Bruegge v. State Bank of Wellston

• Decision Date: 17 July 1934
• Docket Number: No. 32155.,32155.
• Citation: 74 S.W.2d 835
• Parties: BRUEGGE et al. v. STATE BANK OF WELLSTON et al.
• Court: Missouri Supreme Court

74 S.W.2d 835

BRUEGGE et al. v.STATE BANK OF WELLSTON et al.

No. 32155.

Supreme Court of Missouri, Division No. 1.

July 17, 1934.

Motion for Rehearing Overruled September 18, 1934.

Appeal from Circuit Court, St. Louis County; Julius R. Nolte, Judge.

Action by August Bruegge and others against the State Bank of Wellston and others.From the decree, plaintiffs appeal.

Affirmed.

Clarence G. Baxter and A. G. Schumacher, both of Clayton, for appellants.

Bryan, Williams, Case & McPheeters, of St. Louis, for respondents.

HYDE, Commissioner.

This is an action in equity for cancellation of trust deeds, securing obligations aggregating $72,530, on land both in St. Louis county and in the city of St. Louis, and for an accounting.The case was heard by a referee who made a comprehensive finding of facts, stated an account between the parties, and made recommendations for a decree fixing the amount which plaintiffs should pay and requiring the deeds of trust to be canceled.Both plaintiffs and defendants filed exceptions to the referee's report.Plaintiffs' exceptions were overruled and defendants' exceptions were sustained as to a certain credit allowed plaintiffs and as to the cancellation of the trust deeds before plaintiffs' debt was paid.A decree was entered otherwise substantially in accordance with the referee's recommendations.Plaintiffs have appealed from this decree.

The substance of the claims made by plaintiffs in their petition is stated in their brief as follows:

"That in March, 1924, the plaintiffs began the development of a certain tract of land known as the Bruegge Subdivision, which was partly in St. Louis County and partly in St. Louis City, through the erection of a number of residences. * * *

"That plaintiffs were inexperienced in accounting and bookkeeping, and so informed the defendant Bank, and that the Bank, through its officers and agents, told plaintiffs that it would advise them, and did pretend to advise plaintiffs about the handling of their accounts and business; that plaintiffs implicitly relied upon the good faith, honesty and integrity of the Bank and its officers in that regard, and that so relying plaintiffs did not keep any book record of their dealings with said Bank except a pass book.That the defendant bank did not honestly advise the plaintiffs concerning their accounts and financial dealings, and did not honestly keep a correct record of their financial transactions, but on the contrary, fraudulently, deceitfully and unlawfully, and without plaintiffs' knowledge and consent, charged them high and usurious rates of interest on loans, and unlawfully charged them large sums as commissions for money loaned, and fraudulently failed to credit them with large sums paid in liquidation of their indebtedness, the exact amount of which they were unable to state, but upon information and belief allege that they had been unlawfully charged $4,500.00 in usurious interest, and had been unlawfully charged $6,500.00 as commissions on loans, and that the defendant Bank had fraudulently failed to credit them with payments on their indebtedness in sums aggregating $19,000.00, and that all of said amounts could be determined only by an examination of the books and records of defendant Bank and a full accounting between the parties. * * *

"That on or about October 1, 1927, plaintiffs contemplated the development of another tract of land lying south of the first tract; that the defendants, knowing of such contemplated development and pretending to advise the plaintiffs, proposed that plaintiffs execute for the benefit of the defendant Bank a principal note in the sum of $30,000.00 with six semi-annual interest notes in the sum of $900.00 each, secured by a blanket deed of trust on said second subdivision, and that said Bank would hold said notes and said blanket deed of trust as security for moneys plaintiffs might thereafter borrow from said Bank to be used in said development, and that said defendant Bank would allow plaintiffs to borrow against said notes so secured by said blanket deed of trust, an amount equal to the said sum of $30,000.00; that the plaintiffs, still relying on the good faith, honesty and integrity of the defendants, executed said notes and deeds of trust securing the same."(It was this deed of trust and others given to replace it upon parts of the land that plaintiffs asked to have canceled.)

