Rush v. First Nat. Bank, 645.

• Decision Date: 02 December 1895
• Docket Number: 645.
• Citation: 71 F. 102
• Parties: RUSH v. FIRST NAT. BANK OF KANSAS CITY.
• Court: U.S. Court of Appeals — Eighth Circuit

71 F. 102

RUSH v. FIRST NAT. BANK OF KANSAS CITY.

No. 645.

United States Court of Appeals, Eighth Circuit.

December 2, 1895

The first National Bank of Kansas City, Mo., the defendant in error, sued J. W. Rush, the plaintiff in error, in the circuit court of the United States for the district of Kansas, to recover the amount due on a promissory note which was executed by the defendant in the following form '$3780. Kansas City, Mo., Feby. 5, 1894.

'Sixty days after date, I promise to pay to the order of 1st Nat. Bank, Kansas City, Mo., thirty-seven hundred eighty 00/00 dollars, at its office in Kansas City, Mo., for value received, with 8 per cent. interest from maturity; and attached hereto, as collateral security, ten (10) shares of the capital stock of 1st Nat. Bank, Ness City, Kansas; also sixty-four (64) shares of the capital stock of 1st Nat. Bank of Dighton, Kansas,-- with full authority to said bank or its assigns to sell the same at public or private sale, without notice, on nonpayment of this note.

J. W Rush.'

The plaintiff bank alleged, in substance, that it had realized the sum of $740 by the sale of the collateral described in the aforesaid note, and that it had indorsed that amount as a credit on the note on June 29, 1894. It prayed judgment for the balance due on said note, together with accrued interest.

The defendant filed an answer to the complaint, which was adjudged insufficient, and thereafter an amended answer which was as follows: 'Comes now the said defendant, and for his amended answer herein, by leave of court first had says that he admits the execution and delivery of the promissory note in said petition described, and that the plaintiff is a corporation, and alleges that at the time of the execution and delivery of said note, and as a part of the same transaction, the defendant delivered to said plaintiff, as collateral security therefor, sixty-four (64) shares of the capital stock of the First National Bank of Dighton, Kansas, and ten (10) shares of the capital stock of the First National Bank of Ness City, Kansas, all of which shares were of the face value of one hundred dollars per share, and were fully paid up, and of the actual market value of seventy-four hundred dollars; that afterwards, on or about June 29, 1894, without having demanded payment of said defendant of said note, and without having given any notice of defendant to redeem said stock, or of the sale hereinafter mentioned, the said plaintiff a colored porter or janitor in the employ of said bank, for the sum of $740; that said sale was made privately, and without any effort to obtain a better price therefor, and that the same was grossly inadequate, and not the fair value of said stock, which is and was of the value of $7,400. And defendant alleges that the sale to and purchase by said Richard Allen was for the secret benefit and in the interest of said plaintiff, and said purchaser held the same as trustee for said plaintiff; that, after said pretended sale to said Richard Allen, said plaintiff and its said trustee, Richard Allen, though concealing such relation, caused and procured the stock of this defendant to be surrendered to the said several national banks of Dighton and Ness City, Kansas, and transferred on the books of said banks to the name of said Richard Allen, and caused new certificates of stock to be issued in the name of and to said Richard Allen, and the certificates of stock of this defendant so pledged to said plaintiff were canceled; that said plaintiff, from the time of said sale and the transfer and cancellation of the certificates of this defendant, and the issuance of said new certificates to said Richard Allen, claimed that the same belonged to said Richard Allen, free and clear of all claim of this defendant, and said Richard Allen has since said time claimed to have and to exercise complete and absolute ownership over the same, and has disposed of the same as his sole and absolute property, free and clear of all claim or right of this defendant; that by reason of the premises a tender of the amount of this defendant's debt, and a demand of said plaintiff and said Richard Allen, would have been unavailing and fruitless; that by reason of the promises said plaintiff has become liable to this defendant for the value of said stock certificates so pledged to it as collateral, and so converted to its use and benefit, as herein alleged, with interest at the rate of six per cent. per annum from June 29, 1894, which sum is now due and owing, and wholly unpaid. Wherefore, defendant prays judgment against said plaintiff for the sum of $7,400 with interest at six per cent. per annum from June 29, 1894, and that the same be set off against the claim of the plaintiff herein to the amount thereof, and for judgment for the balance over said plaintiff's claim, to wit, for $3,620, and for costs of suit, and for such other relief as may be proper. ' To the foregoing answer the plaintiff filed a general demurrer on the ground that the answer did not state facts sufficient to constitute a defense to the action, which demurrer the circuit court sustained. The defendant declined to plead further, whereupon a judgment was rendered in favor of the plaintiff for the sum of $3,307.81. The case has been brought to this court by a writ of error, which was sued out by the defendant.

Eldon J. Cassoday (C. N. Sterry, W. H. Vernon, and E. A. Austin filed brief), for plaintiff in error.

F. Dumont Smith, for defendant in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above, .

That the bank had no right to purchase the hypothecated stock in the manner alleged in the answer, nor in any other manner or form, admits of no doubt. Being the pledgee of the stock, it could not lawfully become a purchaser thereof at a sale made by itself. Easton v. Bank, 127 U.S. 532, 537, 8 Sup.Ct. 1297; Maryland Fire Ins. Co. v. Dalrymple, 25 Md. 242 265; Baltimore Marine Ins. Co. v. Dalrymple Id. 269,, 302; Stokes v. Frazier, 72 Ill. 428; Parsons, Cont. (7th Ed.) Sec. 120. This proposition is not controverted by counsel for the bank. It is conceded that the sale and purchase of the securities in the mode described in the defendant's answer was a tortious act....