits of McCarty, reciting at length the entire transaction. Of McCarty’s affidavit we will speak later. On the hearing both parties filed written briefs, as well as made oral argument, with the result that the application to remand was denied by order of May 2, 1912. Thereafter the cause was heard on the merits of the appeal. Then an opinion prepared by the chief justice was filed, dismissing the appeal on the court’s own motion, on the grounds that the matter stated in the affidavits of appellant on the motion to remand admitted the reception by-defendant of $1,500 as consideration paid by the bank to him on the», note in litigation, and that as the value of the replevied property im issue was less than the amount so received his defense thereto was wholly destroyed, and was established to be sham and fictitious. On peti
“John Kepreta, being first duly sworn according to law upon oath deposes and says that he is the defendant in the above-entitled action; that the facts in connection with the making and delivery of the note for $2,000, secured by the mortgage under which plaintiff is by this action attempting to recover, are as follows, and not otherwise: That in the fall of 1908, I had immediate use for the sum of about $1,800, and made arrangements with the Farmers & Merchants State Bank of Knox, of which said plaintiff was president then, whereby said bank would advance me the money needed, and it was agreed at the time that affiant was to allow the said bank a bonus of 10 per cent on the amount agreed on to be advanced, and in addition thereto was to pay interest at the rate of 12 per cent per annum from the date of the note; that the total sum of money which was agreed on to be advanced was $1,800, and no more.”
Also was filed the following affidavit:
“J. A. Minckler, being first duly sworn, on my oath depose and say that I reside at Knox, North Dakota, and was a resident of Knox, North Dakota, during the year 1908, and that during said year I was the cashier of the Farmers & Merchants State Bank of Knox, North Dakota, of which said bank the above named plaintiff, John McCarty, was president; that in the fall of 1908, one John Kepreta made an application to said bank through me as its cashier, for a loan of sufficient money to take up his then outstanding indebtedness, which was established at that time to be about $1,800 over and above the value of his crop for that year, then threshed but unmarketed;
“That in said fall of 1908, after the said application of the said Ke-preta was made to me, I had a conversation with the said John McCarty, in the month of October, 1908, and just prior to -the taking of the $2,000 note involved in the above-entitled action from John Kepreta, in which I told him the proposition and arrangement I had with Ke-preta, which was as follows: John Kepreta was to execute the said note of $2,000, and was to receive actually only $1,800, and the other $200 was to be a bonus for making the said loan; and he was to give the note for $2,000, and pay 12 per cent interest on the whole $2,000. John Me-*421 Carty replied by telling me to go ahead and make the loan on that basis, and that he would take it up for himself, instead of the bank, provided I could obtain a sufficient chattel mortgage to secure the $2,000 note. On the 12th day of November, 1908, John Kepreta signed the note for $2,000 involved in this action, and also the chattel mortgage securing the same, and involved in this action, and on which the action is based. The Farmers & Merchants State Bank of Knox, North Dakota, advanced to John Kepreta thereon, on the 12th day of November, 1908, the sum of $1,500, and the note was, on the 12th day of November, 1908, registered in the books of said bank and carried thereon at a $1,500 loan. On the 8th day of December, 1908, John McCarty came into the bank at Knox, and the said note and mortgage were turned over to him by me, and he paid for the note and mortgage the sum of $1,813, the $13 of which represented the interest at 12 per cent on the $2,000 note for twenty-six days, which had accrued thereon to that date, and John Kepretas account at said bank was credited with the sum of $800, and no more; that the mm of $1,800 was all that said John Kepreta ever received from the Farmers & Merchants State Bank of Knox, North Dakota, for the swid note. The $13 was credited to the interest account, and the $1,500 item was canceled from the notes and discounts; that at the time this John Kepreta note of $2,000 was taken by said plaintiff, John McCarty, he also bought a note of one O. P. Kambo, from the said Farmers & Merchants State Bank of Knox, of the sum of $725, and accrued interest thereon in the sum of $5.80, which, added to the $1,813, made a total of $2,544.70, for which sum he gave a check on the Security National Bank of Minneapolis, in the state of Minnesota, dated December 8, 1908, and which was paid by said Security National Bank on December 10, 1908.
