Commercial Bank of Boonville v. Varnum
| Decision Date | 19 January 1914 |
| Citation | 176 Mo. App. 78,162 S.W. 1080 |
| Parties | COMMERCIAL BANK OF BOONVILLE v. VARNUM. |
| Court | Missouri Court of Appeals |
Defendant and her husband executed a joint note, and defendant's stock of goods which was managed in her husband's name was sold, and he applied the proceeds to the extinguishment of the note. Before the expiration of four months, the husband became a voluntary bankrupt, and the payment of the note was set aside as a preference. Held that, as the payee of the note succeeded to whatever rights defendant might have in the money, the judgment setting aside the payment as a preference was conclusive upon defendant, though she was not a party.
3. JUDGMENT (§ 948)—FORMER ADJUDICATION—PLEADING—NECESSITY
In an action on a joint note made by defendant and her husband, who became a voluntary bankrupt, defendant set up payment of the note, claiming that a payment by the husband which had been set aside as a preference, discharged the obligation on the theory that the bank participated in a fraud in taking a preference from him over creditors of the husband. Held, that in view of such answer it was unnecessary for the bank to set up in its reply the conclusiveness of the adjudication in bankruptcy that the money paid was the property of the husband.
4. PAYMENT (§ 21)—PAYMENT BY CHECK.
Where a worthless check is given in discharge of a note, it does not operate as a payment.
5. PAYMENT (§ 11)—WHAT CONSTITUTES.
Where counterfeit money is given in payment of a note, it does not satisfy the obligation.
6. BILLS AND NOTES (§ 499)—ACTIONS—PRESUMPTION.
The marking of a note as paid does not raise a prima facie presumption of payment.
7. PAYMENT (§ 27) — BILLS AND NOTES — WHAT CONSTITUTES.
Where one of the joint makers of a note attempted to discharge the instrument by a payment, which was set aside as a preference upon his filing a voluntary petition in bankruptcy within less than four months thereafter, such transaction was not a payment discharging the note, even though it was duly marked paid and delivered to the bankrupt.
8. BANKRUPTCY (§ 428) — DISCHARGE — EFFECT.
A discharge in bankruptcy affects only the liability of the bankrupt and will not release his comaker from liability on a joint note.
9. PAYMENT (§ 27)—ACTIONS—DEFENSES.
That the payee of a note accepted a payment by defendant's joint maker which was a fraud on the other creditors of the joint maker, is no defense to an action against defendant, where such payment was set aside as a preference upon the joint maker's bankruptcy.
Appeal from Circuit Court, Cooper County; J. G. Slate, Judge.
Action by the Commercial Bank of Boonville against Mary E. Varnum. From a judgment for defendant, plaintiff appeals. Reversed and remanded, with directions.
John Cosgrove, of Boonville, for appellant. Roy D. Williams and W. V. Draffen, both of Boonville, for respondent.
Plaintiff sued defendant to recover the unpaid balance due upon a promissory note executed by the latter jointly with her husband, J. B. Varnum. The defense is the note has been paid. Some years prior to the institution of the suit, the defendant, Mrs. Varnum, bought with her own money a stock of merchandise, and her husband, J. B. Varnum, ran the store for her at Rocheport, Mo., carrying on the business in her name. Thereafter the stock was removed to Boonville, where for two or three years the husband conducted the business in his name with his wife's knowledge and consent. It was so conducted down to the time the business was sold, as hereinafter related. Soon after J. B. Varnum commenced business in Boonville, he and his wife, the defendant, began borrowing money from plaintiff on their joint notes, and the money as borrowed was used in the business. It was generally thought that Mrs. Varnum was possessed of means of her own, and the bank lent the money largely on the strength of her credit. In this way the note now in suit came to be made. It was executed on June 9, 1909, and, as stated before, was signed by defendant and her husband, J. B. Varnum. On April 16, 1910, Varnum, who was still running the store in his own name, with his wife's knowledge and consent, sold the stock of goods to D. L. Davis, who gave a check on the plaintiff bank for the purchase price. J. B. Varnum deposited the check to his own credit in the plaintiff bank and then drew his check payable to plaintiff for the amount due on the note and for some store rent also due. Plaintiff's cashier received the check, stamped the note "paid," and delivered it to J. B. Varnum. Within four months thereafter, to wit, on May 24, 1910, J. B. Varnum became a voluntary bankrupt, and W. R. Million was elected trustee of the bankrupt's estate. The payment of the money by Varnum to the bank on April 16, 1910, being within four months of the bankruptcy, was a preference which could be declared void under the National Bankrupt Act. Paragraphs "a" and "b," § 60, Bankruptcy Act of 1898. Million, the trustee in bankruptcy, thereupon brought suit to have said preference and payment declared void and to recover the money so paid. The trustee obtained judgment against the bank which was affirmed by this court. Million, Trustee, v. Commercial Bank of Boonville, 159 Mo. App. 601, 141 S. W. 453. The bank thereupon paid said judgment and then filed its claim against the bankrupt's estate, and was paid thereon the sum of $664.85. Thereupon, after the discharge in bankruptcy of the husband, the present suit was instituted against the other maker of the note, Mrs. Varnum, to recover the remainder due on same.
As stated, the wife's defense is that the note has been paid. The contention involved in that defense is that the stock of goods sold by J. B. Varnum in reality belonged to Mrs. Varnum, and, consequently, the money received for said stock, and used by him in paying said note, belonged to her, and when her husband, J. B. Varnum, paid it to the bank, it was a payment and satisfaction in full of the note. Defendant's further contention is that she was not a party to the suit by the trustee in bankruptcy, and therefore was not bound by the judgment therein rendered declaring void the payment by her husband to the bank, and hence as to her, the situation is the same as if the transaction between her husband and the bank, whereby he used her money to pay the note in question, had never been declared void and the same as if the bank had never been compelled to refund the money. This is the effect of her contention, though, in words, her contention is that, as she was not a party to the bankruptcy suit, she was not bound by the adjudication therein that the title and ownership of the money with which J. B. Varnum attempted to pay the note was in him and not in her. The further contention, apparently, is that, as the bank knew the payment by J. B. Varnum was a voidable preference and knew that the stock belonged to her, it was engaged in a fraudulent transaction when it received the money in payment of the note, and must therefore be left where it has brought itself. There was practically no dispute as to the facts. The court refused to give plaintiff's peremptory instruction...
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