Bank of Houston v. Kirkman

• Decision Date: 08 May 1911
• Citation: 137 S.W. 38,156 Mo. App. 309
• Parties: BANK OF HOUSTON v. KIRKMAN et al.
• Court: Missouri Court of Appeals

137 S.W. 38

156 Mo. App. 309

BANK OF HOUSTON v. KIRKMAN et al.

Springfield Court of Appeals. Missouri.

May 8, 1911.

1. CHATTEL MORTGAGES (§ 177)—SECURITIES —CAUSE OF ACTION—ACCRUAL.

Where defendants had a chattel mortgage on certain collaterals pledged to plaintiff bank, and plaintiff delivered them to the mortgagor on payment of the bank's debt, defendants' cause of action against the bank accrued at the time of its conversion.

2. CHATTEL MORTGAGES (§ 5)—NATURE OF INSTRUMENT—PLEDGED COLLATERALS.

The owner of a note for $1,500 secured by a deed of trust, having pledged the same to a bank, and desiring further advancements from defendants, executed an instrument promising to pay the amount so to be advanced to them, and, after describing the $1,500 note and deed of trust, recited that the same was pledged to secure defendants' advancements, and that on nonpayment of the note at maturity the holders were invested with full authority to pay the advancements specified. The bank, being notified of this agreement, indorsed thereon a recognition thereof. Held, that such instrument should be construed as a chattel mortgage of the note and deed of trust so pledged; the interest of the owner being a proper subject of sale or mortgage.

3. BANKS AND BANKING (§ 109)—AUTHORITY OF CASHIER.

Since the cashier of a bank is the executive arm of the board of directors, he had authority to bind the bank by recognition of a chattel mortgage of collaterals pledged to the bank for a loan.

4. BANKS AND BANKING (§ 179)—PLEDGED COLLATERALS—MORTGAGE—SURRENDER.

Where a bank was notified of a chattel mortgage on certain collaterals pledged to it for a loan, it was the bank's duty on payment of its debt to surrender the collaterals to the mortgagee and not to the owner.

5. BANKS AND BANKING (§ 179) — PLEDGED COLLATERALS—CHATTEL MORTGAGE—RECOGNITION.

Where a bank was notified of a chattel mortgage of collaterals pledged to it, it was not necessary that the cashier should indorse on the back of the instrument a recognition of the mortgage lien and an agreement to deliver the property to the mortgagee on satisfaction of the bank's lien, in order to impose a duty on the bank to return the collaterals on payment of its debt to the mortgagee.

6. SET-OFF AND COUNTERCLAIM (§ 34) — CLAIMS AVAILABLE — CONNECTION WITH PLAINTIFF'S CAUSE OF ACTION.

C., having pledged certain collaterals to plaintiff bank for a loan, and thereafter desiring further advancements from defendants, executed a chattel mortgage to defendants on the collaterals so pledged. Defendants, in order to obtain a hundred dollars first to be advanced to C., borrowed that amount from plaintiff bank, giving their own note therefor, and at the same time notifying the bank of their chattel mortgage on the collaterals. The bank's claim against C. having been paid, it delivered the collaterals to him, and he collected the amount due thereon, destroying defendants' security. Held, that defendants' claim against the bank for conversion of the collaterals in returning them to C., instead of to defendants, was a cause of action in tort not connected with the bank's claim against defendants on the note given for the advancement to C., and was therefore not available as a set-off or counterclaim against the bank's action on the note.

Appeal from Circuit Court, Texas County; L. B. Woodside, Judge.

Action by the Bank of Houston against L. C. Kirkman and others. Judgment for plaintiff, and defendants appeal. Affirmed.

Dooley, Hiett & Millard and W. E. Barton, for appellants. Lamar, Lamar & Lamar, for respondent.

COX, J.

This action was begun before a justice of the peace upon a note for $100. On appeal to the circuit court judgment went for plaintiff, and defendants have appealed to this court.

The facts connected with this transaction are as follows: Frank Cummings was the owner of a promissory note for $1,500, secured by a deed of trust upon real estate. Cummings borrowed $700 from plaintiff bank and pledged the $1,500 note and deed of trust to the bank as collateral security. Afterwards Cummings and defendants, Kirkman and Williams, entered into a contract by which Kirkman and Williams were to furnish Cummings more money from time to time until $500 should be furnished, and to secure them Cummings executed and delivered to them a writing, the material parts of which are as follows: "$500.00. Houston, Mo., Oct. 3rd, 1907. On or before May 2nd, 1910, after date, I promise to pay to R. W. Williams and L. C. Kirkman, five hundred dollars, for value received, negotiable and payable without defalcation or discount, at the Bank of Houston, with interest from maturity at the rate of eight per cent. per annum, having deposited or pledged with R. W. Williams and L. C. Kirkman collateral security for the payment of this note, one promissory note secured by deed of trust for fifteen hundred dollars, dated May 2nd, 1905, and due seven years thereafter with the express understanding and agreement between the makers and payee thereof that $200.00 thereof should be paid annually thereon until the same is paid in full, drawn by Edith A. Brown and Alfred H. Brown in favor of Henry Parmenter and by him assigned to the maker of this note and now pledged to the Bank of Houston to secure a note of seven hundred dollars, to the payment of which this pledge is subject. Now, in the event of the nonpayment of this note at maturity, the holders thereof are hereby invested with full authority to use, transfer, hypothecate, sell or convey the said property, or any part thereof, or to cause the same to be done, at public or private sale, with or without notice or demand of any sort, at such place, and on such terms as the said holders hereof may deem best, and the holders of this note are authorized to purchase said collaterals for their own protection; that the proceeds of such sale, transfer or hypothecation, shall be applied to the payment of this note, together with all protests, damages, interests, costs, and charges due upon the note, or incurred by reason of its nonpayment when due, or in the execution of this power."

The parties all understood that the $1,500 note and deed of trust of Brown, mentioned in this instrument, was at that time held by plaintiff bank as collateral to secure a loan to Cummings of $700, and they seemed to think that, in order for the note and contract executed by Cummings to Kirkman and Williams to be binding, the bank would have to consent to it, so they all went to the bank and explained the arrangement between them to the cashier, and, at their request, he signed a statement on the back of the Cummings note and contract as follows: "The Bank of Houston recognizes the within as a second incumbrance on the property thereby pledged and agrees to turn over and deliver said property to the holder of this note when the seven hundred dollar note due this bank, for which said property is pledged to it, shall be paid, together with all interest on said $700.00. The Bank of Houston, E. C. Davidson, Cash."

Defendants Kirkman and Williams, in order to pay Cummings $100 of the amount they were to furnish him, borrowed the same from plaintiff bank, and executed their note therefor with defendant Barton as security. The note sued upon is a renewal of...