“Dated this 4th day of April, 1912.”
We italicize that part of the foregoing particularly under consideration.
With these affidavits was also filed that of one of the attorneys of record for defendant and appellant. Bie recites the history of the trial, and the appeal; “that on the 4th day of April, 1912, for the first time this affiant, and also the defendant, discovered that there was a good, meritorious, and valid defense to the whole, or to a great part, of the claim of the plaintiff, and also discovered evidence to substan
“That said evidence is vital and very material to tbe defense in this action.” “That tbe time fixed by the statute of tbe state of North Dakota within which to move for a new trial has expired in this case.”
On these affidavits tbe opinion was based, short-circuiting tbe merits of the appeal and summarily dismissing it, working an affirmance of tbe judgment appealed from, on tbe theory that tbe affidavits constituted a solemn, written, judicial admission made in tbe case that tbe defense was without merit. In considering whether this conclusion was correct, many matters other than tbe statements contained in the affidavits themselves are to be considered. We here observe that tbe affidavits have in no wise misled tbe opposing party, nor have they been acted upon by him, but instead were acted upon by tbe court on its own volition. In fact, until tbe decision was rendered we have every reason to believe respondent must have been as wholly in ignorance of any such contemplated action of this court or tbe effect of these affidavits to work such dismissal as was appellant, who filed them. There is, then, no element of estoppel in this case. Tbe question for determination is whether tbe matter contained in tbe affidavits, taken in connection with tbe matters embraced in tbe entire case, and issues presented, and now also in tbe light of tbe explanation made of their filing, as explained in tbe petition for rehearing and the subsequent argument of appellant, must or should be taken by this court as a judicial admission of want of merit in tbe defense litigated in tbe lower court and now before us on appeal. Most surely, before thus treating property rights presented in good faith on an appeal, this court must be certain that such disposition is the only reasonable one to be made, consistent witb tbe rules of procedure applicable. ' And such we find tbe declared law. Obamberlayne’s Evidence, vol. 2, § 1242, from which we quote: “Judicial admissions should receive a reasonable construction. Thus it will not be assumed, without strong reason, that an admission by counsel covers tbe point on which tbe entire case turns. The rule has even been stated to be that where tbe concession of counsel is ambiguous its mean
A judicial admission, strictly speaking, is a matter determining procedure regardless of proof in the case or probative force of the admission. A plea of guilty, an unqualified admission of the facts of a case to avoid a continuance, or any stipulation or admission conceding-a matter in issue and waiving proof, as a formal admission of fact or issues in a pleading, are examples. A judicial admission relates primarily to procedure. Chamberlayne, Ev. §§ 1234 et seq. Other admissions of various kinds are matters primarily of evidence only, more or less conclusive, according to the weight to be attached to them as evidence only, and their force or effect being determined with all the facts in the case and on trial. With this in mind, let us determine whether, under all the circumstances, the contents of this affidavit amount to written judicial admission, and if so, whether any discretion lies as to the effect of the same upon this suit; that is, whether the coui't has any alternative than to dismiss this appeal.
We first notice that the affidavits are filed as a part of procedure to-
And at this place we may briefly consider, with Minckler’s affidavit, the explanation of the plaintiff himself, also made by his affidavit, in support of his claim of absolute ignorance of any want of consideration or usury in the note. Contrasting the affidavits of McCarty and Minck-ler, it is noticeable that $200 less than the face, and interest, for two
While we do not believe that any conspiracy existed in the offering of this affidavit, as between Minekler and McCarty, inasmuch as none of the counsel in the case would countenance such practice, and all were in ignorance of any such application of them as made heretofore by the
But we are not bound to dismiss the appeal, even though we grant that the affidavit filed may amount to a judicial admission. A court may, at its discretion, upon proper showing, relieve from a judicial admission. See Greenleaf on Evidence, 16th ed. vol. 1, § 206, from which we quote: “Where judicial admissions have been made improvidently and by mistake, the court will, in its discretion, relieve the party from the consequences of his error by ordering a repleader, or by discharging a case stated, or the rule, or agreement, if made in court. Agreements made out of court between attorneys, concerning the course of proceedings in court, are equally under its control, in effect, by means of its coercive power over the attorney in all matters relating to professional character and conduct.” See also 1 Ene. Ev. 476.
