Court Opinion

ID: 7980244
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:04:31.569454+00
Date Added: 2024-06-11T16:35:01.387432
License: Public Domain

Brown, C. J.
(dissenting).
The facts are quite fairly stated in the opinion, but a restatement oí a part thereof is necessary to an understanding of my view of the case. The certificate of deposit was issued by the Merchants & Miners State Bank of Tower, on October 26, 1918, payable to the Mortgage Security Company. It was procured from the bank by one Hirschman, who was probably in some way connected with that company. Whether he procured it for the mortgage company, or for himself and associates, Chase and Mellenthin, is not made clear by the evidence. Chase testified that Hirschman was the "real owner,” though he "supposed” that he -and Mellenthin had some interest therein. But that' is not important. On November 14, 1918, the certificate with the unrestricted indorsement of the security company and of Hirschman, Chase and Mellenthin w*as sold and transferred to the First National Bank of Goodhue, plaintiff in the action, in due course and for value. Thereafter on November 22, 1918, one week later, Hirschman, acting in the name of the Merchants & Miners Bank, the issuer of the certificate, procured from defendant, the Iowa Bonding & Casualty Company, the guaranty contract in question, whereby the bonding company guaranteed to the then or any subsequent 'holder the prompt payment of the same at maturity, or on the date of any renewal. The guaranty contract was so issued on an oral application, but, as stated in the opinion, with the understanding that a written application would be prepared and presented to the company. A written application was subsequently made by the Merchants & Miners’ Bank, acting through its vice-president, Alfred Wadman and D. M. Hick, its cashier, and delivered to the bonding company as evidence of the transaction. It may be conceded that Hirschman attended to all the details in procuring the contract, but he kept under cover, using the name of the Merchants & Miners Bank, and he and his associates were not known to the bonding company at all, or that any interest they had in the matter was involved.
*284On November 30, 1918, the guaranty bond- was delivered to the Goodhue bank by one Crest, who appears to have been acting for Hirsehman, whereupon its president made and delivered a formal release and discharge of Hirsehman, Chase and Mellenthin as indorsers of the certificate.
On the trial counsel for plaintiff cautiously declined to concede that the release was valid or effective. But it 'appears valid on its face and must be so treated in this court; it may, however, be open to the charge of fraud.
The certificate was not paid, the issuing bank being insolvent, and the Goodhue bank still -remaining the holder thereof 'brought this action to recover on the guaranty contract. The bonding company interposed in defense the release of the indorsers, to its prejudice.
The liability of the bonding company on the guaranty contract was that of guarantor of payment, and it is entitled to the legal protection accorded to that relation of secondary liability. It would, on the payment of the debt, be entitled to subrogation to all rights, remedies and securities held by the principal against the debtor at the time the guaranty was made, 3 Dunnell, Minn. Dig. §§ 9045, 9046; a relinquishment of any of which, without the consent of the guarantor, would release and discharge it from further liability. At the time the guaranty was made, Hirsehman, Chase and Mellenthin were liable for the payment of the certificate as indorsers, but were subsequently released therefrom by plaintiff, and without the knowledge or consent of the bonding company. That such release discharged the bonding company as guarantor there can be no question in the law. 20 Oye. 1477.
The effort to spell into the guaranty contract -a purpose of the bonding company to release the indorsers then liable for the payment of the certificate,' finds no support in the record. The indorsers were not before the bonding company at all, and their anxiety or purpose to be released was not presented, or, so far as the record discloses-, considered in any way. Hirsehman and associates kept well under cover, in fact, paraded under the skirts of the insolvent Merchants & Miners Bank, the application for the guaranty being made in its name, with no refrence to the indorsers, who then had no title to the certificate, their only relation thereto then being one of liability. To say, judicially, *285on this state of the facts that the bonding company intended the guaranty contract as a protection of the indorsers who were liable for the payment of the certificate, is, in my opinion, wholly unjustified.
In the absence of some clear showing óf a contrary intention, the contract can be given prospective operation only. Wales v. New York B. F. Ins. Co. 31 Minn. 106, 101, 33 N. W. 322.. On its face the contract w«as intended for the protection of the then or any subsequent holder of the certificate against loss from the failure of the debtor to pay, and not to release securities held by the creditor for its payment.
The whole transaction to me has a malodorous atmosphere; one of deception and fraud. The First National Bank of Goodhue was made an innocent participant by the machinations of the indorsers, acting through Crest, who does not, however, appear to have been a wrongdoer, but who negotiated the sale of the certificate to plaintiff. The bonding company is made the victim by the action of this court in giving, as a matter of law, retroactive operation and effect to the guaranty, and spelling into the contract an intent and purpose to release and discharge the manipulators, who were not before the company at all. ' In my opinion that question was at least one of fact for a jury, and a new trial was properly granted to the end that it might be so submitted.
I respectfully dissent.