Court Opinion

ID: 9865149
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:25:15.182707+00
Date Added: 2024-06-11T12:37:34.349516
License: Public Domain

Mr. Justice Butler
dissenting.
As I read the record, the facts relating to the Curtis note and the Skinner note are as follows: Among the assets sold by the City Bank to the Globe National Bank, was a note for $20,500, signed by Mary A. Curtis, and secured by a second mortgage of land and water rights. The federal bank examiner later objected to that note a& an asset of the Globe National Bank. Thereupon, Mrs. Curtis conveyed the land and water rights to the City Bank; her note was cancelled and surrendered to her, and was noted “paid” on the books of the Globe National Bank. The City Bank gave to Mark A. Skinner its note for the amount of the Curtis note with interest, and secured its note by a trust deed of the property conveyed to the City Bank by Mrs. Curtis. This City Bank note was given to Skinner to secure him against loss by reason of his making and delivering to the Globe National Bank his note for the amount of the Curtis note with interest. At the request of the liquidating committee, Skinner, on November 27,1921, made and delivered such note. It was signed as follows: “Mark A. Skinner. The City Bank Liquidating Committee, By W. J. Galligan, Chairman.” The note referred to in the majority opinion was given July 17, 1923, as a second, third or subsequent renewal *215of the original Skinner note. It is signed, as stated in the majority opinion, not only by Skinner, but also by “The City Bank Liquidating Committee by W. J. Galligan by George McLean.” When he gave the first note, Skinner endorsed and delivered to the Globe National Bank, as collateral security, the secured note that he had received from the City Bank.
1. Is the guaranty broad enough to cover the Skinner note? Let us analyze the contract. The payment of the notes included in the purchase — the Curtis note was one of them — is guaranteed. Upon written consent of two members of the liquidating committee, the time of payment of any of said notes may be extended from time to time without releasing the guarantors from liability. So far, of course, it is clear that the guaranty does not cover the Skinner note. Upon consent of two members of the committee, new notes, payable directly to the Globe National Bank, may be taken in payment of the original notes, and the time of payment of any such new notes may be extended, “or other notes taken in payment thereof, ’ ’ without releasing the guarantors from liability. The plaintiff contends that the quoted words, “or other notes taken in payment thereof,” apply to the Skinner note. The contract was drawn on behalf of the guarantors by one of them. It is true that, in case of ambiguity, a contract should be construed most strongly against the one who draws it, or causes it to be drawn. If the foregoing provision stood alone, we might be able to give to the contract the construction contended for by counsel for the plaintiff. But it does not stand alone. In the very same paragraph, immediately following the provision in question, there is an express statement of the intent of the parties and of the meaning of the words used: “ * * * it being the intent and meaning hereof that the undersigned shall be and remain obligated hereunder to said the Globe National Bank for the payment of all indebtedness represented by said notes payable to *216the order of said the City Bank and for all renewals and extensions thereof made in the manner aforesaid.”
This indicates that the guaranty is limited to the payment of the original indebtedness represented by the notes payable to the order of the City Bank and sold to the Globe National Bank, and to all renewals and extensions thereof. The final words, “made in the manner aforesaid,” show that by the words, “other notes taken in payment thereof,” were meant other notes given by the makers of the old notes. In other words, new notes given by the makers of the old notes. In other words, new notes given by the makers of the old notes to take up the latter, though referred to as taken in “payment” of the latter, are to be considered (as is customary in banking circles) as renewals or extensions of the old notes. Other circumstances harmonize with this construction. The sale agreement, signed on behalf of both the seller and the purchaser, refers to the guaranty agreement as attached thereto, and as “guaranteeing the payment to said the Globe National Bank of the notes * * * included'in said general journal and daily statement.” The notes sold were payable to the order of the City Bank; hence the provision in the guaranty contract that upon consent of two members of the liquidating committee, and without releasing the guarantors from liability, “new notes payable directly to said the Globe National Bank may be taken in payment” of the old notes; which transactions, as we already have seen, are regarded as merely renewals or extensions of the old notes, and not as absolute payment thereof. It is highly improbable that the guarantors intended to permit the plaintiff to take, in payment of the purchased notes, the obligations of other persons, and leave the guarantors still liable on their guaranty; because they might thus become guarantors for persons whom they do not know. Nor would the requirement that the written consent of two members of the liquidating committee shall first be obtained fully protect the guarantors against the danger. The contract *217neither requires nor justifies a construction that would permit such unreasonable results. It was not contemplated by the parties that the guaranty should extend to and cover the indebtedness of third persons, or notes representing such indebtedness; hence, the defendant is not liable on his guaranty by reason of the nonpayment of the Skinner note.