We quote from § 1240, Chamberlayne’s Evidence, as follows: “While a formal judicial admission constitutes the levwmen probationis until modified or withdrawn, the admitting party is not necessarily precluded by it. A showing of mistake or inadvertence may secure him relief from the court. The entire matter is within the administrative function of the court. If it shall be made clearly to appear to the judge that a particular formal judicial admission has been made imprudently and by mistake, the court may, in the exercise of its administrative powers, relieve parties from the consequences of their mistake, by allowing them to withdraw the admission. In the same manner, a party under the rules of practice prevailing in a particular jurisdiction may be allowed to alter the admissions contained in his pleadings, by an amendment,” — citing authority. To the same effect see § 2590, Wig-more on Evidence, reading: “The vital feature of a judicial admission is universally conceded to be its conclusiveness upon the party making it, i. ethe prohibition of any further dispute of the fact by him, and of any use of evidence to disprove or contradict it. In view, how-' ever, of the commendable purpose which leads (or ought to lead) to
Most authorities cite and quote from Prestwood v. Watson, 111 Ala. 604, 20 So. 600. In the note to Wigmore on Evidence we find the following quotation from said case, and here particularly appropriate: “Such agreements are sometimes made to avoid continuances or for some other specific purpose, and by their terms are limited to the particular occasion or purpose, and of course lose all force when the occasion has passed or the purpose has been accomplished.”
There can be no doubt of the right of the court under the authorities, even though the affidavit of this third party be considered as a judicial admission of defendant, to relieve defendant from its force by ignoring it except for the purpose of which it was filed, in this case long ago ruled upon by this court and superseded by subsequent proceedings concerning the merits of the case on appeal.
Then, too, his affidavit was filed, not by the party defendant, but by his attorney; and if it be held to have been adopted thereby as the declaration of the party, it must have been the act of the attorney, perhaps unknown to or not understood by the client, in thus using the affidavit of a third party that would be construed as decisive of this case against said client. And in the affidavit of the defendant, filed with the affidavit of Minckler, we find no statement of knowledge of the contents of Minckler’s affidavit or any corroboration thereof that goes to the extent of verifying the statement in' Minckler’s affidavit that money was advanced defendant as the consideration for said note. In fact, in the affidavit of the attorney filed with the other two affidavits, we find the statement, “that the defendant has always maintained that he never received anything as consideration for the note,” which, if considered with the affidavit of Minckler and given the same construction that must be given to Minckler’s affidavit, to allow the latter to constitute a judicial admission would amount to a denial or repudiation of the affidavit of Minckler, filed contemporaneously with the Minckler affidavit. The admissions, if they may be so construed, contained in Minckler’s affidavit, are but analogous to admissions made in a pleading concerning which much conflict exists as to the extent to which a client is bound when the pleadings embody judicial admissions. 16 Cyc. 968, where it is said that it “would be pushing the relations of attorney and
In wbat has been said heretofore it has been taken for granted that tbe statements contained in Minckler’s affidavit amount to a judicial admission. To give such effect would overlook tbe fact that tbe application to remand, to support which they were filed, was denied, and is no longer before us for review or for any other purpose. Tbe application and tbe supporting affidavits are all superseded matter, and are no longer before tbe court for any purpose, and any statements therein may only still “be competent as extrajudicial admissions. To be so used, tbe superseded pleading must be introduced in evidence, must be shown to have been originally made as a statement of fact, and connected directly with tbe party himself, as having been made, or authorized and inspired by him. It is not sufficient that tbe attorney signed and filed tbe original pleading.” 16 Oye. 911. This affidavit should not now be treated as more than an extrajudicial admission.
