Four-Three-O-Six Duncan Corp. v. Security Trust Co.

• Decision Date: 11 November 1963
• Docket Number: No. 50047,FOUR-THREE-O-SIX,No. 1,50047,1
• Citation: 372 S.W.2d 16
• Parties: DUNCAN CORPORATION, Respondent, v. SECURITY TRUST COMPANY, Appellant
• Court: Missouri Supreme Court

Page 16

372 S.W.2d 16

FOUR-THREE-O-SIX DUNCAN CORPORATION, Respondent, v. SECURITY TRUST COMPANY, Appellant.

No. 50047.

Supreme Court of Missouri, Division No. 1.

Nov. 11, 1963.

Armstrong, Teasdale, Roos, Kramer & Vaughan, Bourne Bean, Walter M. Clark, Donald U. Beimdiek, St. Louis, attorneys for defendant-appellant.

Hocker, Goodwin & MacGreevy, Lon Hocker, St. Louis, attorneys for respondent.

COIL, Commissioner.

Respondent, plaintiff below, filed a suit to restrain appellant Security Trust Company (hereinafter sometimes called Bank) from selling and to regain possession of certain securities which it had pledged as collateral for the performance by respondent of the provisions of a certain guaranty agreement. Bank has appealed from the trial chancellor's judgment ordering it to surrender to respondent the described securities. As will appear from the facts hereinafter stated, jurisdiction is in this court because the amount in dispute exceeds $15,000.

In our de novo review of this equity suit, we weigh the evidence and arrive at our own conclusions as to its weight, deferring to the trial chancellor's findings of fact where proper.

F. W. Strecker, Jr., owned and controlled respondent corporation and was the chief executive officer of F. W. Strecker Transfer Company, Strecker Motor Service, Inc., and Strecker Handling Company, hereinafter sometimes called the Strecker companies. Those companies were tenants in a building located at 4306 Duncan in St. Louis which was owned by respondent Four-Three-O-Six Duncan Corporation (hereinafter sometimes called Duncan Corporation). In 1959 Mr. Strecker and the Strecker companies were indebted to the Bank in the approximate amount of $500,000. Duncan Corporation was organized in May 1959 for the purpose of taking title to 4306 Duncan Avenue and the Bank loaned Duncan Corporation the money with which to purchase that real estate and took a first deed of trust on the property to secure a note evidencing that indebtedness. In February 1960 Mr. Strecker obtained a loan elsewhere and out of the proceeds thereof paid the Bank the amount of its prior loan. At that time Mr. Strecker and the Strecker companies were still indebted to Bank. On February 18, F. W. Strecker, Jr., F. W. Strecker Transfer Company, Strecker Motor Service, Inc., Strecker Handling Company, and Four-Three-O-Six Duncan Corporation (respondent), as parties of the first part, and the Bank (then the Security-Mutual Bank & Trust Company), as party of the second part, executed an instrument called a 'Stand-By Agreement' under the terms and provisions of which it was recited that the first parties were indebted to second party either as principal debtors or as guarantors; that the indebtedness was overdue; that first parties desired to modify the terms as to the overdue indebtedness and, consequently, first parties agreed that Mr. Strecker would pledge his entire stock interest in Duncan Corporation with second party (under the same terms as certain other stock was held under a prior agreement, the details of which are unimportant here); that beginning February 22, 1960, they would pay to second party $1,000 each week to be applied on the principal indebtedness of first parties, and second party agreed that it would not call any of the present indebtedness of any of the first parties because of its delinquency so long as the weekly payments were made. It was further agreed that in the event of default in the weekly payments, second party had the option to terminate the stand-by agreement and, in any event, second party, in its sole discretion, could cancel that agreement with or without cause on 90-days' notice to first parties of its intention to so do.

On February 19, 1960, Duncan Corporation, by F. W. Strecker, Jr., as its president, executed a continuing guaranty agreement by which it guaranteed to Bank the prompt payment, as they might mature, of any and all loans made or which might be made to, or of any and all indebtedness then due or which might thereafter be due from F. W. Strecker, Jr., F. W. Strecker Transfer Company, Strecker Motor Service, Inc., and Strecker Handling Company. As collateral security for the performance of the obligations of that agreement and to secure the payment of any other liabilities, present or future, direct or indirect, of the Duncan Corporation to Bank, Duncan Corporation pledged collateral consisting of three promissory notes in the total face amount of $115,000 and a note for $350,000 secured by a second deed of trust on the Duncan Avenue real estate. Paragraph 6 of the continuing guaranty agreement provided as follows:

