Buder v. Denver Nat. Bank, 13047.

Citation151 F.2d 520
Decision Date14 November 1945
Docket NumberNo. 13047.,13047.
PartiesBUDER et al. v. DENVER NAT. BANK
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Langdon R. Jones, of Kennett, Mo., for appellant Oscar E. Buder.

Taylor Sandison, of St. Louis, Mo., for appellants Gustavus A. Buder and another.

Thomas S. McPheeters, of St. Louis, Mo. (Bryan, Cave, McPheeters & McRoberts, of St. Louis, Mo., on the brief), for appellee.

Before GARDNER and THOMAS, Circuit Judges, and MILLER, District Judge.

GARDNER, Circuit Judge.

This is an appeal by Gustavus A. Buder and Oscar E. Buder individually and as copartners doing business under the firm name and style of Buder & Buder, from a judgment awarding appellee possession as pledgee of 3,500 shares of the common capital stock of Burroughs Adding Machine Company out of the remainder interest in 28,250 shares of such stock bequeathed to G. A. Franz under the will of his deceased father, Ehrhardt D. Franz, and decreeing that Oscar E. Buder and the partnership of Buder & Buder are estopped to assert that appellee's right to possession of said 3,500 shares is inferior or in any way subsequent or subordinate to their respective rights to possession of said stock, and also decreeing that appellee is entitled to hold said stock as collateral security for an indebtedness due it from G. A. Franz, deceased, in the principal amount of $32,749.87, with interest, in accordance with the terms of the notes evidencing such indebtedness and the agreements therein contained, and to apply or dispose of the same in accordance with such terms. The parties will be referred to as they were designated in the trial court.

The action resulting in this judgment was brought by the plaintiff bank to establish and enforce an equitable lien as against Oscar E. Buder and the firm of Buder & Buder in the 3,500 shares of stock of the Burroughs Adding Machine Company. It was the claim of plaintiff in the trial court, and it so contends here, that its lien on said stock is superior in equity to the liens claimed by the defendants because by their conduct they have been estopped as against plaintiff to assert any claim to this stock until after plaintiff's claim has been fully satisfied. This claim is based upon the contention that defendants by their conduct induced plaintiff to accept an order on the trustees of the Franz estate for the delivery to it of 3,500 shares of this stock as collateral to its loans, by the representation or assurance that such 3,500 shares were available and that its loans would be protected by such order, and that relying upon such assurance plaintiff postponed the foreclosure of liens upon similar stock which it already held as collateral, at a time when such foreclosure would have fully liquidated its loans.

An understanding of the issues makes it necessary to give some genealogy of the property involved.

Ehrhardt D. Franz died in 1898, leaving a will which provided for a life estate in his widow, Sophie Franz, with remainder over to his ten children, to be divided among them in equal shares. In 1909 Sophie Franz executed a trust instrument by which she conveyed to one of her sons, G. A. Franz, and Gustavus A. Buder, as trustees, the property received by her from her deceased husband. This instrument specifically provided that the trustees should employ the law firm of Buder & Buder as their counsel, and that firm has in fact continuously represented the trustees. The instrument also provided that Oscar E. Buder should become successor trustee in the event of any vacancy. Among the assets devised by Ehrhardt D. Franz were 210 shares of stock of the American Arithmometer Company, which was exchanged for Burroughs Adding Machine stock, which in turn was "split" as a result of stock dividends, and at the time of the death of Sophie Franz in 1930, there were in the hands of the trustees as trust property 282,500 shares of Burroughs Adding Machine Company stock, of which G. A. Franz, one of the ten children, was entitled to receive 28,250 shares. The named trustees continued to hold this stock, and proceedings for its distribution were pending in the United States District Court of St. Louis, Mo., throughout the period involved in the present controversy.

