Cox v. Sloan

• Decision Date: 30 June 1900
• Citation: 158 Mo. 411,57 S.W. 1052
• Parties: COX v. SLOAN.
• Court: Missouri Supreme Court

57 S.W. 1052

158 Mo. 411

COX v. SLOAN.

Supreme Court of Missouri, Division No. 1.

June 30, 1900.

BILLS AND NOTES — CONSIDERATION — PAYMENT — APPLICATION — EVIDENCE — APPEAL AND ERROR.

1. The extension of time of payment of notes is a sufficient consideration for the giving of other notes as collateral security therefor.

2. Where defendant in the lower court elicited from his own witness testimony as to the circumstances under which the notes in suit were given, he cannot be heard to contend on appeal that such evidence was not admissible.

3. Where notes signed by the cashier and assistant cashier of an insolvent bank on the face, and by the bank itself on the back, were given to secure an overdraft of such bank, such notes were the joint obligations of the bank and the cashiers; and hence, where the president gave his note as collateral for all of the bank's indebtedness, the holder was entitled to apply the proceeds thereof to the payment of the notes given for the overdraft as an indebtedness of the bank.

4. Where a debtor bank gave collateral security to its creditor, and also made payments on the indebtedness, without directing how they should be applied, the creditor was entitled to apply such payments and the proceeds of the collaterals as he saw fit.

5. Defendant, as president of an insolvent bank, executed his notes as collateral security for all its indebtedness to another bank. After deducting certain payments made on such indebtedness, and the sum realized on collateral security given therefor, there still remained due a sum exceeding the face of the notes executed by defendant. Held, that plaintiff, as trustee for the creditor bank, was entitled to judgment for the whole amount of the notes.

Appeal from circuit court, Cass county; W. W. Wood, Judge.

Action by W. O. Cox, as trustee for the Kansas City State Bank, against S. A. Sloan on two promissory notes. From a judgment in favor of defendant, plaintiff appeals. Reversed.

This is a suit on two promissory notes for $6,000 and $4,000, respectively, executed by the defendant to the order of the plaintiff, on July 16, 1895, with 8 per cent. interest from maturity. The answer admits the execution of the notes; pleads want of consideration; avers that on July 16, 1895, the Farmers' & Merchants' Bank of Creighton was indebted to the Kansas City State Bank in the sum of $21,000, evidenced by two notes for $12,000 and $9,000, respectively, which were indorsed by the seven directors, among them the defendant, of the Creighton bank, and that the notes sued on were executed by the defendant to the plaintiff as additional collateral security for the $12,000 and $9,000 notes, and for no other consideration, and were made long after said notes last aforesaid, and after the consideration therefor had passed; that, if there was any other consideration for the notes in suit, it was not known by the defendant, but was purposely concealed from him when those notes were obtained from him; charges that the Kansas City State Bank received from the Creighton bank notes of the face value of more than $50,000 as collateral security for the $12,000 and $9,000 notes, of which it has collected $18,000, and asks to have that credited on those notes; and asks that an accounting be had as the amount collected of said collateral, and that the sum collected be applied as a credit on the $12,000 and $9,000 notes. The reply is a general denial.

