First Nat. Bank v. Guardian Trust Co.

• Citation: 86 S.W. 109,187 Mo. 494
• Parties: FIRST NAT. BANK OF KANSAS CITY v. GUARDIAN TRUST CO.
• Decision Date: 16 March 1905
• Court: United States State Supreme Court of Missouri

86 S.W. 109

187 Mo. 494

FIRST NAT. BANK OF KANSAS CITY v. GUARDIAN TRUST CO.

Supreme Court of Missouri.

March 16, 1905.

INDORSEMENT OF NOTE—CO-MAKER OR SURETY— CORPORATE POWERS—ULTRA VIRES AS DEFENSE.

1. Defendant was properly held to be a co-maker of a note where it indorsed its name on the back of the note before delivery to the payee, and there was no evidence of any agreement or understanding that it should be considered merely an indorser.

2. The facts that one count in the complaint in an action on a note sought recovery against defendant as indorser, and that the note was protested for nonpayment before action, are insufficient alone to show an understanding between the parties that the indorsement of defendant's name on the back of the note before delivery to the payee should be considered the act of an indorser instead of co-maker.

3. A trust company organized under Rev. St. 1899, § 1427, authorizing such companies to act as agent or attorney in fact in the management of property, execute trusts, act as executor or guardian, guaranty the fidelity of persons or corporations holding places of trust, loan money on collateral security, buy and sell securities, etc., has power to execute a note for the benefit of a railroad company which it was financing.

4. Where defendant corporation executed a note to enable the co-maker, a corporation it was financing, to obtain a loan, and the contract has been fully performed by the payee parting with the money, in an action on the note the defense of ultra vires is not availing, especially where the stockholders at a subsequent meeting "fully ratified" the acts of defendant's officers.

In Banc. Appeal from Circuit Court, Jackson County; J. H. Slover, Judge.

Action on a note by the First National Bank of Kansas City against the Guardian Trust Company. From a judgment for plaintiff, defendant appeals. Affirmed.

This suit was commenced in the Jackson county circuit court. Its origin may thus be briefly stated:

The Kansas City Suburban Belt Railroad Company is a corporation organized under the railroad laws of Missouri on the ____ day of January, 1887, for the purpose of building and operating a belt railroad around Kansas City. About two years afterwards, namely, in February, 1889, the Guardian Trust Company was organized under the general trust company law of Missouri, as it then existed, as the Missouri, Kansas & Texas Trust Company. Afterwards this name was changed to its present name, Guardian Trust Company. Mr. E. L. Martin was the president of the Kansas City Suburban Belt Railroad Company from the time of its incorporation continuously until after the time in which the transactions in controversy were had; and soon after the organization of the Guardian Trust Company he became the vice president of the trust company, and continued in such position until after the transactions involved in this controversy were had. On the 22d of September, 1899, long after the Kansas City Suburban Belt Railroad was finished and put in operation, Mr. Martin, as president of the railroad company, went to the plaintiff bank, and made application to Mr. Swinney, its president, to borrow $25,000 for the railroad company. Mr. Swinney asked him what collateral he wanted to give, and Mr. Martin replied that he did not have any at that time. Swinney then told him that he could not make the loan or take the note of the railroad company without collateral or security. It was then suggested by Mr. Martin or Swinney that the Guardian Trust Company should go on the paper as surety, and Swinney, for the bank, consented to make the loan to the railroad company if the Guardian Trust Company would become surety on or indorse the paper. In pursuance of this understanding between Martin, representing the railroad company, and Swinney, representing the bank, the following note was made and executed by the railroad company, and indorsed by the Guardian Trust Company, and delivered to the bank, and $25,000 was deposited by the bank to the credit of the Kansas City Suburban Belt Railroad Company. This deposit was made by the plaintiff in its own bank. The note was as follows:

"$25,000.00. Kansas City, Mo., Sept. 22, 1899. Ninety days after date, for value received, we promise to pay to the order of the First National Bank, Twenty-Five Thousand and no-100 Dollars at its office in Kansas City, Mo., with interest from maturity at the rate of eight per cent per annum. Kansas City Suburban Belt R. R. Co., by E. L. Martin, Prest."

Indorsed: "Guardian Trust Company, by E. L. Martin, Vice President."

