Benton v. German-American National Bank

• Citation: 26 S.W. 975,122 Mo. 332
• Parties: Benton et al., Appellants, v. German-American National Bank
• Decision Date: 28 May 1894
• Court: United States State Supreme Court of Missouri

26 S.W. 975

122 Mo. 332

Benton et al., Appellants, v. German-American National Bank

Supreme Court of Missouri, First Division

May 28, 1894

Appeal from Jackson Circuit Court. -- Hon. J. H. Slover, Judge.

Affirmed.

John L Wheeler and Karnes, Holmes & Krauthoff for appellants.

(1) The note was without consideration. (2) The note was procured by fraud and the bank is chargeable with knowledge thereof. A bank is bound by the knowledge of any director who takes part in the discount of a note presented to the bank for discount as to equities affecting the liability of the maker of the note. Atlantic Mills v. Indian Orchard Mills, 147 Mass. 268; 1 Mor. Priv. Corp., sec. 540, par. a., b. and c.; Wade on Notice [2 Ed.], secs. 675, 676; 1 Am. and Eng Encyclopedia of Law, p. 423; Bank v. Christopher, 40 N. J. L. 435; Bank v. Neil, 10 Bush. 54; Hart v Bank, 33 Vt. 252; Muller v. Insco, 58 Vt. 113; Hovery v. Blanchard, 13 N.H. 145; Patent v. Ins. Co., 40 N.H. 375; Bank v. Hornbeck, 29 Minn. 322; Irmaty v. Bank, 139 Mass. 332; Willard v. Denise (N. J. Err. & App.), 26 A. 29.

Haff & Van Valkenburgh for respondent.

(1) The note was not without consideration. (2) The bank had no notice of any infirmity in the paper. Wilson v. Bank, 7 A. (Pa.) 145; DeKay v. Hackensack Water Co., 11 Stewart (N. J. Eq.), 158; Bank v. Christopher, 11 Vroom (N. J. Law), 435; Barnes v. Gas Light Co., 12 C. E. Greene (N. J. Eq.), 33; Bank v. Neass, 5 Denio (N. Y. Sup. Ct.), 329; In re European Bank, L. R., 5 Ch. App. 358; 2 Randolph on Commercial Paper, par. 1004, p. 698; Savings Association v. Printing Co., 25 Mo.App. 642; Brass Company v. Webster Glass and Queensware Company, 37 Mo.App. 145; Johnston v. Shortridge, 93 Mo. 227; Bank v. Savery, 82 N.Y. 291; Fisher v. Murdock, 13 Hun (N. Y.), 485; Angell & Ames on Corp. [11 Ed.], pars. 307-309, p. 336, et seq.; Bank v. Bank, 10 Otto, 239, loc. cit. 245. (3) The law is settled that knowledge which comes to a corporation officer, through his own private transactions, and beyond the range of his official duties, is not the knowledge of the corporation and attaches to the latter no responsibility by way of notice. State Savings Ass'n v. Printing Co., 25 Mo.App. 648; Johnston v. Shortridge, 93 Mo. 227; Manhattan Brass Co. v. Webster, etc., 37 Mo.App. 155.

OPINION

Brace, J.

This is a bill in equity to cancel a negotiable promissory note and to recover interest paid thereon, against the holder, charging that the note is without consideration, and was procured by fraudulent misrepresentations, of which the defendant had notice.

On the sixth of July, 1889, W. F. Wyman was defendant's cashier, and also secretary and treasurer of the Kansas City Glue and Fertilizer Company. The company was largely indebted to the bank. The evidence tends to prove that on that day the said Wyman as secretary and treasurer of the company, agreed to sell the plaintiff, R. E. Benton, and he agreed to buy, fifty shares of the capital stock of the company of the face value of $ 5,000, for $ 3,000, to be paid for by the negotiable promissory note, at ninety days, of himself and one O. H. Brown, for that amount with interest added, payable to the said Wyman as cashier of the bank, secured by the deposit as collateral of the certificates of certain shares of stock in the Kansas City Varnish Company, and of the certificates for the said fifty shares of stock of the Glue and Fertilizer Company, to be thereafter issued, with the understanding that said note was to be discounted by the bank for the benefit of said company. The note was so drawn and afterwards on the eighth of July, 1889, was discounted by the bank and the proceeds placed to the credit of the company on the books of the bank.

At maturity, on the seventh of October, 1889, this note was taken up and a new note given, signed by the same parties with the same recitals as to collaterals, payable to W. F. Sargent, cashier of said bank, at ninety days, for the same amount with interest added. Up to this time, the certificate of stock to Benton had not been issued, and the deposit of that stock consisted merely of the recital in the note: "Certificates No.'s fifty shares of stock of the Kansas City Glue and Fertilizer Company, being ten shares each."

On the twentieth of December, 1889, certificate number 65 for fifty shares of the capital stock of the company was issued to Benton by the company, by whom it was thereafter indorsed and delivered to the bank, and held as collateral. At the maturity of the last mentioned note, on the eighth of January, 1890, the same was taken up and a new note given, payable at four months to J. G. Strean, cashier, at the bank, for the same amount with interest added, signed by Benton and Brown as before, and also by the wife of R. E. Benton, his coplaintiff, Nellie E. Benton, in which it was recited that said certificate of stock number 65 is deposited as collateral security.

This note, at maturity, was renewed by a like note signed by the same parties for thirty days, dated May 11, 1890, which at its maturity was again renewed by a like note dated June 13, 1890, signed by the same parties, payable ninety days after date, and this seems to be the note which the plaintiffs seek to have cancelled in this action, commenced at some time after its maturity -- but when, this record does not show -- in which a final hearing on the merits was had in the Jackson circuit court, on the fifth day of December, 1891, and the plaintiff's bill dismissed, and judgment rendered against them for costs, from which they appeal.

I. The court made no finding of the facts and gave no declarations of law, consequently the particular ground upon which the bill was dismissed does not appear. It is perfectly clear, however, upon the face of the evidence that the plaintiff, R. E. Benton, was not induced to enter into the contract of July 6, 1889, with Wyman, in pursuance of which he executed his note of that date, by any false and fraudulent misrepresentations of Wyman, of any fact affecting the value of the stock of the company which he was to get for his note, and equally as clear that his wife, the plaintiff, was not induced by any such misrepresentations to attach her name to the note of January 8, 1890, and the subsequent notes in renewal thereof. This is virtually conceded in the argument in this court, but it is insisted that the original note was without consideration, of which fact the bank had notice at the time it discounted it, and that the bank gave nothing for it. Hence the plaintiff's bill ought to have been sustained. So far as the evidence shows, the note was discounted by the bank in the usual and ordinary way in which such business is done, and the net proceeds passed to the credit of the company on the books of the bank, the bank thereby giving full value for the security whether thereafter those proceeds were applied directly in reducing the indebtedness of the company to the bank or paid out on its check over the counter.

There is nothing in the contention that the bank did not give value for the note. In support of the other contention the plaintiffs introduced the articles of incorporation showing that the company was incorporated in July, 1888, "with a capital stock of $ 50,000, divided into five hundred shares of $ 100 each, the whole amount of said stock having been subscribed for, and one-half thereof actually paid up;" and then introduced in evidence the stubs of the stock book of the company showing that prior to the sixth day of July 1889, there had been issued to divers persons certificates of stock for four hundred and fifty-eight shares of the capital stock of the company, which had not been canceled or recalled, and that on the twentieth day of December, 1889, the same day on which the certificate of fifty shares of stock was issued to Benton, certificates of stock were issued, including his, for three hundred more shares, making, in all, seven hundred and...