Bastian v. Dreyer

• Decision Date: 10 June 1879
• Citation: 7 Mo.App. 332
• Parties: JOSEPH BASTIAN, Appellant, v. RUDOLPH H. DREYER ET AL., Respondents.
• Court: Missouri Court of Appeals

7 Mo.App. 332

JOSEPH BASTIAN, Appellant,

v.RUDOLPH H. DREYER ET AL., Respondents.

St. Louis Court of Appeals, Missouri.

Jun. 10, 1879.

1. There can be no recovery, at the suit of the payee, upon a note given for a consideration which is a fraud upon other creditors of the maker.

2. Where creditors sign an agreement to assign all their claims to a third person at an equal discount, the signature of one constituting an inducement for

signing by the others, any secret consideration or prospect of advantage moving one, which is purposely concealed from the others, is a fraud upon such others.

APPEAL from St. Louis Circuit Court.

Affirmed.

T. J. ROWE, for appellant: The agreement was a contract to sell claims to another, and not a composition.-- Babcock v. Dill, 43 Barb. 584; De Page v. McCrea, 1 Wend. 164-172. It was not necessary that all or a majority of the creditors should sign it.-- Goldenbergh v. Hoffman, 69 N. Y. (Ct. App.) 325; Durgin v. Ireland, 14 N. Y. 322; Renard v. Fuller, 11 Bosw. 107. The services to be rendered in obtaining the signature of others to the agreement was a valuable consideration for the note.-- Frost v. Gage, 85 Mass. 560; Eldridge v. Strong, 34 N. Y. 491. A note given in consideration of a doubtful claim is supported by a sufficient consideration.-- Kelfe v. Vogel, 36 Iowa, 87; Wyatt v. Evans, 52 Ala. 285.

PATRICK & FRANK, for respondents: An agreement between two or more parties to perpetrate a fraud upon a third is an illegal consideration for a promissory note.-- Hamilton v. Skull, 25 Mo. 166; Fenton v. Hamm, 35 Mo. 410; Harwood v. Knapper, 50 Mo. 457. “It is against the policy of the law to enable either party, in a controversy between themselves, to enforce an agreement in fraud of the law, or which was made to injure another.”-- Randall v. Howard, 2 Black, 587; 1 Story's Eq., sect. 298; Balk v. Rogers, 2 Paige, 156; Wilson v. Watts, 9 Gill, 356; Church v. Mier, 4 Vroom, 318; Bickley v. Phosphate Co., L. R. 10 Q. B. 491; Guernsey v. Cook, 120 Mass. 501; O'Shea v. Collier White Lead Co., 42 Mo. 397; Bliss v. Matteson, 45 N. Y. 22; 55 Ga. 262.

LEWIS, P. J., delivered the opinion of the court.

This suit is against the defendant Rudolph H. Dreyer as maker, and the defendant Robert G. Coleman as indorser, of a promissory note for $450, payable to plaintiff. The defence is that the note was given without a good and sufficient consideration. The testimony tended to show that on February 14, 1876, plaintiff and defendant Dreyer were directors of the Farmers and Traders' Savings Institution, a banking corporation. Defendant Dreyer was also cashier of the institution, and plaintiff was a depositor. On that day plaintiff handed to defendant Dreyer, across the counter, a draft for $600, drawn in plaintiff's favor by a bank in New Orleans on a bank in New York, and requested him to collect it. Dreyer entered the draft to plaintiff's credit on his deposit account, and on the same day took it, with other drafts, to the Mercantile Bank, where it was passed to the credit of the Farmers and Traders' Savings Institution in the usual course of business under an arrangement between the two banks whereby the Mercantile Bank undertook all clearing and collecting of foreign drafts for the other corporation. On the following day, February 15, the Farmers and Traders' Savings Institution failed and closed its doors. Its account was largely overdrawn at the Mercantile Bank, and that corporation retained the draft and its proceeds. At the time when plaintiff delivered the draft to Dreyer, he had on current deposit in the Farmers and Traders' Institution about $1,319.37, including some interest on a time-deposit. Plaintiff afterwards proved his claim before the assignee for $1,919.67, which included the $600 draft. On this entire amount of his allowance he was paid two successive dividends. A few weeks after the failure of the institution, an agreement was signed by the plaintiff and other creditors, in the following terms: “We, the undersigned, agree with Robert G. Coleman and with each other, to sell and assign to him, the said Coleman, all our respective claims and demands that we may have against the Farmers and Traders' Savings Institution of St. Louis, at and for the price of twenty-five per cent of the face of said claims and demands respectively, provided payment thereof be made us in cash on or before the fifteenth day of July, 1876. This offer to be open and irrevocable until that day.”

The testimony further tended to show that before the plaintiff signed this agreement he repeatedly demanded of Dreyer payment to the amount of the $600 draft, and Dreyer uniformly denied all personal responsibility on that account, averring that the whole affair was purely a bank transaction. Plaintiff insisted that Dreyer should pay him; and when asked by Dreyer to enter into the agreement with Coleman, refused to do so unless he was first paid or secured the amount of the draft. After much discussion in repeated interviews, it was finally agreed that plaintiff would sign the contract with Coleman upon condition that Dreyer would give him his note for $450, with Coleman as indorser. By this arrangement, plaintiff would receive $150 from Coleman, and the $450 on the note would then satisfy the whole claim. The transaction was carefully kept secret. It was supposed that, if known, it would prevent other persons from signing the Coleman agreement, and it was understood that plaintiff would use his influence in procuring such signatures. The note here in suit was thereupon executed and indorsed according to the agreement. The Circuit Court held that the consideration for the note was void, as a fraud upon other creditors who signed the Coleman agreement, and as against public policy.

The law is well settled that in a case where an instrument is signed by a number of parties, and where it is generally understood that the fact of the signing by one or more constitutes part of the inducement for the signing by others, if there be any secret inducement or prospect of advantage moving the former which is purposely withheld from the latter, this constitutes a fraud against the parties prejudiced, which will avoid the instrument. Miller v. Simonds, 5 Mo. App. 33. The principle is that A. may have sufficient confidence in B.'s judgment to adopt it as his own, upon a state of facts and motives in which each has a like interest. But if B. have a special and controlling inducement affecting himself only, it is a...