Bank of Commerce v. Hoeber

• Decision Date: 23 December 1879
• Citation: 8 Mo.App. 171
• Parties: BANK OF COMMERCE, Appellant, v. GUSTAVUS HOEBER, Respondent.
• Court: Missouri Court of Appeals

8 Mo.App. 171

BANK OF COMMERCE, Appellant,

v.GUSTAVUS HOEBER, Respondent.

St. Louis Court of Appeals, Missouri.

Dec. 23, 1879.

1. In case of a composition, if the debtor, professing to deal equally with all, pays to some creditors a larger percentage than the agreement calls for, this is a fraud which vitiates the composition agreement; and in such a case the creditor may recover the original indebtedness, less the amount received under the composition, without rescinding the composition agreement.

2. Where the creditor delivered up the notes at the making of the agreement, an allegation that they were taken from the plaintiff's possession by the defendant's fraud sets up sufficient excuse of profert of the notes.

3 Where a defendant has obtained possession of, defaced, and retained a note executed by him, he is estopped from objecting that the note, when sued on, is not filed with the petition.

4. An allegation of loss or destruction of a note is not inconsistent with a recovery upon the contract.

APPEAL from the St. Louis Circuit Court.

Reversed and remanded.

MYERS & ARNSTEIN, for the appellants: The facts alleged in the replication invalidated the composition. In such case the doctrine of rescission of contracts does not apply. Plaintiff could retain the thirty-five per cent received by it, and still sue on the notes for the unpaid sixty-five per cent.-- Stuart v. Blum, 28 Pa. 225; Green v. Shriver, 53 Pa. 259; Hefter v. Cahn, 73 Ill. 296; Durgin v. Ireland, 14 N. Y. 322; Pierce v. Wood, 23 N. H. 519; Partridge v. Wesser, 14 Gray, 180; Crandall v. Cochran, 3 N. Y. Sup. Ct. 203; Kahn v. Gumberts, 9 Ind. 430; Reynolds v. French, 8 Vt. 85; Grossley v. Moore, 7 Reporter, 149; Ex parte Wood, 2 Deac. & Ch. 508; Ex parte Vere, 1 Rose, 281; Ex parte Gilvey, L. R. 8 Ch. Div. 248; Ex parte Bateson, 1 M. D. & De G. 289. On the facts pleaded and shown, plaintiff was excused from filing the notes: (a) Because they were destroyed.--2 Wag. Stats. 1022, sect. 51; Powers v. Ware, 2 Pick. 451, and authorities there cited. ( b) Because, in their destroyed form, they were in defendant's possession.--2 Bouv. L. Dic., tit. “Profert;” 1 Chitty's Pl. 365; Stephen's Pl. 437; Workman v. Campbell, 46 Mo. 309; Railroad Co. v. Robinson, 27 Mo. 396. ( c) Because there was a plea of payment.-- Bailey v. Wallen, 1 Overt. (Tenn.) 198.

BROADHEAD, SLAYBACK & HAEUSSLER, for the respondent: The failure to file the note sued upon is fatal to plaintiff's action.--Wag. Stats. 1022, sect. 51. The fact that the note sued on is held by a third party is no excuse for a failure to file it. Such failure to file is ground for demurrer.-- Hook v. Murdock, 38 Mo. 224. The failure is a substantial defect in the declaration.-- McCormick v. Kenyon, 13 Mo. 131; Campbell v. Wolf, 33 Mo. 459; Carr v. Waldron, 44 Mo. 393. When the plaintiff alleges a wrongful taking and destruction by the defendant of notes sued on, this is incompatible with a recovery upon the notes.

BAKEWELL, J., delivered the opinion of the court.

The action is for two promissory notes made by defendant to the order of plaintiff: one for $4,000, on which $1,400 has been paid; the other for $1,600, on which $560 has been paid. Plaintiff alleges that the notes have never been negotiated, but that they have been taken from his possession by the fraud of defendant, and by him destroyed, and therefore he cannot file them.

Defendant's answer denies that the notes have been destroyed by defendant, but says that they were for a valuable consideration delivered up to him by plaintiff as paid and cancelled.

Plaintiff, in his replication, denies that the notes are paid, or delivered to defendant for a valuable consideration, but says that the delivery to defendant was without consideration, and obtained by fraud; the circumstances of which are particularly set forth, to the effect that defendant made a fraudulent composition with creditors at thirty-five cents on the dollar, under which he obtained the notes sued on. This composition is alleged to be void, and of no effect as to plaintiff, on account of fraudulent preferences.

On the trial, defendant was examined on behalf of plaintiff. He testified that plaintiff held these notes at the time of the composition in question, and that defendant then received the notes from plaintiff in settlement under this composition; that defendant, on the same day, struck out the signature from the notes, and wrote across their face, “Paid, March 13, 1878.” Defendant produced the notes, which are defaced as stated. After this witness had testified further to some facts as to his failure, his indebtedness, the names of his creditors, and the amounts due them, defendant objected to the introduction of further evidence, on the ground that the replication is a departure. The court excluded all further evidence, on the objection of defendant.

Plaintiff then offered to prove the facts set out in his replication as to fraud in the composition agreement; and also that he had, on February 11, 1878, obtained a delivery order for these notes, in a proceeding under the statute directed against defendant and a member of the firm of attorneys who represented defendant; and that defendant and the attorney then denied that the notes were in their possession, and refused to deliver them up. Plaintiff also offered to prove that the notes, at the date of the delivery order, were in possession of the attorney named, and that he had refused to deliver them up to the sheriff. Defendant objected to the offer of this testimony, and the objection was sustained. The court then gave an instruction that, under the pleadings and evidence, plaintiff is not entitled to recover. Plaintiff then took a nonsuit.

A composition agreement must be made with the utmost good faith on the part of the debtor. Where he professes to deal equally with all his creditors, and has a secret agreement with some or one of them, under which (as plaintiff offered to show in this case) he gives to such creditors an undue advantage, paying on their claims a percentage in excess of that named in the composition agreement signed by all--this is a fraud which vitiates the composition agreement as to the other creditors. And it seems that in such a case the creditor need not first rescind the composition agreement and return the money received under it; but may sue for and recover the full amount of the original indebtedness, less the amount received under the composition agreement. Hefter v. Cahn, 73 Ill. 296; Durgin v. Ireland, 14 N. Y. 322; 53 Pa. St. 259; Forsyth v. Camp, Law Lib. Ed. 23. And it is expressly determined that when the creditor delivered up the notes held by him to the debtor, at the making of such an agreement, which was afterwards avoided on the ground of fraud, he may recover the balance due by declaring on the notes. Stuart v. Blum, 28 Pa. St. 225.

The Practice Act requires (Wag. Stats. 1022, sect. 51) that when any pleading is founded on any instrument of writing...