Smith v. Becker
| Decision Date | 06 March 1916 |
| Citation | 184 S.W. 943,192 Mo.App. 597 |
| Parties | WILLIAM F. SMITH, Respondent, v. LOUIS H. BECKER and THE BRANDT INDEPENDENT MINING CO., Appellants |
| Court | Kansas Court of Appeals |
Appeal from Jackson Circuit Court.--Hon. E. E. Porterfield, Judge.
AFFIRMED.
Decree affirmed.
Jamison Hutchinson & Ostergard for appellants.
Chas M. Bush and R. W. Crimm for respondent.
--Plaintiff as the assignee of one Dana B. Cox, brought this suit in equity to have plaintiff declared to be the owner of 20,000 shares of stock in the Brandt Independent Mining Company, which stock plaintiff alleges Cox pledged to defendant Becker to secure a loan of $ 100; and which he, Becker, caused to be transferred upon the books of the company to himself without having any sale thereof made under said alleged pledge and without having taken any legal steps for the foreclosure of the same. The petition further prayed that defendant Becker be declared the trustee for the benefit of plaintiff and that title to said stock be divested out of defendant and be vested in plaintiff, and that the defendant, Brandt Independent Mining Company, be directed to issue a certificate to plaintiff for said stock and place said stock in plaintiff's name upon its books. Ancillary to the main object sought by the suit, the petition also prayed and obtained a temporary injunction restraining Becker from selling, mortgaging or disposing of said stock in any manner.
The petition also pleaded that the pledge of said stock was void for the reason that said loan from Becker to Cox was usurious in that an unlawful rate of interest was required and exacted.
The defendant Becker's answer admitted the existence of the defendant corporation, The Brandt Independent Mining Company, under the laws of Arizona with a capital stock of five million dollars divided into five million shares of the par value of one dollar each. Said answer further admitted that said Cox was the owner of 20,000 shares of said stock, and set up that on or about the 3rd day of September, 1909, said Cox made a conditional sale of said stock to Becker for $ 100 with the option of buying said stock back on or before fifteen days thereafter for $ 110, and if said Cox did not exercise that option within fifteen days after September 3, 1909, he agreed to forfeit all right, title and interest to said stock, all of which it was alleged, was shown by a written memorandum of agreement of said date between Cox and Becker, attached as Exhibit A. to said answer. (This memorandum of agreement is the same as the one relied upon by plaintiff to show a pledge of said stock for the loan of $ 100; so there is no dispute over the terms of this agreement.)
The answer further admits that defendant, after having waited a reasonable length of time after the expiration of said fifteen days, to-wit, until December 9, 1909, had said stock transferred to himself.
The answer of the defendant, The Brandt Independent Mining Company, after admitting its incorporation and capitalization as hereinabove stated, alleged that on or about the 3rd day of September, 1909, Cox was the apparent owner of 20,000 shares of the capital stock of said defendant, and that on the 9th day of December, 1909, the certificates therefor were surrendered duly endorsed and cancelled, and new certificates were issued to defendant Becker. The answer further alleged that said defendant corporation knew nothing further of the controversy between the plaintiff and Becker, had no interest therein, and asked that strict proof be required of plaintiff.
The reply denied that the stock was sold to Becker with an option of buying the same back at an increased price.
The findings and decree of the chancellor were for plaintiff. Defendants have appealed.
The original ownership of the 20,000 shares of stock by Cox is conceded by the pleadings. Becker's answer also concedes, in effect, that after waiting a reasonable time for Cox to take up the stock, he, Becker, had the stock transferred on the books of the corporation to his own name, and that no sale of the stock or foreclosure of Cox's rights therein was had. Whether the answer does this or not, Becker's evidence clearly shows that he made no sale of the stock but simply had it transferred on the books of the company to his own name and now has possession of the stock and claims it as his own.
It will be seen at once that the controlling question in the case is whether the agreement under which defendant Becker came into possession of said stock was a pledge as contended for by plaintiff, or was a conditional sale, as claimed by defendant.
