Gate City Nat. Bank v. Elliott

• Decision Date: 02 December 1915
• Docket Number: No. 16539.,16539.
• Citation: 181 S.W. 25
• Parties: GATE CITY NAT. BANK et al. v. ELLIOTT et al. SAME v. RUPPEL et al.
• Court: Missouri Supreme Court

181 S.W. 25

GATE CITY NAT. BANK et al. v. ELLIOTT et al.

SAME v. RUPPEL et al.

No. 16539.

Supreme Court of Missouri, Division No. 1.

December 2, 1915.

Appeal from Circuit Court, Dade County; B. G. Thurman, Judge.

Suit by the Gate City National Bank and others against S. G. Elliott and another, consolidated with a suit by the same plaintiff's against B. V. Ruppel and another. Judgment for defendants, and plaintiffs appeal. Reversed, and cause remanded, with directions to enter judgment for plaintiffs.

McCune, Harding, Brown & Murphy, of Kansas City, and J. B. McGuffin, I. V. McPherson and McNatt & McNatt, all of Aurora, for appellants. Edgar P. Mann, of Springfield, H. H. Bloss, of Aurora, and Edw. J. White, of St. Louis, for respondents.

BLAIR, J.

This is an appeal from a decree of the Dade circuit court dismissing bills brought to have certain warranty deeds declared mortgages and for foreclosure, etc. Two separate suits were begun, but were consolidated and tried as one. The real defenses set up in the amended answer were: (1) Lack of consideration; (2) duress; and (3) want of title in plaintiffs. There was also a prayer for the cancellation of the deeds counted on in the petition and for judgment for $400, averred to have been the proceeds of some lots sold.

The record shows that for some time prior to the fall of 1907 defendant Elliott was vice president and a director of the Miners' & Merchants' Bank of Aurora, Mo. His son-in-law, Loy, was the cashier of the institution, and was heavily indebted to it. The weight of the evidence is that the amount Loy had borrowed from the bank and those amounts for which he was responsible as the practical owner of a company or two which had borrowed considerable sums approximated $10,000. It appears there was no irregularity in these loans, except that their total considerably exceeded one-fourth of the capital and surplus ($25,000) of the bank, which was the statutory limit upon the amount which could be loaned Loy.

About October 1, 1907, Elliott and Loy sold 54 shares of stock to W. P. Sparks, and Loy retired from the bank, Sparks becoming cashier. Elliott continued as vice president until January 1, 1908. In the early part of January, 1908, the board of directors of the bank discovered the fact that Loy's obligations to the bank amounted to some $10,500, and began to press him for payment or security. Loy had been and then was dabbling in mines, and he and Elliott, it appears, were of the opinion that he then had pending negotiations which would in all probability result in enabling him to meet his indebtedness out of the proceeds of the sale of the Golden Jack mine. An extension of time was necessary, however, in order that this hope might be realized. Loy discussed the matter with the officers and directors. There is some evidence that he offered to mortgage his home. He discussed the matter with his father-in-law, Elliott, and Elliott went to the bank, upon the invitation of the bank officials, and the situation was there considered. The upshot of the matter was that Loy executed his note for a little over $6,000, and Boyer, one of the directors, executed his note for $4,306, the balance of Loy's indebtedness. These notes were dated January 15, 1908, and became due in 90 days. Previously Elliott had conveyed to B. V. Ruppel many lots in the High School addition to Aurora, including those described in the petition, in order that Ruppel might sell the property for Elliott and execute deeds to purchasers, without, as Elliott put it, "bothering" the Elliotts to make deeds. Ruppel had executed his note to Elliott for $11,000, but this seems to have been intended to constitute no fixed obligation in case Ruppel fulfilled his trust. Probably as a result of sales and consequent credits the amount apparently due on the $11,000 note from Ruppel to Elliott had been reduced to $6,500. The lots described in the petition were in fact, therefore, Elliott's property, held in trust for the purposes of sale for him by Ruppel. Elliott himself held title to the 15-acre tract involved in these proceedings.

