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Law School Case Brief

Newman & Snell's State Bank v. Hunter - 243 Mich. 331, 220 N.W. 665 (1928)

Rule:

A note given by a widow for the payment of a debt due from her deceased husband's estate, which estate is insolvent, is void in law without a new consideration; and such consideration will not be raised by an agreement on the part of the creditor that the note will be renewed from time to time after maturity. It is no sufficient consideration to support the promise of the surviving widow of a pauper in a promissory note, given by her shortly after her husband's death, to one of his creditors, that such demand should be discharged against the estate of her husband by virtue of her undertaking to pay it. Likewise, the execution, by a woman, of a note to take up one of her deceased husband, is without consideration if she received nothing from his estate. 

Facts:

The widow's husband died intestate. His estate was insufficient to pay his funeral expenses and the widow's allowance. The bank held the husband's note. Shares of his company's stock were held as collateral. When the husband died, that business was insolvent and was eventually placed in receivership. Thereafter, the widow gave the bank a note in return for the surrender of her husband's note. The bank subsequently commenced an action against the widow to collect the balance owed on her note. The trial court entered a judgment in favor of the bank. Defendant widow appealed from the trial court's judgment entered by a trial court. 

Issue:

Was the note issued by defendant widow for the payment of a debt due from her deceased husband’s insolvent estate valid?

Answer:

No

Conclusion:

The Supreme Court of Michigan noted that a note given by defendant widow in exchange for the discharge of her deceased husband's obligations was enforceable unless his estate was insolvent. However, when his estate was insolvent, the widow's transaction was without consideration and void. Therefore, the court found that the widow's defense of failure of consideration was sustained. Furthermore, with regard to the bank's purported surrender of the stock, the court noted that the transaction still lacked consideration given the company's insolvency.

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