Cox, offered as a witness in plaintiff's behalf, testified that shortly before September 4, 1909, he applied to one, Joseph F. Gaume, then secretary and treasurer of the Missouri Savings Bank, for a loan of $ 100; that Gaume did not lend him the money himself but got defendant Becker to agree to make the loan on 15,000 shares of said stock; that when he, Cox, went to Gaume with the stock to get the money, he had 20,000 shares with him and that he put up the whole 20,000 instead of the 15,000 Becker had agreed to accept. Gaume took the stock, and enclosed it in an envelope with a letter to Becker, and sent the office boy to the latter for the $ 100. The boy delivered the stock and the letter to Becker who gave the boy the $ 100 and he returned to Gaume and the money was turned over to Cox.
The letter accompanying the stock containing the terms of the transaction together with Cox's acceptance of said terms is as follows:
"Kansas City, Mo., September 4, 1909.
Friend Louis:
You will find inclosed 20,000 shares of Brandt Independent stock in the place of 15,000 shares. I made Cox put it all up to secure the loan of $ 100 and if he does not pay the same plus $ 10 interest on or before fifteen days from date, he agrees to forfeit all his right, title and interest to the same.
Please give the boy the check and oblige.
JOS. F. GAUME.
I accept the above contract for the loan of $ 100.
DANA B. COX.
As hereinbefore stated, the parties concede that the foregoing is the memorandum of agreement under which the stock was transferred from the possession of Cox to that of defendant Becker.
We are of the opinion that the transaction between the two, evidenced by the foregoing contract, was a pledge and not a conditional sale. Certainly this is true when the contract is considered along with the testimony of Cox and Becker concerning the circumstances surrounding the transaction and out of which it grew.
In the first place, if doubt exists whether a transaction is a conditional sale or a pledge, the doubt is resolved in favor of its being deemed a pledge. [Book v. Beasley, 138 Mo. 455, l. c. 463; Phillips v. Jackson, 240 Mo. 310, 144 S.W. 112; Bender v. Markle, 37 Mo.App. 234; Turner v. Brown, 82 Mo.App. 30.]
In the next place, the language of the contract shows it was a loan and not a sale, and accords with Cox's testimony that the original agreement was for 15,000 shares instead of 20,000. The letter to Becker from Gaume says he will find 20,000 shares There is nothing said about any present transfer of the title nor indeed of any transfer. It is spoken of as being put up to secure a loan of $ 100 for fifteen days, at which time it, together with $ 10 as interest, would be due. And Cox's acceptance reads: "I accept the above contract for the loan of $ 100."
Furthermore, the evidence shows that such was the intention of the parties. Not only does the contract show the transaction to be a loan with the stock pledged as security, but the evidence shows that it was a loan and not a sale Cox was seeking. As said by ELLISON, J., in Bender v. Markle, 37 Mo.App. 234; "The character of such transaction is ascertained by learning the intention of the parties, and is fixed at its inception and is not changed by lapse of time." Defendant seems to think that because there is no express promise in the contract on Cox's part to repay the $ 100, this prevents, or aids in preventing, it from being a pledge. But the law imposes the duty upon Cox to repay and hence there does not have to be an express promise on his part to that effect in order to create the relation of debtor and creditor between them the moment the contract went into effect and the money was paid over to Cox. It is not necessary that the duty to repay should be evidenced by a bond, covenant note or other security. [Brant v. Robertson, 16 Mo. 129, l. c. 143.] This case also holds that, in order to determine whether a transaction was a conditional sale or a mortgage, the courts will not only look to the writings but to all the circumstances of the contract.
In Bobb v. Wolff, 148 Mo. 335, l. c. 344, the Supreme Court lays down one prime test and several subordinate tests by which it may be determined whether a transaction is an absolute conveyance or a mortgage. The prime test is the "continued existence of a debt." The subordinate tests are: 1. The collateral agreement to pay money, which we say in this case the law implies from the fact that Cox obtained the money as a loan. 2. Grantor's liability to pay interest. 3. An application for a loan pending the transaction. 4. Was the conveyance, when executed, intended as a security for a debt? And as to the existence of the debt, it does not have to exist prior to the transaction, but if it arises from a loan made at the time of the conveyance evidenced by an agreement not discharged or settled by the conveyance, the transaction is a mortgage. [Book v. Beasly, 138 Mo. 455, l. c. 461.] The opinion in Sheppard v. Wagner, 240 Mo. 409, l. c. 433, quotes t...
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