Brady v. Kirby
| Decision Date | 02 December 1929 |
| Parties | F. B. BRADY, RESPONDENT, v. GEORGE W. KIRBY ET AL., APPELLANTS. [*] |
| Court | Kansas Court of Appeals |
Appeal from the Circuit Court of Platte County.--Hon. Guy B. Park Judge.
AFFIRMED.
Judgment affirmed.
T. C Sparks, James H. Hull and H. G. Leedy for respondent.
Gresham & Gresham and Eastin & McNeely for appellant.
Trimble, P. J., absent.
This is a suit on a promissory note in the sum of $ 2500, dated Dearborn, Missouri, July 20, 1923, due six months after date, payable to the Bank of Dearborn and signed by the defendants as makers. The note bears the following indorsement upon the back thereof: "Bank of Dearborn by John W. Tays, Cashier."
At the end of all of the testimony the court refused defendants' instruction in the nature of a demurrer to the evidence and gave plaintiff's instruction directing a verdict for him. A verdict was accordingly rendered in favor of plaintiff in the amount of the note, interest and attorney's fees. Defendants have appealed.
The facts show that in 1918, the Dearborn Electric Light & Power Company, of which defendants were stockholders, borrowed $ 4500 from the Bank of Dearborn, giving its note for said amount with the present defendants as sureties thereon; that on or about July 20, 1923, there had been paid by these defendants on said indebtedness the sum of $ 2000, and accrued interest; that on that day a new note (the note in suit) for $ 2500, was given the Bank of Dearborn due six months after date, which note was signed by the defendants only.
On December 20, 1922, the Bank of Dearborn (hereinafter called the Bank) borrowed from the Commerce Trust Company of Kansas City (hereinafter called the Trust Company), the sum of $ 37,000, pursuant to a resolution shown in the minutes of a meeting of the board of directors of the bank held on December 16, 1922. This resolution did not mention anything about placing collateral with the Trust Company to secure the note, but did recite that the note to the Trust Company "carry the individual indorsements of the board of directors" of the Bank of Dearborn. Accordingly a note in the sum of $ 37,000, was given by the bank to the Trust Company indorsed by the directors of the bank. However, Mr. Tays, cashier of the bank, in connection with this loan, delivered to the Trust Company certain collateral of the bank to secure its note. There is no evidence of any authority given by the board of directors to Tays for the pledging of this or any other collateral. The Trust Company would permit the bank to substitute other collateral for collateral the latter had with the former, and on August 17, 1923, Tays pledged to the Commerce Trust Company the note in suit along with other notes totaling $ 11,670 to take the place of the notes the Trust Company then held as collateral. There is no evidence of any authority given by the board of directors of the bank to Tays to pledge the note in suit to the Trust Company. The note to the Trust Company had been renewed from time to time and various credits had been given thereon. On September 29, 1923, the bank owed the Trust Company, on this and other loans, the sum of $ 60,000. On the last mentioned date the bank suspended and went into the hands of the Commissioner of Finance.
On December 31, 1923, the sureties on the note given to the Trust Company by the bank gave a new note to the Trust Company signed by themselves alone as individuals and not by the bank. This note was in the sum of $ 38,931.49, the net balance then due from the Bank of Dearborn to the Trust Company on all loans. This note was ultimately paid by the makers thereof on May 28, 1924, at which time the notes held by the Trust Company as collateral security, including the one in suit, were turned over to them by it. Thereafter these men who had signed the bank's notes to the Trust Company as sureties, executed a written instrument authorizing the plaintiff, as trustee, to bring action upon the note in controversy and the other notes received from the Trust Company.
Before bringing the present suit plaintiff, as such trustee, instituted a proceeding against the Bank of Dearborn and Frank C. Millspaugh, State Finance Commissioner in charge of the bank, in which a decree was entered subrogating plaintiff, as trustee, to all the rights and remedies of the Commerce Trust Company in and to the promissory note sued upon herein, as well as other collateral security which had been held by the Trust Company as aforesaid and granting him specific relief. A full description of that proceeding will hereinafter be made.
