Central Nat. Bank v. Doran
| Decision Date | 14 March 1892 |
| Citation | 18 S.W. 836,109 Mo. 40 |
| Parties | The Central National Bank v. Doran et al., Appellants |
| Court | Missouri Supreme Court |
Appeal from the Cooper Circuit Court. -- Hon. E. L. Edwards, Judge.
Affirmed.
Cosgrove & Johnson and J. G. Chandler for appellants.
(1) The deed of trust was valid as to Doran and his creditors, when it was given, and, unless the respondent has been injured by withholding it from the record, it cannot successfully attack its validity. The withholding the deed of trust from the record, and keeping its existence a secret, are not in themselves wrong. "It is only when they become a part of a policy whose design is evil that such measures fall under the censure of the law." Walsh v. Chambers, 13 Mo.App. 301; Berry v. Ins. Co., 2 Johns. 606; Story's Equity Jurisprudence [12 Ed.] secs. 390, 391 393. The English doctrine is stated, in cases of negligence in failing to record title papers, to be that a grantee "cannot lose such preference and be postponed, unless by himself, or by his agents, he is chargeable with fraud or with gross negligence -- mere negligence will not do." 2 Pomeroy on Equity, sec. 732. (2) The respondent is only a "creditor at large" of Doran's. It has been the settled law of this state that the title of a bona fide purchaser or mortgagee under a deed or mortgage, not recorded, "is good against creditors at large." Sappington v. Oeschli, 49 Mo. 244, and cases cited; Parks v. Bank, 97 Mo. 130. (3) The burden was upon the respondent to prove that the failure to record the deed of trust at, or about, the time it was delivered was as to it fraudulent, and as fraud will not be presumed, when all the facts in the case consist as well with honesty and fair dealing as they do with the intention to defraud, and, as the preponderance of the evidence in the case at bar was entirely consistent with honest dealings and honorable business methods, the judgment of the lower court shall be reversed. It was error in the court below to presume fraud which was clearly done in this case. Henderson v. Henderson, 55 Mo. 535; Ames v. Gilmore, 59 Mo. 537; Rumbolds v. Parr, 51 Mo. 592; Ryan v Young, 79 Mo. 30. (4) The respondent is estopped by the agreement of March 20, 1887, from prosecuting the suit against Bartle. By the terms of said agreement it is provided that said Bartle shall not be liable for a greater sum than $ 5,000, it being the intention thereof that said Bartle shall make good to said bank one-half of any loss that it may sustain, provided, however, that in no event shall he be bound to pay more than $ 5,000. State v. Potter, 63 Mo. 226; Quinlan v. Keiser, 66 Mo. 603; Galbreath v. Newton, 30 Mo.App. 380; Acton v Dooley, 74 Mo. 63; Guffey v. O'Reiley, 88 Mo. 418. (5) In the case at bar, Doran alone testified that it was agreed that the deed of trust was not to be recorded until be became of doubtful solvency. Benne v. Schnecko, 100 Mo. 250; McElroy v. Maxwell, 101 Mo. 294. (6) The fact that the deed of trust was not recorded, and that respondent became a creditor of Doran, relying upon his being the owner of unincumbered property, furnishes no ground for the support of this suit and decree. This was distinctly ruled by this court in Parks v. Bank, 97 Mo. 130; Benson v. Maxwell, 14 A. 161. Creditors are not within the recording acts, and are not entitled to complain of the failure to record a deed or mortgage. Davis v. Ownby, 14 Mo. 170.
Walker & Johnson and Draffen & Williams for respondent.