There can be no sound argument to the contrary based upon a supposed distinction between a note and the indebtedness represented by the note. The indebtedness represented by the Curtis not¿ payable to the order of the City Bank was the indebtedness of Mrs. Curtis; and the guaranty covered both the' indebtedness and the note. The indebtedness represented by the Skinner note is the indebtedness of a person other than Mrs. Curtis. The Skinner note is not a renewal or an extension of either the Curtis note or of the indebtedness represented by the Curtis note; and, therefore, it is not covered by the guaranty. If the holder of a note receives absolute payment thereof, and cancels and surrenders the note, and thereafter sues upon the indebtedness formerly represented by the note, he, by his failure to recover, would be made to realize the shadowy character of the distinction supposed to exist between a note and the indebtedness it represents.
2. But the plaintiff contends that, in any event, the Curtis note is covered by the guaranty contract, that the Curtis note has never been paid,- and that the defendant is liable on his guaranty by reason of such nonpayment. The trouble with this contention is that it assumes that the note has not been paid. Mrs. Curtis deeded the land and water rights to the City Bank. That bank gave its note to Skinner, secured by a trust deed of the land and water rights. Skinner gave his note to the plaintiff, and pledged the note of the City Bank as collateral security. The plaintiff accepted the Skinner note, so secured, as payment of the Curtis note, and on the books of the plaintiff the Curtis note was noted “paid.” The note was *218cancelled and returned to Mrs. Curtis. Thereafter, the plaintiff wrote to the deputy comptroller of the currency, at Washington, a letter stating that, “The real estate loans mentioned all have been disposed of. ’ ’ The Curtis loan was a real estate loan. In a suit brought by this plaintiff against Mark A. Skinner and others, the plaintiff alleged, in its amended complaint, that the Skinner note was taken in payment of the Curtis note. The defendant in the present case offered that amended complaint in evidence, but an objection to its introduction was sustained — why, it is hard to understand.. However, no cross-error is assigned.
Fyom the evidence, it is clear that Mrs. Curtis is no longer liable on her note, or on her indebtedness formerly represented thereby; that if she were sued on either such note or such indebtedness, no judgment could be rendered against her. The trial court found that her note was paid. The evidence amply supports the finding. The defendant, therefore, cannot be held liable on his guaranty of the .payment of the Curtis note, or of the indebtedness at one time represented by that note.
3. Upon the nonpayment of the Curtis note, the plaintiff had the right to pursue one of three courses: (1) With the written consent of two members of the liquidating committee, it could extend the time of payment of the note, either by an extension agreement or by taking a new note signed by Mrs. Curtis; in which case the guarantors would remain liable on their contract. (2) It could demand that the guarantors pay in cash the amount of the note, and, if they failed to comply with such demand, it could sue them on the guaranty contract. (3) It could accept in lieu of cash, in payment of the Curtis note, a note not covered by the guaranty contract, e. g\, the note of a third person; in which case the guarantors would no longer be liable on their contract. The plaintiff chose the third course, and thereby released the guarantors. The fact that subsequent events prove that *219such choice was unwise, that it would have been better for the plaintiff to choose the first course and require additional security, or to choose the second course, does not entitle the plaintiff to a judgment saving it, at the expense of the defendant, from a loss (unforeseen at the time of the transaction) that resulted from the plaintiff’s own voluntary choice.
4. In the majority opinion, it is said that, even if the transaction resulted in “otherwise” releasing the defendant from liability, he could not, by reason of his relations to the parties concerned in the deal, avail himself of such release. True, he was a director of the plaintiff bank. He was, however, but one of several directors. There is no evidence that he induced or persuaded the plaintiff to accept the Skinner note in payment of the Curtis note; or that he made any representation with reference to the value of the Skinner note, or of the collateral securing it; or any representation concerning the solvency of Skinner; or that he knew, or had any reason to believe, that the Skinner note was, or would prove to be, uncollectible. ‘ In fact, there is no allegation in the complaint and there is no proof that the note is uncollectible. That it has not been paid is admitted. The defendant testified: “I took no active part in the substitution of the Skinner note for the Curtis note. Mr. Galligan handled that matter. I knew about it after it was made. * * * didn’t know of it until after it had been done.” When the defendant signed the Skinner note, it is fair to assume in view of the defendant’s testimony, he did so to carry out the arrangements that had already been made by Galligan. In short, there is no evidence whatever that, in the transaction, the defendant was guilty of fraud or breach of trust, and there is no evidence that supports the conclusion that the defendant is estopped to rely upon the release. This no doubt was the belief of the numerous and able lawyers for the plaintiff, when they said in their brief: “As plaintiff relies wholly on the *220guaranty of the original indebtedness, and as the final decision herein must turn upon the construction of said guaranty agreement by the Supreme Court, counsel respectfully invite the special attention,” etc.
Entertaining the foregoing views, it is impossible for me to concur in the majority opinion. The judgment of the district court is right. It should be affirmed.
Mu. Chief Justice Denison and Mu. Justice Walked concur in this dissenting opinion.