When the note became due, it was not paid, but was renewed by giving another like note; the only difference being that the indorsement of the trust company in the latter case was signed by F. B. Wilcox, assistant treasurer, instead of E. L. Martin, vice president of the trust company. When this second note matured it was not paid, but was again renewed by giving another similar note. The last-mentioned note (being the one sued on in this action) differed from either of the two former notes only in that it ran for 60 instead of 90 days, and the name of the Guardian Trust Company was signed by F. B. Wilcox, manager, and is as follows:

"$25,000.00. Kansas City, Mo., Mch. 26, 1900. Sixty days after date, for value received, we promise to pay to the First National Bank or order, Twenty-five Thousand Dollars at First Nat'l Bank, K. C. Mo., with interest after maturity at 7 per cent. per annum until paid. Kansas City Suburban Belt R. R. Co., by E. L. Martin, Prest. No. 34348. Due May 28, 1900."

Indorsed: "Guardian Trust Company, by F. B. Wilcox, Manager."

The $25,000 borrowed by the Belt Railroad Company was deposited to its credit in plaintiff bank, and was all checked out by the railroad company to pay its own obligations. The Guardian Trust Company never in any way received a dollar of the money.

On the 6th day of September, 1900, the said railroad company was placed in the hands of receivers by the United States Court at Kansas City, and Mr. Swinney, president of the plaintiff bank, was appointed as one of the receivers. Afterwards, to wit, on the 19th day of September, 1900, the plaintiff instituted this suit on the note last above mentioned. The suit was brought against the defendant, the Guardian Trust Company, alone; the Kansas City Suburban Belt Railroad Company not being made a party defendant.

The petition contains two counts. The first alleges that the Guardian Trust Company was the maker of said note, and seeks to recover the amount of the note from it as maker. The second count of the petition alleges that the Guardian Trust Company was the indorser of the note, and that the same had been protested for nonpayment, and seeks to recover from the Guardian Trust Company as indorser. The answer to the first count admits the incorporation of the plaintiff and defendant, but denies that the defendant made, executed, or delivered the note sued on to the plaintiff. The answer further alleges that the Kansas City Suburban Belt Railroad Company made the note sued on for so much money then or theretofore borrowed by the Kansas City Suburban Belt Railroad Company from the plaintiff, and that the defendant, the trust company, indorsed the same simply as an accommodation for the Belt Railroad Company, and without any consideration whatever moving to it; that the defendant did not then or at any other time receive any part of the consideration for which said note was given, but that the entire consideration thereof, to wit, the $25,000 in money borrowed by the Belt Railroad Company from the plaintiff, was received by the said Belt Company, and that the defendant's connection with the said promissory note was and is nothing more than that of an accommodation indorser, and that all of said facts were well and fully known by the plaintiff, and so understood by it, at and prior to the execution of the said note by the Belt Company, and the indorsement thereof by the defendant; that the defendant was incorporated and organized as a trust company under and by virtue of article 6 of chapter 21 of the Laws of the state of Missouri, as found in the Session Laws of said state of the year 1885, at pages 103 and 107, approved March 20, 1885, and as amended by an act of the Legislature of said state approved March 31, 1887 (Acts 1887, p. 116); that the defendant, under the laws of the said state of Missouri, and under its charter and articles of association, had no authority or power to indorse said promissory note as accommodation indorser, or otherwise become surety for the Kansas City Suburban Belt Railroad Company thereon; and that the said indorsement of the defendant's name on said note was and is ultra vires, and without and beyond the powers of the defendant, all of which was well known to the plaintiff at the time of the delivery of the said promissory note. The answer to the second count of the petition admits that the Kansas City Suburban Belt Railroad Company made the note sued on, and that the said note was delivered to plaintiff with the name of the defendant indorsed thereon by F. B. Wilcox, defendant's manager, but denies all of the other allegations in the said second count of the petition. For further answer to the second count, the answer alleges that the Kansas City Suburban Belt Railroad Company made, executed, and delivered the note sued on to the plaintiff for so much money then or theretofore borrowed by the said railroad company from the plaintiff, and that the name of the trust company was indorsed thereon simply as an accommodation for the said Belt Railroad Company, and without any consideration whatever; that the defendant did not then or at any other time receive any part of the consideration for which said note was given, but that the entire consideration thereof, namely, the $25,000 so borrowed by the said Belt Railroad Company from the plaintiff, was received by the said Belt...