(1) A deed of trust or other incumbrance, which, by agreement, has been withheld from record in order that its existence may not be known, and the grantor's credit may not be impaired by reason of it, will be declared fraudulent at the suit of those induced to extend credit to the grantor in reliance upon the apparently unincumbered title to the property covered by the incumbrance, and in ignorance of such secret lien. Blennerhassett v. Sherman, 105 U.S. 100; Goldsby v. Johnson, 82 Mo. 602; Walsh v. Chambers, 13 Mo.App. 301; Hilderburn v. Brown, 17 B. Mon. 779; Bank v. Housman, 6 Paige, 526; Hilliard v. Cagle, 46 Miss. 309; Walton v. Bank, 13 Colo. 265; Steel v. Coon, 43 N.W. 411; Barker v. Barker's Assignee, 2 Woods, 87; Blackman v. Preston, 12 W. Rep. (Ill.) 817; Hildreth v. Sands, 2 Johns. Ch. 35; Coats v. Gerlock, 44 Pa. St. 43; Wait on Fraudulent Conveyances [2 Ed.] sec. 235. (2) The plaintiff when this bill was filed was a judgment creditor of Doran, and its judgment was a lien upon these lands. Plaintiff had the right to maintain this action to declare the deed of trust fraudulent, and the lands subject to said judgment. Freeman on Executions [1 Ed.] sec. 430; Cornell v. Railroad, 22 Wis. 261; Clarkson v. DePeyster, 3 Paige Ch. 320; Lionberger v. Baker, 88 Mo. 447; Bobb v. Woodward, 50 Mo. 95; Ryland v. Callison, 54 Mo. 513; Zoll v. Soper, 75 Mo. 460; Shaw v. Dwight, 27 N.Y. 244. (3) There is no estoppel in this case. First. No such issue is tendered by the pleadings. An estoppel in pais must be pleaded. Bray v. Marshall, 75 Mo. 327; Noble v. Blount, 77 Mo. 235; Hammerslough v. Cheatham, 84 Mo. 13. Second. This court, even in an equity case, will not consider a defense alleged to be shown by the evidence, but which is not within the issues made and tendered by the answer. Hammerslough v. Cheatham, 84 Mo. 13; Reed v. Bott, 100 Mo. 62; Crowe v. Peters, 63 Mo. 429; Newham v. Kenton, 79 Mo. 382.
IN BANC.
The plaintiff, a judgment creditor of defendant Doran, instituted this proceeding in equity to postpone to the lien of plaintiff's judgment the lien of a certain deed of trust on land lying in Cooper county, executed by Doran to the defendant Bartle, and to declare such deed fraudulent. On hearing the evidence the court below entered a decree, as prayed by plaintiff, making the lien of the latter prior to that of the deed of trust.
Summarized, the facts upon which the decree is based are these: Doran, in the year 1885, and long prior thereto, had been a large live-stock dealer, and the largest shipper of cattle and hogs in that section of the state. He resided in Cooper county on a large farm, worth over $ 20,000, and also owned a considerable farm in Morgan county, as well as a large amount of personal property, which, with his landed estate, made his financial standing good in the vicinity of his business ventures.
The defendant Bartle was Doran's brother-in-law, resided in St. Louis, and to him Doran's shipments of live stock were usually made.
On December 22, 1885, Doran was indebted to the defendant, the State Bank of St. Louis, in the sum of $ 12,800, and Bartle was indorser. Doran was in St. Louis at this time, and it was proposed to him in St. Louis about that time that he execute a note for $ 20,000 to Bartle, to cover the amount he then owed said bank and for future advances, Bartle to indorse the note to the defendant bank, and Doran to execute a deed of trust upon his Cooper county farm, and another upon his Morgan county land, to secure said note. The defendant bank and Bartle knew that Doran was then an extensive trader, and that he intended to continue to carry on his business of buying and shipping stock. Doran, who was called as a witness by the plaintiff, testified that he told Bartle and the president of the defendant bank that he was unwilling to give the deeds of trust, if they were to be recorded, because to do so would impair his credit at home. He consented to execute them upon the distinct understanding and agreement, as he states, with both Bartle and the president of the bank, that they should be withheld from the record, so that his credit might not be impaired by reason of them; that, if there was any danger of trouble, or if he saw that there was any likelihood of their losing anything, or of his becoming insolvent, he would notify them in time to have the deeds put upon record. With this agreement he executed one deed of trust upon his farm in Cooper county, and another upon his Morgan county land, to secure the $ 20,000 note, which was drawn up, signed by Doran, indorsed by Bartle, and delivered to defendant bank on the twenty-third or twenty-fourth of December, 1885. After these deeds of trust, covering all of Doran's real estate, were executed to secure this note for $ 20,000, while his real indebtedness represented by said trust deeds was then only $ 12,800, they were laid aside unrecorded, and their existence was only known to Doran and the parties who held said secret liens. He then, with the knowledge of said parties, continued to carry on his business of buying and shipping stock as before, and the existence of said deeds of trust being unknown his credit was unimpaired.
Doran had been a customer of the Central National Bank, the plaintiff herein, for a number of years. At the time these deeds of trust were executed, that bank held notes which it had discounted for him. When these secret liens were created he could have paid all of his debts. As the notes held by the plaintiff bank became due, the defendant Doran wanted to take them up by making new discounts, the new notes having longer time to run; and also wanted the bank to let him have more money. The officers of the bank, after inquiry, learned that his land in Cooper county was unincumbered; he was in full credit, and upon the faith thereof, during the year 1886, while these deeds of trust were being withheld from record, so as not to impair his credit, the plaintiff let him have more money, and permitted him to make new discounts in lieu of his old notes. Said bank advanced him more money, and accepted renewal notes having longer time to run, and extended him the same accommodations as he had been accustomed to receive, the bank being in entire...
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