But it is urged that in any event tbe affidavit having been offered by defendant, all statements therein must be taken as'true, and no part of it can be questioned. Wigmore on Evidence, § 1015, effectively answers this contention.
“If a party expressly states that a certain piece of testimony by another person is correct, there can be no question that it becomes bis statement by adoption, and is receiveable as bis admission. But does be by implication approve and adopt as bis all tbe depositions, testimonies, and affidavits that are offered on bis behalf in a litigation, so that in a subsequent litigation these may be used against bim as bis admissions ? It is true that tbe rule against impeaching one’s own witness was once explained upon tbe theory that a party guarantees tbe credibility of bis witness and (by inference) tbe correctness of tbe witness’s statements.” § 898. “But that impossible theory has long been exploded, and cannot serve here.” § 899. And as an extrajudicial admission under all of tbe authorities, any statements contained in these affidavits might be explained, qualified, or controverted on retrial.
Eor tbe foregoing reasons we do not feel justified, from this partic
This case is remanded for a new trial, appellant to recover bis costs and disbursements on this appeal, but excluding those on tbe reargument bad on tbe rehearing granted herein.
Dissenting Opinion
( dissenting). While disposed to think it might be tbe part of wisdom for tbe legislative assembly to prohibit an official of a state bank from dealing in commercial paper taken by tbe bank, or at least from asserting a good faith purchase from the bank by himself, I am by no means clear that tbe law as it now stands considers a bank official, and particularly one who does not participate in tbe active, personal management of tbe bank, in any other light than as a stranger to tbe entity known as a bank, in such dealings; and tbe authorities cited to tbe contrary in tbe majority opinion on this question are not convincing, especially when tbe whole of each is read. But, as I deem it unnecessary to pass upon tbe merits of this case, I refrain from any expression of opinion thereon.
I am of tbe opinion that tbe decision is wrong, and I cannot concur
In April, 1912, after appeal from the judgment herein, defendant submitted a motion to have the record remanded to the district court to enable him to submit a motion therein for a new trial on the ground of newly discovered evidence. That motion was argued in this court and denied, and the reason for its denial was the fact that the allegations of the affidavits on which the motion was predicated negatived the defense contained in the answer, and that, although there might be a partial failure of consideration, such affidavits showed that a defense of partial failure of consideration would be of no avail, as plaintiff would still be entitled to possession of the security for foreclosure purposes. Subsequently the case was argued on 'the merits, and this court, after very careful consideration, agreed on the disposition of it, and dismissed the appeal. A most remarkable document was subsequently filed in this court, asking a rehearing. The court decided, in view of all the circumstances, it was best to give the parties an opportunity to be heard on the dismissal of the appeal, and on the rehearing this was done. Nothing developed that was unknown to the court at the time the original opinion was written in any way tending to diminish the force of the decision dismissing the appeal. On the contrary, it seems to me that the reasons for doing so are emphasized at this time.
I shall not set out the affidavits presented, as .they are sufficiently stated in the latter part of the opinion of my learned associate. It must be borne in mind that the defense pleaded was total want of considera
“From the solemn declarations, under oath, of the defendant and his witnesses, it is clear that the defense on which he stood in the district court, on which the case was tried and judgment entered, and on which the argument of the appeal proceeded in this court, was purely fictitious, sham, and false. To reverse the judgment'now would be to permit the defendant to set up a defense, stand on it two years, through- the district court into this court, knowing all the time that it was false, get a decision in his favor on some error in the admission or exclusion of evidence relating to the false issue, mulct the plaintiff for costs, and then adopt a new theory and a new defense, and solicit the assistance of the courts to relieve him from the fraud perpetrated upon his counsel and the courts.”