The case was tried before the court, but whether as a court of law or as a court of equity the parties are disagreed. The plaintiff offered the notes in evidence, and then rested. The further facts which are in this record are as follows: The Creighton bank was organized in 1888, and since 1889 the defendant, Sloan, has been its president, D. B. Wallis its cashier, and I. B. Wallis its assistant cashier. The plaintiff during that time has been the president of the Kansas City State Bank, and F. C. Adams the treasurer thereof. The only correspondent the Creighton bank has had since 1889 was the Kansas City State Bank. During all that time the business of the Creighton bank has been done almost exclusively by the cashier, D. B. Wallis, the other officers and directors paying practically no attention to the business of the bank. The Creighton bank became a borrower from the Kansas City State Bank almost from the beginning, and on December 30, 1893, the former bank owed the latter $37,598.24, of which $14,598.24 was an overdraft, which was unsecured, and the balance was secured by the individual note of Cashier Wallis for $20,000, dated September 16, 1893, and that note was secured by a deed of trust on 400 acres of land. The Kansas City State Bank was dissatisfied with this status of affairs, and it was agreed that, to cover the overdraft, the two Wallises should each execute two joint and several notes for $7,500 each, to the order of the Kansas City State Bank, and the Creighton bank should, before the delivery thereof, sign its name on the reverse side thereof; which being done, the proceeds, amounting to $14,890, were placed to the credit of the Creighton bank by the Kansas City State Bank, thereby wiping out the overdraft of $14,598.24, and leaving a credit of $276.49 to the Creighton bank. The remainder of the indebtedness of the Creighton bank to the Kansas City State Bank was evidenced and secured by a note or notes of the Creighton bank, indorsed by the seven directors, so that on the 1st of July, 1895, this indebtedness, amounting to $22,000, was evidenced by two notes for $12,000 and $10,000, respectively, which fell due at about that date, and which are the notes referred to in the answer as the notes for which the notes in suit were given as collateral security; the $10,000 note, however, being referred to as a $9,000 note, but this arises from the fact that shortly thereafter there was a payment of $1,000 made on the $10,000 note, and so, all through the case, it is referred to as a $9,000 note, and it will be so referred to hereinafter. When these two notes fell due, July 1, 1895, or shortly afterwards, the Creighton bank sent renewal notes therefor, as it had been doing for several years previously; but, instead of accepting them, Adams, the assistant cashier of the Kansas City State Bank, took all the notes, old and new, and went to Creighton, and told Wallis, the cashier of the Creighton bank, that his bank was not willing to renew the $12,000 and $9,000 notes unless it got more collateral or security. At that date the two Wallis notes, of $7,500 each, had been reduced to $5,500 each by a payment on June 28, 1894, by the Creighton bank, of $4,000, of which $2,000 was applied on each (and thereafter, on July 17, 1895, there was a further payment of $1,000 thereon by the Creighton bank, so that those notes are referred to as the two Wallis $5,000 notes). On the 15th of July, Wallis went out to see the defendant about the difficulty, and upon his return reported that the defendant would not obligate himself further in the matter. On July 16th, Adams went out to see the defendant, and, according to Adams' testimony, showed him the four notes, to wit, the $12,000, the $9,000 (then $10,000), and the two Wallis notes for $5,500 each, which aggregated at that date $33,000; but, according to the defendant's testimony, Adams showed him only the $12,000 and the $9,000 (then $10,000) notes; and, according to Adams' testimony, he told the defendant the Kansas City State Bank would not renew those unless it got more security; but, according to defendant's testimony, Adams simply said his bank must have more collateral security, and did not make the renewal of those notes to depend upon getting more security. However, the conference resulted in the defendant executing the $6,000 and $4,000 notes in suit, and securing them by a deed of trust on certain lands of the defendant. Adams agreed not to put the deed of trust on record at once, and on the 17th the $12,000 and $10,000 notes were renewed, and the old notes canceled. When Wallis returned from his visit to defendant, on the 15th, he brought Adams the following note from defendant: "7, 15, `95. F. C. Adams — Dear Sir: Mr. Wallis can give you a list of my land. I have no mortgages against any of it. You hold our notes signed individually, and you have collateral notes, Mr. W. says, to the $30,000. I don't think it advisable to mortgage my land, as records would show it, and it would be against our business. We can pay off gradually at least $1,000 per month. S. A. Sloan."

At the time the defendant executed the notes in suit, with the deed of trust securing them, Adams, for plaintiff, and the defendant, made the following written contract: "Whereas, the undersigned, S. A. Sloan, has executed and delivered to Wiley O. Cox, trustee, his certain two promissory notes in the sum of $4,000 and $6,000, respectively, dated Kansas City, Missouri, July 16th, 1895, and payable at the Kansas City State Bank, in said city, on or before six months after their date, with interest from its maturity at the rate of eight per cent. per annum secured by deeds of trust on certain lands in Cass and Henry counties, Missouri (for a more particular description of which reference is hereby made to said deeds of trust of even date herewith), it is hereby agreed between said S. A. Sloan and Wiley O. Cox, trustee, that said notes have been executed and delivered to said Cox, who is the president of said Kansas City State Bank, as agent and trustee for said Kansas City State Bank, and as collateral security for the indebtedness of the Farmers' & Merchants' Bank of Creighton, Missouri, to said Kansas City State Bank, the said S. A. Sloan being desirous to secure the indebtedness of the said Creighton bank; and it is further agreed by said S. A. Sloan that said Kansas City State Bank may at any time change the form of the...