Mercantile-Commerce Bank & Trust Co. v. Kieselhorst Co.

• Decision Date: 01 July 1942
• Docket Number: 37619
• Parties: Mercantile-Commerce Bank & Trust Company, a Corporation, v. Kieselhorst Company, a Corporation, Edwin A. Kieselhorst and Wallace W. Kieselhorst, as Trustees for said Kieselhorst Company, Appellants
• Court: Missouri Supreme Court

164 S.W.2d 342

350 Mo. 30

Mercantile-Commerce Bank & Trust Company, a Corporation, v. Kieselhorst Company, a Corporation, Edwin A. Kieselhorst and Wallace W. Kieselhorst, as Trustees for said Kieselhorst Company, Appellants

No. 37619

Supreme Court of Missouri

July 1, 1942

Rehearing Denied July 28, 1942. Motion to Transfer to Banc Overruled September 8, 1942.

Appeal from Circuit Court of City of St. Louis; Hon. Ernest F Oakley, Judge.

Affirmed.

Goodbar Ferriss & Hall and Henry T. Ferriss for appellants.

(1) Upon the filing of the amended answer asking for equitable relief, the case was transferred to the equity division of the circuit court and tried as in equity before the judge as chancellor. Pitts v. Pitts, 201 Mo. 356; Hubbard v. Slavens, 218 Mo. 598. (2) Upon appeal to this court in an equity case, this court will review all the evidence and reach its own conclusions as to the weight and effect thereof, practically trying the case de novo and entering such judgment as it considers proper. Scott v. Cowen, 274 Mo. 398; Friedel v. Bailey, 329 Mo. 22, 44 S.W.2d 9; Barlow v. Scott, 85 S.W.2d 504; Fullerton v. Fullerton, 345 Mo. 216, 132 S.W.2d 966; Wrigley v. Wrigley, 345 Mo. 207, 132 S.W.2d 989; Cooper v. Cook, 148 S.W.2d 512. (3) An illegal sale of collateral by a pledgee does not destroy the pledge or the pledgor's equity of redemption. Pledgor may sue in equity to set aside the sale and redeem the pledged collateral and obtain an accounting and a money judgment. Byrne v. Carson, 70 Mo.App. 126; Smith v. Becker, 192 Mo.App. 597; Hagan v. Continental Bank, 182 Mo. 319; Neal v. Heinrichs, 259 S.W. 492; State ex rel. Shull v. Liberty Bank, 331 Mo. 386, 53 S.W.2d 899; Fowle v. Ward, 113 Mass. 548, 18 Am. Rep. 534; Pierce v. Natl. Bank of Commerce, 268 F. 487; Satterwhite v. Harriman Natl. Bank & Trust Co., 13 F.Supp. 489; same 13 F.Supp. 493; Treadwell v. Clark, 73 A.D. 473; same, 114 A.D. 493; same, 190 N.Y. 51; 12 Fletcher, Cyc. Corps., sec. 5673. (4) The note in suit was, in legal effect, a six months' time note, because: (a) The phrase in its left-hand corner, "Due October 15, 1932," written in longhand, was an integral part of the note and therefore part of the contract, and must be given full effect; Mo. Pac. Rd. Co. v. Levy, 17 Mo.App. 501; Black v. Epstein, 93 Mo.App. 459; Farmers' Bank v. Siemers, 210 Mo.App. 247, 242 S.W. 417; Scholbe v. Schuchardt, 292 Ill. 529, 13 A. L. R. 247; Costello v. Crowell, 127 Mass. 293, 34 Am. Rep. 367; Iron City Natl. Bank v. McCord, 139 Pa. 52, 23 Am. St. Rep. 166; Heywood v. Perrin, 10 Pick. 228, 20 Am. Dec. 518; Franklin Savs. Institution v. Reed, 125 Mass. 365; Barron v. Boynton, 15 A.2d 191. (b) This clause in the note, being written in longhand, and being inconsistent with the printed language in the note, prevails over the printed language and controls the interpretation to be given to the instrument and the trial court erred in not so ruling. This is true both under our Negotiable Instruments Law and under the Law Merchant. Sec. 