Commerce Trust Co. v. McGirk State Bank

• Decision Date: 05 December 1927
• Docket Number: No. 15809.,15809.
• Citation: 300 S.W. 526
• Parties: COMMERCE TRUST CO. v. McGORK STATE BANK OF McGERK et al.
• Court: Missouri Court of Appeals

300 S.W. 526

COMMERCE TRUST CO. v. McGORK STATE BANK OF McGERK et al.

No. 15809.

Kansas City Court of Appeals, Missouri.

December 5, 1927.

Appeal from Circuit Court, Moniteau County; Henry J. Westhues, Judge.

Action by the Commerce Trust Company against the McGirk State Bank of McGirk and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

James E. Goodrich, H. G. Leedy, and Milford W. Rider, all of Kansas City, for appellant.

Embry & Embry and S. C. Gill, all of California, Mo., for respondents.

BLAND, J.

This is an action in two counts, each being upon a certificate of deposit issued in the name of the defendant, the McGirk State Bank, by C. F. Moore, cashier, in favor of one H. T. Severin. Both of the certificates were dated August 20, 1921, one is in the sum of $2,000 and the other in the sum of $3,000, and payable six months after date in current funds; they bore three per cent. interest per annum from date but no interest after maturity. The certificates were indorsed and delivered by said Severin before maturity to plaintiff. At the close of plaintiff's testimony the court at the request of defendants instructed the jury to return a verdict in favor of defendants on both counts of the petition, resulting in a verdict and judgment in their favor, and plaintiff has appealed.

The testimony tends to show that the Motor & Finance Company, a corporation of Kansas City of which Severin was president, together with Severin individually, was indebted to plaintiff on August 27, 1921, upon several notes, one of the notes being in the sum of $20,000, dated August 1, 1921, and due upon demand. This note was secured by a chattel mortgage on certain motorcars in the corporation's place of business. On August 27, 1921, Severin brought to plaintiff the two certificates of deposit in question and offered them to it to take the place of certain motorcars covered by plaintiff's chattel mortgage. Severin had sold these motorcars on an understanding that he was to pay over the sale price thereof to plaintiff on its debt but he reported on said date that he was unable to make this payment. Therefore, the certificates of deposit were to be taken as additional security because the chattel mortgage had been made of less value by reason of the sale of the motorcars. Severin delivered the certificates to plaintiff which agreed to accept them as security, in view of the fact that the cars had been sold, until the factory with which Severin was dealing, sent some new cars with shipper's order bill of lading with sight draft attached. These papers were to come through plaintiff bank and when they arrived the latter was to use the certificates of deposit to pay the draft, Severin stating that the factory had agreed to accept the certificates in payment of the cars, and plaintiff was to take the bill of lading covering these new cars as substituted collateral security for the $20,000 note. The certificates were never exchanged for the draft and bill of lading because the McGirk State Bank closed its doors before the arrival of the shipment of motorcars.

The debt, on account of which Severin delivered the unpaid certificate of deposit to plaintiff bank, remains unpaid in an amount greatly in excess of the certificates in question. The McGirk State Bank was taken in charge by the state commissioner of finance and was at the time of the trial in possession of the defendant A. B. Cole, special deputy commissioner of finance in charge of defendant bank.

The records of defendant bank show that the certificates of deposit sued on were duly recorded in the records of the bank kept for that purpose and that Moore who signed them as cashier was its cashier and a member of the board of directors, an executive officer and the manager of the bank, and that he received all of its deposits and had the custody of the bank's books.

The separate answers of defendants pleaded that the certificates of deposit were executed without consideration to the defendant bank and defendants sought to show at the trial that no money was "deposited with the McGirk State Bank for these certificates sued on in this case," but objection was sustained to the question.

It is insisted that the court properly sustained the demurrer to the evidence for the reason the certificates were delivered to plaintiff as collateral security for a pre-existing indebtedness to the bank and there was no other consideration shown for their delivery to it. In support of their contention that one who takes collateral security for a pre-existing debt is not a holder of the collateral in due course, defendants rely upon the case of Kincaid v. Estes, 218 Mo. App. 109, 262 S. W. 399, 403, decided by this court, and Wright v. Mississippi Trust Co., 144 Mo. App. 640, 129 S. W. 407, decided by the Springfield Court of Appeals. The rule claimed by defendants was in force in this state prior to the enactment of the Negotiable Instruments Act but ...