Bank v. Ricker
| Decision Date | 08 April 1932 |
| Docket Number | No. 30060.,30060. |
| Citation | 49 S.W.2d 20 |
| Parties | CONTINENTAL AND COMMERCIAL NATIONAL BANK OF CHICAGO v. GEORGE E. RICKER ET AL., Defendants, THOMAS LYNN, R.C. HEALY and L.M. BREELAND, Appellants. |
| Court | Missouri Supreme Court |
Appeal from Jackson Circuit Court. — Hon. Ben Terte, Judge.
AFFIRMED.
Charles O. French and James M. Johnson for appellants.
(1) Where the proof of payment is in the exclusive knowledge and control of the plaintiff, the burden is on him to produce evidence showing payment. Schneider v. Maney, 242 Mo. 36, 145 S.W. 823. (2) A pledgee is a trustee for the pledgor and is in duty bound to exercise good faith in making a sale of the pledged property and to make reasonably diligent efforts to make the property bring its value, or all that it would fetch in the market. Schaaf v. Fries, 77 Mo. App. 346; Schaaf v. Fries, 90 Mo. App. 111; State Bank of St. Louis v. Bartle, 114 Mo. 276, 21 S.W. 816: Natl. Exchange Bank v. Kilpatric, 204 Mo. 119, 102 S.W. 499; Troll v. Real Estate Co., 186 Mo. App. 196, 171 S.W. 665; Hagen v. Continental Natl. Bank, 182 Mo. 319, 81 S.W. 171; LaClede National Bank v. Richardson, 156 Mo. 270, 56 S.W. 1117; 1 Brandt on Suretyship and Guaranty No. 480. (3) The pledgee owes the same duty to a surety or guarantor on notes secured by collateral pledged by the maker as he owes to the pledgor. State Bank of St. Louis v. Bartle, 114 Mo. 276, 21 S.W. 816; Long v. Mason, 273 Mo. 266, 200 S.W. 1062; Taylor v. Jeter, 23 Mo. 244; Ely-Walker Dry Goods Co. v. Karnes, 9 S.W. (2d) 245; Troll v. Real Estate Co., 186 Mo. App. 196, 171 S.W. 665; 1 Brandt on Suretyship and Guaranty, 937, sec. 500; Natl. Exchange Bank v. Kilpatric, 204 Mo. 119, 102 S.W. 499; 50 C.J. 195, secs. 331, 333. (4) Where it is not sought to set aside the sale or to recover the collateral, pledgee's failure in his duty in respect to disposing of pledged collateral need not amount to positive fraud in order to entitle pledgor to relief; lack of reasonable care and diligence, or mere negligence, is sufficient. Natl. Exchange Bank v. Kilpatric, 204 Mo. 119, 102 S.W. 499; State Bank of St. Louis v. Bartle, 114 Mo. 276, 21 S.W. 816; Hewitt v. Steele, 136 Mo. 327, 38 S.W. 82; Schaaf v. Fries, 77 Mo. App. 346; Taylor v. Jeter, 23 Mo. 244. (5) The pledgor, or a surety or guarantor, when sued on the principal note is entitled to have credited thereon the actual value of the collateral wrongfully or negligently disposed of by plaintiff, and to have said actual value off-set against the unpaid balance of the principal note; in other words, if property pledged by the principal debtor is sold irregularly or negligently by the pledgee so that it brings less than its value, the surety is discharged pro tanto. 50 C.J. 161, sec. 261; Ely-Walker Dry Goods Co. v. Karnes, 9 S.W. (2d) 245; Taylor v. Jeter, 23 Mo. 244; Kansas City ex rel. v. So. Surety Co., 203 Mo. App. 148, 219 S.W. 727; State Bank of St. Louis v. Bartle, 114 Mo. 276, 21 S.W. 816; Troll v. Real Estate Co., 186 Mo. App. 196, 171 S.W. 665; Natl. Exchange Bank v. Kilpatric, 204 Mo. 119, 102 S.W. 499; LaClede Natl. Bank v. Richardson, 156 Mo. 270, 56 S.W. 1117. (6) Pledgor, or his assignee sued on the principal note is entitled to counterclaim such sum as he is able to prove the actual value of the pledged collateral irregularly or negligently disposed of by the plaintiff, pledgee, exceeds the balance due plaintiff on the principal note. Ely-Walker Dry Goods Co. v. Karnes, 9 S.W. (2d) 245; Long v. Mason, 273 Mo. 266, 200 S.W. 1062; Hornsby v. Knorpp, 207 Mo. App. 302, 232 S.W. 776. (7) The answer alleged facts which, if true, constituted gross negligence, lack of good faith and wilful breach of trust, on the part of plaintiff, pledgee, in making sale of the pledged collateral; and the evidence offered by defendants tended strongly to prove said facts. Schaaf v. Fries, 77 Mo. App. 346; Schaaf v. Fries, 90 Mo. App. 111; Hagan v. Continental Natl. Bank, 182 Mo. 319, 81 S.W. 171; LaClede Natl. Bank v. Richardson, 156 Mo. 270, 56 S.W. 1117. (8) Though the pledge agreement authorizes sale without notice, it still remains the duty of pledgee to make sale fairly and to the advantage of the pledgor. Hagan v. Continental Natl. Bank, 182 Mo. 319, 81 S.W. 171. (9) The pledge agreement, containing waiver of notice of sale, was signed only by the principal debtor and was not signed by the defendants. The contract of guaranty is an independent contract. Central Savings Bank v. Shine, 48 Mo. 464; Parmerlee v. Williams, 71 Mo. 410; London v. Funsch, 188 Mo. App. 14, 173 S.W. 88; Graham v. Ringo, 67 Mo., 324; Jobes v. Miller, 201 Mo. App. 45, 209 S.W. 549; Rector, etc., of Mt. Calvery Church v. Albers, 174 Mo. 331, 73 S.W. 508; 1 Brandt on Suretyship & Guaranty (2 Ed.) secs. 145-166; 28 C.J. 888. (10) In view of the foregoing principles of law, the evidence offered by defendants and excluded by the court was clearly competent, relevant, material and admissible. Authorities, supra.