3033, R. S. 1939; 7 Am. Jur., p. 816, sec. 52; Summers v. Hibbard, 153 Ill. 102, 46 Am. St. Rep. 872; McReynolds v. Mtge. & Acceptance Corp., 13 F.2d 313; Whittier v. First Natl. Bank, 73 Colo.Supp. 153; Acme Coal Co. v. Northrup Natl. Bank, 23 Wyo. 66, L. R. A. 1915D, 1084; First Nat. Bank v. Greenlee, L. R. A. 1918D, 224; Smith v. Williams, 15 Tenn.App. 613. (5) In case of doubt or uncertainty as to the meaning of a note or pledge agreement prepared by the pledgee, the instrument will be construed strictly against the pledgee and in favor of the pledgor. 49 C. J. 920, sec. 51; 17 C. J. S. 751-754, sec. 324; Dibert v. D'Arcy, 248 Mo. 617; State ex rel. Shull v. Liberty Bank, 331 Mo. 386, 53 S.W.2d 899; Hornsby v. Knorp, 207 Mo.App. 302, 232 S.W. 776; Garrett v. Bank of Chelsea, 211 Mo.App. 238, 241 S.W. 87; Croghan v. Savings Trust Co., 85 S.W.2d 239; Gillet v. Bank, 160 N.Y. 549; Van Sandt v. Hanover Natl. Bank, 129 F. 127; Hanover Natl. Bank v. Suddath, 215 U.S. 110. (6) In case of ambiguity in the terms of a written instrument, parol evidence is admissible to prove the real intent of the parties, and the court erred in sustaining the plaintiff's motions to strike out the testimony of the defendant company's president, E. A. Kieselhorst. Bank of Commerce v. Flanagan, 268 Mo. 547; Haseltine v. Farmers Mutual, 240 S.W. l. c. 817; Baptiste Tent & Awning Co. v. Uhri, 129 S.W.2d 9; Finch v. Heeb, 231 Mo.App. 591, 107 S.W.2d 962; Bertig Smythe v. Bonsack Lbr. Co., 112 Mo.App. 259; Scholbe v. Schuchardt, 292 Ill. 527, 13 A. L. R. 247. (7) Even if the clause "Due October 15, 1932," be ignored, the note was not by its terms a demand note, but a six months' note, subject to a prior demand. Brown v. Maguire, 101 S.W.2d 41; Boyd v. Buchanan, 176 Mo.App. 56; Shapleigh Hdw. Co. v. Spiro, 141 Miss. 38, 44 A. L. R. 393. (a) If it was such a note, when signed and delivered to the bank, a subsequent oral agreement was made the following day to carry the note for six months, without demand for payment or collateral. 22 C. J. 1273; Brown v. Bowen, 90 Mo. 184; Fisher v. Stevens, 143 Mo. 181. (b) If it was such a note, then the right to make a prior demand could be verbally waived and was waived in this case by the bank officer's verbal agreement to carry the loan for six months, which was relied on by the Kieselhorst Co. to its injury, thus creating an equitable estoppel against a later demand. 21 C. J. 1142; Jones Store Co. v. Dean, 56 F.2d 110; Faxton v. Faxon, 28 Mich. 159; Greer v. Bank, 128 Mo. 559; Byrne v. Carson, 70 Mo.App. 126; Van Sant v. Austin, 221 Mo.App. 1096, 295 S.W. 506; Swinney v. Modern Woodmen, 96 S.W.2d 655. (8) As between the original parties to a promissory note, the maker may prove by parol evidence that by reason of fraud the written instrument does not express the real agreement between the parties. Fraud is not merged into the written agreement. 22 C. J. 1215; Natl. Bank of Commerce v. Laughlin, 305 Mo. 8, 264 S.W. 706, 716; Bunch v. Phillips, 79 S.W.2d 785. An intentional misrepresentation of one's present purposes, thoughts and plans, for the purpose of misleading another has the same legal effect as a misrepresentation of present fact and is a sufficient basis of fraud. 