'6. Upon the maturity of any note the payment of which is hereby guaranteed or upon the maturity of any indebtedness of the undersigned, the Bank may, without notice or demand, forthwith apply any balances of any deposits of the undersigned with said Bank toward the payment of such note and of any or all of the liabilities of the undersigned to said Bank, and may likewise forthwith realize upon any property of the undersigned in its posses(s)ion and receive the proceeds therefrom, and may also, without demand, advertisement or notice, sell at public or private sale, or at any exchange or broker's board, at such prices as it may deem best, and either for cash or on credit, or for future delivery, any part or all securities or property of any kind held by it as collateral security or on which it may have a lien for the indebtedness of the undersigned as hereinabove provided, and with the right in said Bank at any such sale, public or private, to purchase the whole or any part of such securities of property so sold, free from any right or equity of redemption in the undersigned, any such right or equity of redemption being hereby expressly waived by the undersigned.'

In November or December 1960, Mr. Strecker informed officers of the Bank that he desired to increase the amount of the present loan on the Duncan Avenue realty (not made or held by Bank) and inquired whether, in the event a new deed of trust and note were executed, such new deed of trust would have superiority over Bank's second deed of trust. Apparently Bank agreed to cooperate with the understanding that some portion of the cash received by Duncan Corporation as a result of the new loan would be paid Bank to be applied against existing indebtedness of the Strecker companies. Mr. Strecker proceeded under the arrangement and was able to obtain an additional $50,000 or $55,000 on a new first deed of trust and Bank, in accordance with its agreement, took a new second deed of trust securing a new $350,000 note, both dated January 10, 1961.

On that same day, January 10, 1961, a new guaranty agreement (in the same form and containing the same provisions as the prior one) was executed by Duncan Corporation by F. W. Strecker, Jr., as president, in which the same three notes which had been pledged by the February 1960 guaranty agreement were again pledged as collateral and the new $350,000 note and second deed of trust securing it replaced the February 1960 $350,000 note and deed of trust as collateral. On the same day, January 10, 1961, the parties to the February 18, 1960, stand-by agreement executed what they called 'Supplement To Stand-By Agreement Dated February 18, 1960,' in which new agreement it was recited that the prior stand-by agreement was attached and made a part of the new agreement; that certain financing had been obtained by one of the parties of the first part (Four-Three-O-Six Duncan Corporation) based upon the expressed 'willingness' of Bank to accept a new note and deed of trust to replace the former note and deed of trust which had been lodged with Bank as security for the performance of Duncan Corporation's prior guaranty agreement; that from the proceeds of the new loan parties of the first part were to pay Bank $20,000 on the Strecker companies' indebtedness; and that the parties desired to modify the prior stand-by agreement in certain respects. It was therefore agreed that Bank would release the note and deed of trust dated February 19, 1960, held as collateral under the 1960 guaranty agreement and would accept in its stead a new note and second deed of trust dated January 10, 1961; and first parties agreed to forthwith cause to be paid to Bank $20,000 of the proceeds of the new financing to be applied on the first parties' indebtedness; and the stand-by agreement of February 18, 1960, was modified by providing that Bank could cancel that agreement by giving 10 instead of the formerly required 90-days' notice of its intention to so do.

Paragraph 4 of said supplement to the stand-by agreement was:

'4. Except as so modified and except for the substitution of the new Note and Second Deed of Trust as collateral security under the Guaranty Agreement of Four-Three-O-Six Duncan Corporation, all of the terms and conditions of said Stand-By Agreement relating to the overdue indebtedness of Parties of the First Part to Party of the Second Part shall remain unchanged and in full force and effect, and said Stand-By Agreement is ratified and affirmed in all respects.'

By the first part of 1962, Mr. Strecker and the Strecker companies were in default in the required $1,000 weekly payments and, by April 1962 they owed the Bank in excess of $300,000. On April 25 the Bank mailed the following letter addressed to F. W. Strecker, Jr., F. W. Strecker Transfer Co., Strecker Motor Service, Inc., and Strecker Handling Company:

'Pursuant to the terms of Stand-By-Agreement, dated February 18, 1960, and a Supplement thereto, dated January 10, 1961, executed by F. W. Strecker, Jr., F. W. Strecker Transfer Co., Strecker Motor Service, Inc., Strecker Handling Co., Four-Three-O-Six Duncan Corporation and the Security Mutual Bank & Trust Company, you are hereby given notice of the undersigned's intention to cancel and terminate said agreements.

'You are further notified that Security...