Defendants' answer was a general denial, pleas of account stated, laches, limitations, and estoppel, and a cross-bill which alleged that plaintiffs owed the bank five demand collateral notes, designated Exhibits 1 to 5, of a total amount of $21,640, which were secured by the trust deeds sought to be canceled; that plaintiffs owed the bank nine other notes (signed by some of plaintiffs), designated Exhibits 6 to 14, aggregating $13,945.32; that the trust deeds were held as security for the payment of all of them; and asked that they be ordered sold to pay them.Plaintiffs' reply admitted the execution of the five collateral notes, but alleged that there had been material alterations in them which prevented recovery by the bank and alleged that there was no consideration for the other notes.

The facts, which form the background of this case, found by the referee, are stated in plaintiffs' brief as follows:

"The referee found that appellants, who are designated in the evidence as `The Bruegges,' inherited from their father a small tract of land lying partly in St. Louis County and partly in St. Louis City; that during his lifetime the father of appellants operated a `truck patch' on said land and transacted all of his banking business with the State Bank of Wellston, referred to in the evidence as `The Bank'; that the then president of said bank was a personal friend of appellants' father and advised said father in regard to all of his financial affairs; that when the sons, appellants herein, came into their father's estate they likewise advised with said bank; that the Bruegge brothers had received a very meager schooling and were `wholly lacking in that character of commercial experience or ability even necessary to have succeeded in the enterprise which gave occasion to this lawsuit'; that they, like their father before them, sought the advice and counsel of respondent bank in all their financial transactions, and that they were ignorant of business transactions, unable to read or write understandingly, and that the bank kept the records of all their financial transactions had with said bank.The referee further found as a matter of fact that said bank, in its dealings with appellants, breached their trust in said bank in the matter of their financial transactions and `entirely overreached the Bruegges, took advantage of their ignorance and their abiding faith in the integrity of the officers of the bank to honestly advise them in their business transactions, and thereby secured a contract from them so inequitable and unjust as to set the same aside.'(Making plaintiffs' obligations due on demand after they were secured by deeds of trust.)

"The referee further found that during the year 1924 the bank suggested to the Bruegges that, inasmuch as their land, which they had up to that time been using as a truck farm, had become too valuable for farming purposes, it would be to their advantage (the Bruegges) to subdivide the land, improve the same with streets, alleys and sewers, and erect houses thereon to be sold to the public; that the bank would assist them in financing said subdivision; that as a result of these conferences the Bruegges did subdivide the north half of their truck farm, lay out streets and alleys, build sewers, erect houses thereon and market a great number of these houses, and that the respondent bank, pursuant to promise, did finance the enterprise, which was carried out in the years 1924 to 1927, inclusive; that in the summer of 1927, after the Bruegges had disposed of the major portion of the lots and houses in the first subdivision, the bank suggested to them that they subdivide the south half of their land and develop the same in the manner they had developed the first subdivision, and that said bank would loan all the money necessary for said development up to the sum of $30,000 upon their note, due in three years, secured by a `blanket deed of trust,' without other notes or security; * * * that in October, 1927, the Bruegges did execute and deliver to the bank their principal note for $30,000, with 6 per cent interest, due in three years, payable to the order of Fred L. Wuest, the bank's straw man, who endorsed the same without recourse and delivered it to the bank, which note was secured by a deed of trust to George W. Rinkel, vice-president of the bank, as trustee, and which deed of trust is referred to in the evidence as the blanket deed of trust; that no money was given to the Bruegges on account thereof, no interest paid thereon, demanded or expected."

The report of the referee further found the facts as follows:

"It seems that upon the delivery of this blanket trust deed on October 12, 1927, a decided change came over the attitude of the Bank toward the Bruegges.The Bruegges in their devotion to the Bank did not see the change, but it shines out like a beacon light on the stormy sea of this litigation.Had they possessed ordinary business sagacity they might have realized that by their venture they had only succeeded in raising on the north half a crop of mortgages, the interest on which worked while they slept; that they then owed the Bank $16,950.00 with a first mortgage on the south half.In their apparent guilelessness they cheerfully signed the note for $30,000.00 due in three years, trusting that their friend, the Bank, under the magic of a blanket deed of trust would somehow pull them out, yet I find that within three weeks after the blanket deed was given the old note of $7,500.00, Exhibit 1, not yet due for fifteen months...