The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1917-11-16
Judge Engerud, in Opinion
for Bankers Association,
Holds Such Belief
WATERS RAISES
THE QUESTION
His Order Ties up Reserve
of rs Banks in Minnea-
polls Correspondents

Helena. Mont. have no defense
against payment Of such certificates,
in the opinion Of Judge E. G. Enge-
rud. Fargo. given to a member Of
the North Dakota Bankers associa-
tion-
Judge Engerud discusses the ques-
ton that has been raised by the ac-
ton OF the state bank examiner. ].
r. Waters. who. on the advice OF the
attorney general. ordered the banks
not TO pay the certificates Of deposit
The bank examiner has taken his
position as a means OF forcing the
company to pay losses on drought In
surance.
The action Of the bank examiner
resulted in punishment proceedings
in Minneapolis Wednesday, the re-
serves Of rs North Dakota banks
being held up as q result.
The North Dakota banks issued
certificates Of deposit to the Bankers
Insurance company. due Nov. l.
Notes taken by agents Of the insur-
ance company formed the basis for
the certificates. It is common prac-
tice for banks TO take notes in pay
ment OF. insurance premiums. The
companies will not accept such
notes, but will take certificates Of
deposit. As a rule, notes are made
payable on Oct. l. and certificates
q month later. Now the state bank
examiner has ordered the banks not
TO pay the certificates.
Judge Engerud covers the ques-
ton fully in the folloWing letter ter
Farmers & Merchants Bank.
Barton, N. D.
EnuAIoVnmns-
have yours Of 18th inst relative
70 your dif1culty concerning your
connection with a crop insurance
concern.
Under an arrangement with the
company's soliciting agent you took
the farmers notes for the premium
and issued to the company certtfi-
Gates OF deposit for the amounts due
20 the company less the agents COM
mission presume you paid the
agent his commission.
In most cases the notes for the
premium were made directly to your
bank; but in some cases the notes
were made payable to the soliciting
agent and by him endorsed over to
you.
The losses turned out to be so
heavy that the company claims 1t
cannot pay them and is endeavoring
TO induce the policy holders to accept
a return Of the premiums and re-
lease the company's liability for loss.
You wish to know If the makers OF
the notes can rightfully refuse to
pay the notes you hold on the ground
Of want Of consideration.
I do not think the note makers
have any defense against the notes
IN your hands. There was no want
Of consideration. The policies were
ISSUED and the note makers got ex-
actly what they contracted for,
namely, the company's obligation to
pay the hail losses according to the
terms OF the policies.
The failure OF the company to
promptly satisfy its obligation when
TIE came due after you accepted the
notes and paid for them is no con-
Germ OF yours.
You are in no way rNBponsible for
the 'company's breach Of its obliga-
4ton.
The same principle holds true with
respect to your liability on the GER
tiioatss Of deposit even If the COM
pany still holds them.
As understand it, the company
cid not guarantee payment of the
otherwise. II the company were
liable on the notes. then you could,
oE course, Offset that liability against
your liability on the certificates, pro-
aided the company were still the
holders Of the certificates at matur-
ity.
The chances, however, are that the
Icertihcates have been negotiated:
and IL such is the case you will have
50 pay them when presented even If
yen had any claim against the COM |
nany.
a do not think you have any claim
Aeainst the company for the same
Teason that the note makers have no
Cefense against you on the notes.
You are not in a legal sense at |
Kected by or concerned with the COM
pany's breach of its obligation to the
policy holders after you took the
notes. The notes were given for a
fxIl and valuable consideration. The
note makers received that considera-
Epn. namely, the company's policy
oniigation. The fact that the COM
nany afterwards preached that obli-
alton does not destroy the consid-
eration for the notes or affect you In
any legal way.
The policy holders can sue the
eompany and enforce their claims in
that way. That is q matter between
tins policy holders and the company
nich does not concern you. The
enfnpanys breach Of its policy obi |
ationa&is in no legal sense any |
wrong TO you; and consequently you |
ave no claim against the company |
cn that account which you could use
a defense against the certificates |
deposit even IL the company still !
held them.
of course, If the company is still |
EHs holder OF the certificates and |
esents them for payment, the |
policy holders II they were prompt |
act could garnishee the money, If |
they could so arrange matters at 70 |
the punishment served after you |
eeive the certificates and before |
the money Is transmitted In payment |
them.
They could not, however. reach |
IS money By punishment before
certificates are presented for
fment: because debt evidenced
negotiable instrument is not
beet TO garnishment. See Book
Opinions No. 1877 and 222.
suggest that the policy holders
kht to bring the matter TO the at
tion Of the State Insurance COM
saiuner for action. The company
doubt has q guaranty fund on de-
G. with the state treasurer that
be reached by appropriate pro-
dings for the benefit Of the policy
aers
Yours respectfully.
Edw. q. Engerud.