“It is not a case where the defendant relied on other parties for knowledge of his defense. He knew at the time his answer was prepared that he had in fact received consideration for the note, just as well as he did when, on the 6th day of March, 1912, he came into this court- seeking to abandon his defense and substitute a new and different one, and was denied such relief. His attorneys were ignorant of the*435 facts, but tbis did not relieve him from responsibility or from the duty to disclose and make the defense which he claims to have had, rather than one which he knew he did not possess. . . .”
“If courts can be played and juggled with in this manner they deserve to become subjects of ridicule and contempt. If the money of the taxpayers can be collected to maintain courts engaged in settling issues which are confessedly fictitious, every taxpayer may well protest and. every party to bona fide litigation has just ground for complaint at delay in the conduct of his litigation occasioned by the time and energy of the court being devoted to questions confessedly without merit,”
We further stated:
“In no view of this case does the verdict and judgment work injury or hardship to the defendant. The value of the property involved was stipulated by the parties to be $875,- — more than a thousand dollars less than the face of the note, and less than half the amount that the defendant confesses he received as the consideration for the note.”
A usurious note is not invalid, and plaintiff was entitled to the possession of the security if any part of the debt was due and unpaid. Appellate courts, on attention being called to the fact that questions presented are no longer concrete, decline to act on them. See: Re Kaeppler, 7 N. D. 307, 75 N. W. 253; Foote v. Smith, 8 Wyo. 510, 58 Pac. 898; Sutcliffe v. McSweeney, 102 Ga. 807, 30 S. E. 268; Meyer v. Prichard, 131 U. S. CCIX, Appex. and 23 L. ed. 961; Berry v. Des Moines, 115 Iowa, 44, 87 N. W. 747; Hice v. Orr, 16 Wash. 163, 47 Pac. 424; State ex rel. Daniels v. Prosser, 16 Wash. 608, 48 Pac. 262; Territory ex rel. Hubbell v. Dame, 13 N. M. 467, 85 Pac. 473; Bindley v. Atchison, T. & S. F. R. Co. 47 Kan. 432, 28 Pac. 201; Oscanyan v. Winchester Repeating Arms Co. 103 U. S. 261, 26 L. ed. 539; The Harry, 9 Ben. 524, Fed. Cas. No. 6, 147; State ex rel. Hahn v. Westport, 135 Mo. 120, 36 S. W. 663; Watkins v. Huff, 94 Tex. 631, 64 S. W. 682; Southwestern Teleg. & Teleph. Co. v. Galveston County, — Tex. Civ. App. —, 59 S. W. 589. Examination of these cases will disclose that they originally presented questions for determination. In the case at bar one was presented, but one which, in fact, did not exist, and this is conceded by the defense in presenting the affidavits of Kepreta and Minekler. Courts are constantly acting upon statements of counsel made on argument, waiving assignments of error contained in briefs,’
In Re Kaeppler, 7 N. D. 307, 75 N. W. 253, the appellant instituted, under the state law, involuntary insolvency proceedings against the respondent, who contested them. The court found in favor of the respondent, dismissing appellant’s petition. An appeal was taken to the supreme court. In the meantime respondent himself filed a voluntary petition in insolvency proceedings, and thereupon was adjudged insolvent, and the court declined to pass upon the question presented on the appeal from the judgment dismissing appellant’s petition, and held that in such cases and all similar cases the appellate court will dismiss the appeal on the ground that judicial tribunals are not organized for the purpose of rendering decisions which can be of no possible advantage to the parties to the litigation. And numerous authorities are cited, to which we call attention, supporting the court’s conclusion, most of them cases where the condition arose after the appeal had been perfected.