The answer to the present suit consists of a general denial and plea of payment of the note. In connection with this plea it is alleged that defendants signed as sureties the original note for $ 4500, given by the Dearborn Electric Light & Power Company to the bank, at which time the Light & Power Company was solvent; that at that time one W. H. Gabbert was cashier and director of the bank and also a stockholder and member of the board of directors of the Light & Power Company and secretary of said company; that after the execution of said note in the sum of $ 4500, a corporation was organized known as the Dearborn Iron & Power Company; that Gabbert became a stockholder, director and officer of this corporation; that the Iron & Power Company purchased the property and assets of the Light & Power Company and as a part of the transaction delivered to the bank forty-seven shares of the stock of the Iron & Power Company in payment of the $ 4500 note of the Light & Power Company to said bank; that the bank accepted said shares of stock in full payment of the indebtedness and, the note having been paid, defendants were discharged as sureties thereon; that the transactions between the Light & Power Company and the Iron & Power Company and the issuance of the forty-seven shares of stock in the bank in satisfaction of the note and the acceptance thereof by the bank were handled and conducted by Gabbert in behalf of the Light & Power Company and the Bank of Dearborn; that thereafter the bank accepted dividends upon the stock; that subsequent to these transactions the bank, through its officers and agents, represented to the defendants that the indebtedness had not been paid and demanded payment from them; that relying upon such representations and without knowledge of the facts they paid the bank the sum of $ 2000, and interest and executed the note for $ 2500, sued upon herein; that the last mentioned note was thus procured by fraudulent representations of the bank; that the directors of the bank knew at the time the note was pledged to the Trust Company that it was not a subsisting and valid asset of the bank and knew that it had been procured by such false representations; that the parties whom the plaintiff represents did not pay the indebtedness of the bank to the Trust Company until after maturity of the note in suit and plaintiff is not entitled to be subrogated to the position occupied by the Trust Company as the holder of the note.
To the answer plaintiff filed a reply consisting of a general denial.
It is defendant's contention that the note in suit was not lawfully pledged as collateral by the bank to the Trust Company and that it was not so pledged as collateral to the note given to the Trust Company by the directors individually on December 31, 1923. In this connection it is contended that the directors of the bank, although they paid the bank's indebtedness to the Trust Company, are not entitled to recover on the note in suit for the reason that they could not be subrogated to any rights of the Trust Company which it did not lawfully have. It is also insisted by defendants that the beneficial plaintiffs herein, as directors of the bank, were charged with notice that the note in suit was pledged without authority and were further charged with notice that the note had theretofore been paid and was not a valid asset of the bank.
In support of the contention that the note was not legally pledged to the Trust Company defendants rely upon section 11762, Revised Statutes 1919, which provided, at the time of the alleged pledging of the note, that a cashier or other officer or employee of a bank should have no power to pledge any notes of a bank until "authority shall have been given by the board of directors, a written record of which proceeding shall first have been made."
We need not decide the question as to whether, in view of the statute, the note in suit was lawfully pledged to the Commerce Trust Company, for the reason that this question has been foreclosed by the Circuit Court of Platte County in a decree rendered by it in the suit by plaintiff against the bank and the Commissioner of Finance, to which we have alluded. In that decree it was established that plaintiff was the lawful holder of the note. Defendants are now attempting to assert a right of the bank which was a party to that suit in which suit it was adjudicated that the bank had no such right. Consequently defendants are in no position to urge that there was no lawful pledge of the note in suit to the Commerce Trust Company or that it was not legally pledged as collateral to the note of December 31, 1923, given to the Trust Company by the directors alone.
Defendants object to the introduction of the pleadings and judgment in the case referred to and now strenuously contend that these records were not properly admitted in testimony and cannot be considered as having any bearing on the controversy. In the first place defendants claim they were not parties to those proceedings and had no notice of them. In this connection defendants cite the cases of ...
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