Broadway Bank v. Schlater

• Decision Date: 04 March 1929
• Docket Number: No. 16479.,16479.
• Citation: 17 S.W.2d 591
• Parties: BROADWAY BANK v. SCHLATER.
• Court: Missouri Court of Appeals

17 S.W.2d 591

BROADWAY BANK v. SCHLATER.

No. 16479.

Kansas City Court of Appeals. Missouri.

March 4, 1929.

Certiorari Denied May 25, 1929.

Appeal from Circuit Court, Jackson County; Ralph S. Latshaw, Judge.

"Not to be officially published."

Suit by the Broadway Bank against Frank Schlater. Decree for plaintiff, and defendant appeals. Affirmed.

Luther W. Adamson and Kelly, Buchholz & O'Donnell, all of Kansas City, for appellant.

Winger, Reeder, Barker, Gumbiner & Hazard and Moore, Smith, Aughinbaugh & Ault, all of Kansas City, for respondent.

ARNOLD, J.

This is a suit in equity seeking an order to require the indorsement by defendant of a certain note alleged to have been placed in the hands of plaintiff as collateral. Plaintiff is a banking corporation operating in Kansas City, Mo.

The facts shown are that at some time prior to August 1, 1924, defendant, in company with his brother-in-law, one T. E. Postlewait, applied for a loan of $1,500 with which to pay various urgent debts of said Postlewait. When asked what security they could furnish, defendant herein stated he owned a note in the principal sum of $1,500, secured by a first mortgage on five lots in the city of Platteville, Grant county, Wis., executed by one John T. Lee and Ida F. Lee, his wife, in favor of the State Bank of Platteville, which had been assigned and transferred to defendant after maturity, which note he offered as collateral.

The schedule of the obligations of Postlewait when submitted showed the total to be $2,150, instead of $1,500, as suggested when the loan was sought. In the said schedule were listed various notes which had been signed by Postlewait as principal and certain of his fellow employees as accommodation makers. Plaintiff did not desire to make the increased loan without further security than the Wisconsin note, and it was suggested these accommodation signers might be induced to sign with Postlewait a new note, provided it was secured by defendant's collateral note, and thus liquidate their old obligations. Instead of executing one note for the whole sum, the new obligation was divided into several notes, which were to be signed by Postlewait and the accommodation signers, each in amounts somewhat in proportion to his old obligation. Thereafter, on August 1, 1924, all parties met at the bank, and the several notes which had previously been prepared by plaintiff were exhibited. The notes all bore the recital, as shown by plaintiff's testimony (but denied by defendant), that they were collaterally secured by the said Wisconsin mortgage note. It is in evidence that defendant agreed with plaintiff to indorse and deposit said mortgage note as collateral for all the notes making up the total amount of the loan which Postlewait was asking. However, defendant denied that he made such agreement. It is also in evidence that the accommodation signers declined to sign the new notes because they represented an increase of their obligations; but upon the assurance of defendant that the mortgage note was being put up as collateral to protect them, the notes were executed as follows, all bearing date of August 1, 1924: One note for $400, signed by T. E. Postlewait, Frank Schlater, and M. Baum; one for $450, signed by T. E. Postlewait and A. W. Larison; one for $200, signed by T. E. Postlewait, R. E. Lake, and A. A. Millke; and one for $1,100, signed by T. E. Postlewait, J. A. Hill, and A. McMaster; all payable on demand. It is further in evidence that the accommodation signers signed only upon defendant's promise and agreement that his said mortgage note would stand between them and liability thereon. Defendant, in the presence of all parties, then deposited the said mortgage note with plaintiff, but through mutual mistake and inadvertence, as plaintiff claims, the indorsement of defendant thereon was omitted.

The new notes were all introduced in evidence and each bore the recital that they were secured by a "first mortgage note for $1,500 signed by John T. Lee," being a description of defendant's Wisconsin mortgage note. The full sum of $2,150 then was paid into the hands of Postlewait. There was a provision in each of the said notes directing the payee to sell the collateral and apply the proceeds to the liquidation thereof. The evidence shows that the $400 note signed by Postlewait, defendant, and M. Baum was thereafter fully paid, but no part thereof was paid by defendant. After its payment defendant demanded of plaintiff the return of the mortgage note. Payment of the other notes being in default, the demand was refused. The accommodation makers of the other notes were demanding that plaintiff sell the mortgage note and apply the proceeds. It was then discovered that the indorsement of the mortgage note by defendant was omitted; the note then standing payable only to the order of defendant. It was urged by plaintiff that without the indorsement of defendant the note could be sold only at a great sacrifice. Thereupon plaintiff filed this suit in equity, asking that defendant be directed to indorse the mortgage note as per alleged oral agreement.

The petition is formal and covers facts substantially as herein set out. The prayer asks that the court will find, adjudge, and decree "that plaintiff is entitled to have said endorsement made on said note and will further order, adjudge and decree that defendant endorse the same." Defendant demurred to the petition, on the ground that it did not state facts sufficient to constitute a cause of action; but this demurrer was overruled. Defendant then filed answer consisting only of a general denial. The cause was tried to the court, sitting as chancellor. The decree is in accord with the allegations of the petition and is as follows:

"It is therefore ordered, adjudged and decreed by the court that plaintiff is the owner and holder of said note for the said purpose of collateral security; that defendant endorse said note without recourse, in blank or payable to plaintiff or order, and that he shall so endorse the same within a period of three days from this date. It is further ordered, adjudged and decreed by the court that if the defendant shall fail within said time to so endorse said note, this decree shall operate in lieu thereof as a declaration and determination of said transfer of said note for the purpose aforesaid from defendant to plaintiff, and as effectively as if said endorsement had been made shall bind all parties interested in said note now and hereafter."

Timely motions for new trial and in arrest of judgment filed by defendant were overruled and the cause is before us on appeal. The motion for a new trial embraced the following points:

(1) The court erred in rendering a decree for plaintiff under the pleadings and evidence.

(2) The court erred in excluding competent, relevant and material testimony offered by defendant.

(3) The court erred in refusing to permit the defendant to introduce evidence tending to show that the alleged contract sued on was illegal and tainted with usury.

(4) The court erred in refusing to permit defendant, on cross-examination of plaintiff's witness Wornall, to prove by said witness that plaintiff had knowingly included a debt and promissory note in the alleged contract sued on which was tainted with usury.

(5) The court erred in admitting irrelevant, incompetent and immaterial evidence offered by the plaintiff.

(6) Because the evidence disclosed that the collateral note was delivered by defendant in accordance with the provisions of the $400 note, and that the alleged oral contract was merged in the written contract, and the alleged oral contract was void under the statute of frauds, and that the court is without jurisdiction to require specific performance of the alleged oral contract.

(7) Because the judgment and decree are erroneous for the reason there is no evidence in the record upon which to base the court's findings of law and fact as set forth in the judgment and decree.

The $400 note in controversy was introduced in evidence by defendant, and in so far as it applies to matters here in issue, it provides as follows:

"* * * Having deposited with the said bank as collateral security for payment hereof 1st mortgage note signed by John T. Lee for $1,500.00 and hereby authorize said bank, by its president, or its cashier, or its assigns, at any time after the principal above becomes due and wholly or partly unpaid, or in case of depreciation in the value of the within named securities, without demand of payment hereof, to pay said indebtedness, or any part thereof, out of any money of the undersigned which the holder of this note may then or thereafter have in or under his, or its, possession or control, or, to sell said collateral securities or any part or parts thereof at public or...