Counsel’s great excuse is that his client is ignorant, and could not comprehend and did not understand court proceedings or the effect of any given set of facts in law or otherwise. This may be conceded, but it in no manner excuses appellant for concealing the facts regarding the transaction from his counsel. He knew the facts about it, whether he knew what part of them might constitute a defense or not. I do not
It is said that this affidavit does not state positively and unequivocally that Kepreta was paid $1,800, or any part thereof, or that he received any cash or its equivalent from said bank in the sum advanced as the consideration for the note in suit. This is a mere distinction without a difference, when the affidavit says that the bank advanced Kepreta $1,500, and no more. “Advance, — to furnish, as money or other value, before it becomes due, or in aid of an enterprise; to supply beforehand, as a merchant advances money on a contract.” Webster’s International Dictionary. The meaning as used in these affidavits is clear. It means money paid by the bank to Kepreta at the time or before he gave this note.
His affidavits are something different from the ordinary affidavit, which may be used in evidence as indicating that a party has taken conflicting positions on a question, but they "were here solemnly vouched for by the appellant himself. No court should permit a party to profit by and speculate on his ability to draw affidavits of a fine-spun sort for purposes of delay, and when he intermingles facts showing his position om the merits false, let him be heard to say that it should take notice of; only those allegations favorable to him. A great deal might be said on this subject, but it seems to me that its naked statement ought to be sufficient. It is very easy to find authorities apparently supporting any
While this may or may not be correct, I do not deem its correctness of much importance. Neither do I consider the question of estoppel necessarily controlling. For the purposes of this discussion it may be conceded that the defendant was not, by the adoption and presentation of the affidavit of Minckler, estopped to prove a partial failure of consideration. This would not help him, for the reasons hereinbefore stated. Neither should it matter if he may be allowed to impeach these affidavits on a retrial. For the same purpose this may be conceded. From this standpoint, is it the part of wisdom, does it tend to promote justice between litigants, is it a wise use of the powers and functions of a court, to devote its time to considering such matters, and permit the defendant to make repeated changes in his attitude toward the litigation, taking contradictory and conflicting positions with reference to the rights of the plaintiff, when, if his statements are accepted at their face, they conclusively show that he has no defense to the action brought by the plaintiff?
But is it simply a question of evidence? Let us inquire what Mr. Chamberlayne, an authority cited to support the decision, says. “For forensic purposes, admissions may be classed as judicial or extrajudicial. The judicial admission is one made on the record or in connection with the judicial proceedings in which it is offered in evidence. An extrajudicial admission is one in pais, not made in court for the purposes of the case on trial in which it is offered.” 2 Chamberlayne, Ev. § 1233. And, again: “According to the proportion in which the elements of procedure and logic respectively enter into their effect, judicial admissions may be treated in two general classes, — formal judicial admissions and those which are informal. In case of the formal judicial admission, the influence of the element of procedure is supreme. That of logic is practically absent. This fact removes formal judicial
I shall not refer in detail to the authorities cited in the opinion on this question. It is sufficient to call attention to the fact that some of those to which apparently the most weight is attached, in no manner sustain the points to which they are cited. The quotations which 1 have made from Ohamberlayne are contained in the long chapter cited in bulk in the majority opinion, and show the distinction between judicial admissions and extrajudicial admissions; and a further inspection of that chapter and the statements in the majority opinion, I think, disclose a misapplication of the law relating to extrajudicial admissions to this case. The definition of judicial admissions is applicable herein and to the affidavits under consideration. They were made in this case, filed in this case, and used in this case, and are therefore judicial admissions, the effect of which is defined in the quotation I have used. The further quotation contained in the majority opinion, from § 898 of Wigmore on Evidence, relates to admissions made in one case and sought to be used in subsequent litigation, — that is, in another case, Finally, I may say that I am impelled to my conclusion by the obvious effect, if not purpose, of acceding to defendant’s demands. This effect is to grant a new trial, which cannot legally afford the defendant relief in this action; and as to all questions, except the law as to the president of a bank being a due course purchaser, it simply amounts to giving the defendant an opportunity to produce evidence which he might,. with the slightest effort, have produced at the former trial, and which he will now be enabled to obtain by this indirect method of applying for a new trial, and on grounds on which a new trial is never granted, even when application is made to the trial court.
In my opinion the appeal should be dismissed.
Concurrence Opinion
I concur in the above opinion.