Conrey v. Seligman

GATES, J. The parties to this action Nvere stockholders in the Columbia Equity Exchange, a farmers’ elevator company. The company was in financial distress. At a meeting of the stockholders in February, 1921, the financial situation of the company was disclosed, showing an indebtedness of from $30,000 to $35,-ooo.* It was proposed that each of the 70 odd stockholders give his promissory note to the company in the sum of $500 for the purpose of keeping the company afloat. Defendant 'Seligman executed and delivered his note in said sum. This action was brought to recover on said note. Plaintiffs and defendant Daly were the directors of the company. Daly was made defendant because he refused to join as plaintiff. Plaintiffs advanced to- the company $12,000, and claim to hold' this note as collateral security. The company afterward went out of business. At the conclusion of the evidence the trial court 'directed a verdict for plaintiffs. Defendant Seligman appeals from the judgment and an order denying new trial. Appellant argues that the purpose for which the note was given did not constitute a consideration therefor. Such contention'is without merit. Skordal v. Stanton, 89 Minn. 511, 95 N. W. 449; Union Bank v. Sullivan, 214 N. Y. 332, 108 N. E. 558; Continental Nat. Bank v. Doyle, 55 Cal. App. 405, 203 Pac. 780. [241] One of the defenses interposed by the answer was that there was an agreement made at the time the notes were solicited to the effect that the notes would not be used unless a sufficient number was obtained to equal thé amount of the indebtedness of the 'company. There was some evidence in support of the making of that agreement, and it also appeared that only 36 notes of $500 each were obtained. If such an agreement was made, plaintiffs are not “good-faith” holders of this note. If that agreement was made, the right of plaintiffs to recover from defendant would be based upon defendant’s liability as a stockholder and not upon the promissory note. The question as to the making of that agreement was for the jury to determine. For that reason the court erred in directing the verdict. The judgment and order appealed from are vacated, and the cause is remanded for a new trial. Note. — 'Reported in 197 N. W. 293. See, Headnote, American Key-Numbered Digest, (1) Bills and Notes, Key-No. 92(5), 8 C. J. Sec. 366; (2) Bills and notes, Key-No. 537(1), 8 C. J. Sec. 1373.