West v. St. Paul National Bank

Dickinson, J. The plaintiff was the holder of a promissory note for $1,150, executed by one Onken to one McMenemy, and by the latter sold and indorsed to the plaintiff before maturity. It was secured by a mortgage of real estate. Long before the maturity of the note the plaintiff delivered it to the defendant bank for collection, as we must now consider the fact to have been. When the note matured, in. August, 1891, the bank did not protest for nonpayment; and for want of notice the indorser, who was solvent, wras discharged. In June, 1892, the plaintiff foreclosed her mortgage by advertisement, she being the purchaser at the sale for $870. This action was commenced in November, 1892, to recover the difference between the amount for which the plaintiff bid off the property— less the expenses of the foreclosure — and the amount of the note, the action being founded upon the neglect of the bank to take the necessary steps, to charge the indorser. In receiving the note for collection the bank assumed the duty of taking the proper steps to fix the liability of the indorser. Borup v. Nininger, 5 Minn. 523, (Gil. 417;) Jagger v. National German-Am. Bank, 53 Minn. 386, (55 N. W. Rep. 545.) For a neglect of that duty [469] it would be responsible to tbe extent of tbe damages suffered thereby. If the maker of tbe note were solvent, so that tbe note could be collected from him, tbe damages resulting from tbe discharge of tbe indorser would be merely nominal. Hence, as tbe plaintiff must prove tbe extent of tbe damage, tbe question of tbe solvency of the maker, Onken, became material. Borup v. Nininger, supra. The fact that one is insolvent may be established by proof that such is bis general reputation in tbe community where be resides, (Nininger v. Knox, 8 Minn. 140, [Gil. 110;] Burr v. Willson, 22 Minn. 211; Angell v. Rosenbury, 12 Mich. 241, 251; Bank of Middlebury v. Town of Rutland, 33 Vt. 414; State v. Cochran, 2 Dev. 63;) or, it may be added, where he is engaged in business. Tbe proof of tbe financial irresponsibility of tbe maker of this note was meager, and not wholly satisfactory; but we regard it as prima facie sufficient. It appeared that in the fall and winter of 1S91 be was living in Duluth, but it was not shown how long be bad lived there. There was evidence going to show that at that time be was reputed to be insolvent, and that such bad been bis reputation since tbe spring of 1891. It is said that a general condition of insolvency is not inconsistent with ability on tbe part of tbe debtor to pay a particular debt, or on tbe part of the creditor to enforce payment. This is true, but proof of insolvency is evidence, prima facie, of the inability of a creditor to enforce payment; and the mere possibility that tbe plaintiff might have enforced collection of tbe note from the maker does not forbid her recovery for tbe negligence of tbe defendant in allowing tbe discharge of tbe in-dorser, admitted to have been solvent. Lambert on v. Windom, 18 Minn. 506, 514, 515, (Gil. 455.) While tbe plaintiff did not institute legal proceedings to enforce payment from tbe maker, tbe defendant, while it held tbe note for collection, and at or after maturity, demanded payment by mail, which demand tbe maker disregarded. We think that proof of this demand and of tbe maker’s insolvency was sufficient to justify tbe plaintiff in calling upon tbe defendant to respond in this action. Some of tbe appellant’s assignments of error are based on tbe erroneous theory that because tbe cause of action arose in August, when the indorser was discharged, tbe proof of tbe insolvency of [470] tbe maker of tbe note should have been confined to that time. Tbe proof of tbe maker’s insolvency was not necessary to establish a cause of action, but to show tbe extent or measure of tbe resulting damage. Tbe plaintiff was not bound to sue tbe maker immediately upon tbe maturity of tbe note, even though be were then solvent; and if tbe maker became insolvent thereafter, — at least, if within such time as tbe plaintiff might have reasonably allowed to pass without instituting legal proceedings,- — such insolvency would afford a basis for tbe measurement of damages resulting from tbe discharge of tbe indorser. Hence there was no error in receiving proof of the insolvency of tbe maker some four months after tbe maturity of tbe note. (Opinion published 56 N. W. Rep. 54.) Tbe defendant was responsible to the extent of tbe difference between tbe amount realized by tbe foreclosure sale — that is, the amount for which tbe plaintiff bid off the property, less tbe proper expenses to be deducted therefrom — and tbe amount of tbe note; and tbe fact that tbe land may have been worth more than tbe sum bid was not material. Borup v. Nininger, 5 Minn. 523, 552, (Gil. 417.) Tbe plaintiff was not charged with fraud or want of good faith in respect to tbe foreclosure. As a purchaser she was at liberty to fix tbe price for which she would take tbe property, subject to redemption. It may.be added, although we do not think tbal this is important, that when this action was tried tbe time for redemption bad not expired, and, if redemption should be made, plaintiff would not acquire title to tbe land, but would only have paid to her tbe amount for which she bad purchased, with interest. Order affirmed.