G. A. Franz was engaged in the development of mining properties in Colorado and became a borrower from the plaintiff bank. Shortly prior to April 10, 1939, his indebtedness to the bank had reached a total of $67,000, represented by several notes secured by the pledge as collateral of 5,333 shares of Burroughs Adding Machine Company stock. On that date the market price of this stock had materially fallen, and even prior to that date the bank had become greatly disturbed as to the sufficiency of the collateral security of the Franz loan and Franz was being importuned to furnish additional security. On March 26, 1939, Franz wrote the bank, explaining that because of his illness he would not be able to get back to St. Louis to get the 3,500 shares of Burroughs stock to be distributed to him; that he had had a wire from his attorney (Oscar E. Buder), advising that the litigation which had been holding up distribution of the estate had been decided and that there was no reason why the entire estate could not be distributed as soon as he got back there; that if the market continued to drop he would have his St. Louis attorney send the bank additional collateral. On April 3, 1939, he again wrote the bank, saying that he was not strong enough to leave immediately for St. Louis but that if the market did not show strength he would phone St. Louis and have his attorney send the bank additional collateral. Just prior to April 10, 1939, Franz talked with Oscar E. Buder, his attorney, over the telephone, and as a result of that conversation on April 10, 1939, Oscar E. Buder wrote the plaintiff bank as follows: "There is to be a partial distribution of the Franz Trust as soon as the mechanics thereof can be arranged wherein Mr. G. A. Franz will have clear 3500 shares of stock of the Burroughs Adding Machine Company, which he has directed me to notify his co-trustee is to be delivered to me to be sent to you as additional collateral for his loan. I feel safe in assuring you that his loan is protected by the above direction."

This letter Oscar E. Buder showed to his brother and law partner, Gustavus A. Buder, a few days after it had been written. Gustavus A. Buder did not take the witness stand. The bank, relying on this letter of April 10, 1939, refrained from exercising its right to sell out the Franz collateral then held by it, but on the contrary made him a new loan. Shortly prior to May 19, 1939, Franz, at the request of the bank, executed an order on the trustees to deliver 3,500 shares of stock to Oscar E. Buder, to be forwarded to the bank. This order was duly received by Oscar E. Buder who endorsed thereon, "The above instructions acknowledged by me," and returned the duplicate copy to the bank.

At the time Oscar E. Buder wrote his letters of April 10, 1939, and June 6, 1939, to the bank, and at the time he acknowledged the order dated April 10, 1939, directing the trustees to deliver 3,500 shares of the Burroughs stock to Oscar E. Buder for delivery to the bank, G. A. Franz had assigned 26,750 shares out of the 28,250 shares which he was entitled to receive, as collateral security. He had sold and assigned 1,000 shares of this stock to H. C. Becker, and 1,500 shares of the stock had been impounded by order of the United States District Court prior to 1939 as security for the payment of attorney fees chargeable against said stock. These assignments of stock to secure obligations of Franz are as follows:

                      Name                    Date       Principal     No. Pledged    Due 4/10/39
                  Buder & Buder            12/31/33    $ 35,116.64        2,250       $ 45,772.82
                  Buder & Buder            12/31/33      21,483.91        1,250         27,923.28
                  Buder & Buder            12/31/33      27,513.46        1,500         35,319.83
                  Buder & Buder            12/31/33      14,544.58        1,000         18,683.10
                  Buder & Buder            12/31/33      26,296.35        1,500         34,412.28
                  Buder & Buder             7/11/31      25,000.00        2,500         36,250.00
                  Buder & Buder             7/11/31      10,000.00        1,000         14,255.00
                  Buder & Buder             4/10/31      30,000.00        3,000         44,430.00
                  Oscar E. Buder            3/16/31      30,000.00        3,000         44,400.00
                  E. A. Buder              10/21/31       5,000.00        1,000          5,525.00
                  A. W. Wenger, Trustee    12/15/30      30,000.00        3,000         43,220.00
                  Pontiac Realty Co.        2/ 1/31      30,000.00        3,000         46,775.00
                  G. A. Buder              12/31/33      16,105.00        1,500         21,178.07
                  A. U. Simmons             8/24/38      10,000.00        1,250         10,000.00
                                                       ___________       ______       ___________
                  Total                                $311,059.74       26,750       $428,144.38
                

Adding to the 26,750 shares pledged, the 1,000 shares sold to H. C. Becker and the 1,500 shares impounded for litigation expenses, make a total of 29,250 shares, or 1,000 shares more than he was entitled to. Oscar E. Buder had knowledge of all these assignments, with the possible exception of the assignment to A. U. Simmons representing 1,250 shares, and he knew that if a total distribution should be made only 28,250 shares would be available for distribution to Franz, of which 28,000 shares had already been pledged.

G. A. Franz died July 30, 1939. He had pledged to plaintiff 5,333 shares of Burroughs Adding Machine Company stock other than that here involved, which plaintiff sold in October, 1940, for $8 per share, and after applying the proceeds of sale to the debt of Franz, there was a balance due the plaintiff of $32,749.87 as of October 20,...

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11 cases
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    • January 7, 1949
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