Lathrop, Crane, Reynolds, Sawyer & Mersereau, Thomas H. Reynolds, Winston H. Woodson and Geo. O. Pratt for respondent.
(1) The court did not err in overruling defendants' demurrer to plaintiff's evidence. 8 C.J. p. 1015; Haver v. Schwyhart, 48 Mo. App. 53; Amick v. Empire Trust Co., 317 Mo. 167, 296 S.W. 798; First State Bank v. Cooper, 179 S.W. 295; Barnes v. Bradley, 19 S.W. 319; Tinsley v. McIlhenny, 70 S.W. 793. (2) The evidence offered by defendants was not admissible and even though it was admissible, it was insufficient to constitute a defense. Therefore, the ruling of the trial court in directing a verdict for the plaintiff was proper. (a) Plaintiff contends that the evidence offered to be shown by defendants was not admissible because it did not come within the pleadings and did not prove or tend to prove any issue in the case. 49 C.J. sec. 263, p. 1005. (b) Even if the proof offered by defendants was admissible, it was insufficient to constitute a defense or to support defendants' counterclaim. Wright v. Dyer, 48 Mo. 525; Warder Co. v. Johnson, 114 Mo. App. 574; Osborne v. Lawson, 26 Mo. App. 549; Baskin v. Crews, 66 Mo. App. 22; Jones on Collateral Securities (3 Ed.) sec. 735: Williams v. Parker (Cal.), 157 Pac. 550, 552; Sec. 777, R.S. 1929; Church v. Beechman, 180 S.W. 1065; Reppy v. Reppy, 46 Mo. 571; Todd v. Crutsinger, 30 Mo. App. 145; 24 R.C.L., p. 833.
This suit is based on a promissory note. The trial court directed a verdict for plaintiff. The amount, found to be due, according to the verdict of the jury, was forty-one thousand two hundred and forty-four dollars and fifty-eight cents ($41,244.58). After unsuccessfully moving for a new trial, appellants perfected an appeal to this court. Respondent, Continental and Commercial National Bank of Chicago, was the original payee of the note. The National Farms Estate, a common-law trust, was the maker of the note. George E. Ricker, L.C. Smith, Thomas Lynn, R.C. Healy, L.M. Vreeland and Jay M. Jackson were guarantors on the note. L.C. Smith was adjudged a bankrupt, prior to the filing of the suit, and was not made a party defendant. A claim, for the amount due on the note, was filed against the bankrupt estate. George E. Ricker was made a party defendant, but filed an answer alleging that he had been duly adjudged a bankrupt and had applied for a discharge of his obligations in the bankruptcy court, and asked the State court to stay the proceedings, on the note against him, until such time when his application for discharge would be acted upon. Jay M. Jackson, defendant, against whom a judgment was entered, did not join in the application for an appeal. R.C. Healy, L.M. Vreeland and Thomas Lynn, all guarantors on the note, appealed from the judgment against them. Hereafter, they will be referred to as appellants.
There was pledged with respondent, as collateral security, for the payment of the note sued on, sundry notes aggregating thirty thousand dollars ($30,000), secured by mortgages on lands in Arkansas and Kansas; also notes of the face value of approximately sixty-three thousand dollars ($63,000), secured by mortgages on lands in the State of Florida. Respondent's petition alleged that the National Farms Estate executed and delivered a note to plaintiff, on February 23, 1922, in the sum of forty-two thousand five hundred dollars ($42,500). The note was due and payable ninety days after date. The petition also alleged the pledging of the collateral, above mentioned, and the signing of appellants as guarantors. Payments made on the principal of the note are recited in the petition and the balance due, on December 1, 1925, was pleaded as twenty-seven thousand one hundred twenty-three dollars and nineteen cents ($27,123.19), principal, and seven thousand three hundred and sixty-one dollars and eighty-four cents ($7,361.84), interest. Respondent asked judgment for thirty-four thousand four hundred and eighty-five dollars and three cents ($34,485.03) with interest at seven per cent, from December 1, 1925, together with attorneys' fees and costs. According to the petition, the payments on the principal of the note were the proceeds of sales of a part of the collateral pledged with the note. It is alleged in the petition that respondent had the right and authority under the collateral pledge agreement, to sell assign and deliver the collateral without notice, and to apply the proceeds thereof to the payment of the note. An itemized account of these sales and of the proceeds derived therefrom, was filed with the petition as an exhibit.
Appellants filed a separate answer and counterclaim. In their answer appellants alleged that they and George E. Ricker, L.C. Smith and Jay M. Jackson were shareholders in the National Farms Estate; that Ricker and Smith had undertaken to finance the National Farms Estate in its land operations in the State of Florida; that in doing so they obtained the note sued on from the National Farms...
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