26 C. J. 1093; Wendell v. Ozark Orchard Co., 200 S.W. 747; Judd v. Walker, 215 Mo. 312; Stonemets v. Head, 248 Mo. 243; State ex rel. v. Daues, 316 Mo. 474, 290 S.W. 425; Metropolitan Pav. Co. v. Brown-Crummer Co., 309 Mo. 638, 274 S.W. 815. (9) A pledgee is a trustee and must use the utmost good faith and a sound discretion in order to realize the highest amount for collateral at a foreclosure sale and must not sacrifice same. Laclede Natl. Bank v. Richardson, 156 Mo. 270; Hagan v. Bank, 182 Mo. 319; Dibert v. D'Arcy, 248 Mo. 617; Haake v. Union Bank, 54 S.W.2d 459; West v. Axtell, 322 Mo. 401, 17 S.W.2d 328; Cont. & Coml. Bank v. Ricker, 330 Mo. 75, 49 S.W.2d 20. (10) Stock Exchange quotations are not always proof of the reasonable value of property, and were not under the abnormal and extreme conditions existing in June, 1932. Sale of this collateral by offering all of same at 12 o'clock noon on the stock exchanges "at the market" on June 20, 1932, amounted to a sacrifice of the collateral and an abuse of the pledgee's power and discretion. Cases cited under Point (9); Walter v. Duffy, 287 Fed, 41; Weed v. Lyons Petroleum Co., 294 F. 725; Heiner v. Crosby, 24 F.2d 191; In re Schuyler, 73 F.2d 241; Rogers v. Strong, 72 F.2d 455. (11) The judgment below should be reversed and the circuit court directed to enter a new decree setting aside said foreclosure sale and ordering the plaintiff to restore said collateral, or its value, plus dividends, to the defendant upon payment by the defendant of the amount found due on the $ 62,000 note, plus interest, after an accounting. The value of the collateral and the amount due on the note should be determined as of the date of the trial and, unless plaintiff restores the collateral in kind, defendant should be given a money judgment for the net amount due it, based on such accounting. Sedgewick on Damages (9th Ed.), sec. 508; Ferguson v. Comfort, 194 Mo.App. 423; Hagan v. Bank, 182 Mo. 319; Satterwhite v. Harriman Natl. Bank. & Tr. Co., 13 F.Supp. 493; Treadwell v. Clark, 73 A.D. 473; same, 114 A.D. 493; same, 190 N.Y. 51; Pierce v. Natl. Bank of Commerce, 268 F. 487; Fowle v. Ward, 113 Mass. 548, 18 Am. Rep. 534. (a) Rules recognized in other jurisdictions for measuring damages for conversion of stocks having a fluctuating value, examined and discussed. Sedgewick on Damages (9th Ed.), p. 991; 11 Fletcher, Cyc. Corps., sec. 5117; Romaine v. Allen, 26 N.Y. 309; Baker v. Drake, 53 N.Y. 211, 13 Am. Rep. 507; Wright v. Bank, 110 N.Y. 237, 6 Am. St. Rep. 356; Griggs v. Day, 158 N.Y. 1; Filler v. Creole Syndicate, 230 A.D. 509; Haywood v. Edwards, 4 N.Y.S. (2d) 699; Bank v. Reese, 26 Pa. 143; Learnet v. Paxson, 208 Pa. 602; Gervis v. Kay, 294 Pa. 518, 63 A. L. R. 297; Galigher v. Jones, 129 U.S. 193; In re Salmon Weed & Co., 53 F.2d 335; Dimrock v. U.S. Natl. Bank, 55 N. J. Law 296, 39 Am. St. Rep. 643; Glidden v. Mechanics' Bank, 53 Ohio St. 588, 43 L. R. A. 737. (b) Under any of the rules recognized in the adjudicated cases, the defendant will be entitled on an accounting to a substantial judgment against plaintiff, and the case should be reversed with instructions as to the proper basis of accounting to be followed in this case.

Thompson, Mitchell, Thompson & Young, Samuel A. Mitchell, Robert Neill, Jr., and Richard D. Shewmaker for respondent.

(1) The action of the plaintiff in selling the stock held as collateral security was in all respects lawful and proper. On conflicting evidence this court will defer to the decision of the lower court. Gorman v....