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FIRST NATIONAL BANK OF ST. CLOUD v. GEORGE LANG and Another

Minnesota Supreme Court1905-02-24No. Nos. 13,806—(216)
94 Minn. 261

Summary

Holding. The trial court properly struck the original answer as sham and frivolous because the defense of accommodation paper without consideration lacks legal sufficiency when the note was taken in the regular course of business before maturity, and the trial court did not abuse its discretion in denying the motion to file an amended answer. Judgment affirmed.

A bank sued to enforce a promissory note against the maker and a guarantor. The maker's original answer asserted that he signed the note solely as an accommodation to the guarantor, without consideration, and that the bank knew this when it took the note. The bank moved to strike this answer as sham and frivolous, supported by affidavits and letters from the maker acknowledging the debt and promising payment. The trial court granted the motion and struck the answer. The maker then sought to file an amended answer that was substantially similar but contained one alteration: it alleged the note was signed as an accommodation to both the bank and the guarantor, rather than only to the guarantor. The trial court denied this motion, entered judgment for the bank, and the maker appealed.

The court held that the original answer was properly struck because it lacked legal sufficiency as a defense. Although the maker claimed the note was accommodation paper given without consideration, this defense fails as a matter of law when the recipient took the note in the regular course of business before maturity—the benefit to the person accommodated constitutes sufficient consideration to support the maker's liability. The letters acknowledging the debt further undermined the general denial in the answer. The trial court also properly exercised its discretion in refusing to allow the amended answer, as permitting amendment after striking an answer as sham would not serve the interests of justice.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether an answer asserting accommodation paper and lack of consideration states a valid defense to a promissory note
  • Proper grounds for striking an answer as sham and frivolous
  • Trial court's discretion to deny leave to amend after striking an answer

Procedural posture

The maker appealed from the trial court's order striking his answer as sham and frivolous and denying his motion to file an amended answer, after which judgment was entered for the bank.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

JAGGARD, J.

This is an appeal from a refusal by the trial court to allow an amended answer to be filed in lieu of the original, which the court had stricken out as sham and frivolous.

The complaint sets forth a promissory note to respondent, signed by appellant, and guarantied and transferred to respondent by another defendant, named Clarke. The original answer, besides pleading the general issue, sets forth that the note was executed by appellant solely for the accommodation of said Clarke, and without consideration, and that these facts were well known to respondent at the time the note was transferred to it. This answer respondent moved to strike out as sham and frivolous, on affidavits denying said new matter in the answer, and setting forth that the note in suit was given as a renewal of the two other notes signed and delivered by the same parties, and that, after its maturity and frequent demands to pay, appellant wrote three letters acknowledging the debt, and promising to pay or arrange this note. The appellant filed a counter affidavit, stating at length a series of business transactions between him and Clarke relating to sale of Clarke’s horses by him, and to the payment of his1 indebtedness for them by his deposit with Clarke of notes received by him from the persons to whom he sold the horses. The court granted the motion to strike out the answer as sham and frivolous.

Thereupon appellant moved for leave to file an amended answer. The proposed amended answer pleaded the general issue, - alleged in greater detail the transactions between appellant and Clarke, and was in all other respects substantially the same as, and consistent with, the original answer, excepting in this: That it alleged that the note in suit was signed and executed by appellant solely for the accommodation of plaintiff and also of defendant Clarke, instead of for the accommodation of Clarke only, as set forth in the original answer. This difference does not affirmatively appear to have been called to the attention of the trial court, nor was it emphasized here. The court denied the motion, judgment was entered for plaintiff, and this appeal was then taken.

1. The legal sufficiency of defenses to an action to put a promissory note into judgment is ordinarily determined by demurrer, or some appropriate form of motion specifically directed thereto. The truth or falsity of such defenses is normally tried by a jury,- with full opportunity for producing, examining, and cross-examining witnesses. Courts properly refuse to try cases on affidavits. A motion to strike out an answer as sham and frivolous will therefore be granted only in extraordinary cases, in which the propriety and necessity of so doing is clear and free from doubt. Wright v. Jewell, 33 Minn. 505, 24 N. W. 299. And mere affidavits simply denying the facts alleged in the answer, and asserting their falsity, are insufficient foundation for such an order. City Bank v. Doll, 33 Minn. 507, 24 N. W. 300. But where the falsity of the essential facts of a pleading is certainly and indisputably shown, especially when they fail in legal sufficiency, the courts will not permit that pleading to delay or obstruct the administration of justice, but will, on motion, strike it out as sham and frivolous. Morton v. Jackson, 2 Minn. 180 (219); Barker v. Foster, 29 Minn. 166, 12 N. W. 460; Van Loon v. Griffin, 34 Minn. 444, 26 N. W. 601; Stevens v. McMillin, 37 Minn. 509, 35 N. W. 372; Dobson v. Hallowell, 53 Minn. 98, 54 N. W. 939.

The trial court properly granted the motion to strike out appellant’s answer. That answer contained a general denial. Therefore respondent could not demur, nor move for judgment on the pleadings. Its motion was a proper one. The letters of appellant show the falsity of the general denial, and establish the genuineness of the respondent’s •claim. He expressly admits them. The new matter set up in the answer — the explanatory statements of his affidavits — tends only to support the alleged defense that the note was executed without consideration and as accommodation paper, and it may be admitted that this was known to respondent. This does not make out a defense. No evidence to maintain it would have been received on the trial, as against the plaintiff, who took the note in the regular course of business before its maturity. A benefit accruing to the person accommodated is a •sufficient consideration to sustain the liability of the accommodation maker or indorser. Tourtelot v. Reed, 62 Minn. 384, 64 N. W. 928; Rea v. McDonald, 68 Minn. 187, 71 N. W. 11; 7 Cyc. 723; 2 Current Law, 1027, 1028; Wedge v. National (Colo. App.) 73 Pac. 873; Boughner v. Meyer, 5 Colo. 71; Hill v. Coombs, 93 Mo. App. 264. See also State v. Hayes (S. D.) 92 N. W. 1068. The answer was frivolous, within the test that, if true, it does not contain any defense to any part of the plaintiff’s cause of action, and its insufficiency as a defense is so glaring that the court can determine it upon a bare inspection, without argument. Nichols v. Jones, 6 How. Pr. 355.

2. The court properly exercised its admitted discretion in denying the motion to file an amended answer, which, if consistent with the original, did not set forth a defense, and which, if inconsistent, for that reason had no standing of its own, and justified the court’s refusal. “Admitting, without deciding, that the proposed amended answer was an improvement upon its predecessor, the court below did not abuse its discretion when it denied defendant’s motion for leave to amend, made after the original answer had been shown to be sham and false, and had been stricken out for these reasons.” Hertz v. Hartmann, 74 Minn. 320, 322, 77 N. W. 232. “Purely discretionary orders, under the rule universally adopted, are reviewable only upon the ground of an abuse of discretion.” An order concerning leave to amend pleadings is within this class. 2 Shipman, Pr. § 919, pp. 1151, 1152.

Judgment affirmed.