Case Name: SECURITY STATE BANK OF CROSBY, NORTH DAKOTA, a Corporation, Appellant, v. EDWIN PETERSON, Respondent
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1923-02-27
Citations: 49 N.D. 585
Docket Number: 
Parties: SECURITY STATE BANK OF CROSBY, NORTH DAKOTA, a Corporation, Appellant, v. EDWIN PETERSON, Respondent.
Judges: Christianson, Johnson, Nuessle, and Birdzell, JJ., concur.
Reporter: North Dakota Reports
Volume: 49
Pages: 585–591

Head Matter:
SECURITY STATE BANK OF CROSBY, NORTH DAKOTA, a Corporation, Appellant, v. EDWIN PETERSON, Respondent.
(192 N. W. 491.)
Opinion filed February 27, 1923.
Rehearing denied March 13, 1923.
R. H. Points and Leighton & Brace, for appellant.
Braatelien & McIlraith, for respondent.

Opinion:
Statement.
Bronson, Ch. J.
Plaintiff bank, in its complaint, has alleged the making of a promissory note by defendant to plaintiff. In an answer, defendant alleges, for a first defense, that he did not receive any consideration whatsoever for the promissory note; for a third defense, that the note was obtained by fraud and misrepresentation that it was necessary for plaintiff to secure such note from defendant before the plaintiff would extend credit to the United Consumers Stores Company in which defendant was interested; that defendant relied upon such false representations and thereby made the note; that, in fact, the loan to the Stores Company had been made several weeks prior to the time of the making of said defendant's note; that nothing was furnished by plaintiff in reliance upon defendant's note; that such note did not create any obligation at the time it was given or at any time and was wholly lacking in any consideration whatsoever; for a fourth defense, that the note was made upon the understanding that it was never to he effective or to bo enforced; that plaintiff had previously made a loan of $18,000 to the Stores Company and represented to defendant that such lean was an excess loan not permitted by law; that in order to satisfy the Bank Examiner and the law it was necessary to secure notes from individuals in an amount equal to and, to substitute for, such excessive loan, all for purposes of examination of the bank; that it was amply secured by other notes and security; that defendant relied upon these assurances and so executed the note; that such note was given for such special purposes only and its delivery was induced by fraud, deceit, and false representations for plaintiff's benefit; that, in addition to obtaining such note as an asset of the bank, plaintiff obtained such note partially to gain favor with, and secure the patronage of, the Stores Company which was then operating its store in a large mercantile business at Crosby, North Dakota; that such store had bank accounts and made extensive bank deposits at banks at Crosby, North Dakota, where plaintiff was engaged in the banking business, but such Stores Company had not, prior to the procurement of such note, extensive deposits with plaintiff bank; that, partly to secure such business and patronage of the Stores Company, plaintiff, conspiring with the Stores Company, through fraud, deceit, fraudulent concealment, and false pretenses as alleged, procured such note. The pleadings are not set forth in full; only the salient ultimate facts have been stated.
Plaintiff separately demurred to each of the three defenses upon the ground that each failed to state grounds sufficient to constitute a defense. It has appealed from an order overruling its demurrers.
. Plaintiff contends that want of consideration must be specially pleaded as a defense in an action upon a promissory note and that the first defense is insufficient in that regard; concerning the third defense, it is maintained that the acts of fraud and deceit pleaded are insufficient, through lack of specific averment and of representations not within the knowledge of defendant, to constitute a defense; concerning the fourth defense, it is further contended that the alleged oral agreement for nonliability and nonenforcement expressly contradicts the terms of a valid written contract and therefore is invalid.
Decision.
First defense' The rule of liberal construction applies to allegations admitted by a demurrer. In such case allegations of fact sufficient to Teasonably and fairly apprize tbe opposite party of the nature of tbe claim against bim will be upheld. Weber v. Lewis, 19 N. D. 473, 34 L.R.A.(N.S.) 364, 126 N. W. 105. Under such circumstances tbe allegations that defendant received no consideration whatsoever for tbe note may be considered sufficient as an allegation of tbe ultimate fact that there was no consideration for such note. Grimes v. Ericson, 94 Minn. 461, 463, 103 N. W. 334. See McCarty v. Kepreta, 24 N. D. 400, 48 L.R.A.(N.S.) 65, 139 N. W. 992, Ann. Cas. 1915A, 834.
Third defense: This alleges fraud and deceit as well as lack of consideration. If it constitutes a defense upon any ground as alleged it will be upheld as such. Kautzman v. National Union F. Ins. Co. 48 N. D. 1229, 189 N. W. 325.
If, however, tbe fraud and deceit alleged are to be considered as forming tbe basis for tbe lack of consideration alleged we are nevertheless of tbe opinion that if tbe note was so secured, pursuant to tbe allegations made, without tbe extension of any credit or tbe parting by plaintiff with anything of value, a valid defense is asserted. Sec Collins v. Townsend, 58 Cal. 608, 616; 8 C. J. 930.
Fourth defense: It is unnecessary, to express any opinion upon tbe validity of tbe oral agreement concerning nonliability and nonenforcement in connection with tbe express written terms of tbe note and tbe obligations that would flow therefrom. Further, upon tbe question whether tbe oral agreement made to deceive tbe bank examiner, as alleged, constitutes a defense, we express no opinion. It is sufficient to state that otherwise a defense is asserted, if, through fraudulent representations and false pretenses the note was secured without any consideration whatsoever therefor and as a pure accommodation to tbe bank. See Kautzman v. National Union F. Ins. Co. supra.
Tbe order of tbe trial court overruling tbe demurrer is affirmed.
Christianson, Johnson, Nuessle, and Birdzell, JJ., concur.