Upon January 17, 1908, Elliott and wife executed a warranty deed, reciting a consideration of $5,000, which in terms conveyed to the bank the 15-acre tract described in the petition. On the same date Ruppel and wife executed their warranty deed, reciting a consideration of $5,000, which in terms conveyed to the bank the lots in the High School addition here in controversy. Upon the same date Elliott and Ruppel executed an agreement as follows:

"This contract, made and entered into this 17th day of January, 1908, witnesseth: That S. G. Elliott, party of the first part, and B. V. Ruppel, party of the second part, have entered into the following agreement: Whereas, the second party has given to the said first party a note of $11,000, dated August 27, 1906, there has been paid upon said note to September 17, 1907, $4,500. Party of the first part, for and in consideration of $5,500, gives said note credit on this day for that amount. Party of the second part has given this day deed to the Miners' and Merchants' Bank for twenty-five lots in Elliott's High School addition, to be held as security for two certain notes, one for $4,306.58, given by J. H. Boyer, and one for $6,075.65, given by D. B. Loy, due April 15, 1908. When said deed, which will not be entered upon record unless said notes are not paid, is turned back by Miners' & Merchants' Bank to said second party, the said second party waives credit of $5,000, and balance on note will be $6,500, the same as before, and deeds will be destroyed. It is further agreed that party of the first part pays all taxes on all the lots in Elliott's High School addition that are held in B. B. Ruppel's name until said note for $11,000 is paid. Witness our hands this 17th day of January, 1908."

On the same day Elliott and the Miners' & Merchants' Bank executed the following agreement:

"This agreement, made and entered into by and between the Miners' & Merchants' Bank of Aurora, Missouri, a corporation, as party of the first part, and S. G. Elliott of Aurora, Missouri, as party of the second part, witnesseth: That the party of the second part is to deposit with the party of the first part one warranty deed to be held in escrow by B. V. Ruppel, to secure the payment of two promissory notes, held by the party of the first part and described as follows: One note dated January 15, 1908, payable 90 days after date, in favor of Miners' & Merchants' Bank of Aurora, Mo., for $4,306.58, with interest at 8% from maturity, due April 15, 1908, and signed by J. H. Boyer; one note dated January 15, 1908, payable 90 days after date, in favor of Miners' & Merchants' Bank of Aurora, Mo., for $6,075.65, with interest at 8% from maturity, due April 15, 1908, and signed by D. B. Loy. The conditions are such that, whenever the notes above described are paid, then this contract is to be null and void and the deeds returned to the party of the second part. It is further agreed by the parties hereto that this contract may be extended from time to time, for a period of one year, provided said notes are not paid at maturity, and the first note to be paid is the one signed by J. H. Boyer for $4,306.58. On the payment of the above notes, the notes are to be turned over to said party of the second part, and signed over without recourse. Witness our hands this 17th day of January, 1908."

These deeds and agreements were put in escrow as agreed. The notes were not paid when they fell due, but, the evidence indicates, were renewed several times. August 3, 1909, the board of directors, at a special meeting, ordered the notes in suit sold and transferred to the individual plaintiffs in this case, who subsequently hypothecated them to the Gate City National Bank. In the meantime defendant Elliott had been attempting to induce the bank to accept the lands involved, free from all liens, and to indorse the Loy and Boyer notes to him. This he did, both by word of mouth and by letter. The bank consistently refused. The reason probably was that this would not protect Boyer, who was an accommodation maker, and seemed to be intended to be fully protected by the provision in Elliott's contract to the effect that his note was first to be paid out of the sales of the lands involved; the lands being concededly worth materially more than the amount of his note.

As stated, two suits were instituted. The petitions were substantially alike. The plaintiffs in each were the individual plaintiffs named above; the Gate City National Bank not being an original plaintiff in either suit. One suit was against Ruppel and wife, and one against Elliott and wife, and the purpose of each was to reach by foreclosure the lands to which the respective defendants had executed the deeds in escrow. The Ruppels filed answer, admitting "that the allegations of plaintiffs' petition herein are substantially true," and thereafter the court, on Elliott's motion previously filed, consolidated the causes. Defendants Elliott thereafter filed an answer, in which they set up, among other things, that neither the then plaintiffs nor the Miners' & Merchants' Bank had any legal or moral right to the securities or property in suit, but that the notes in suit had been hypothecated and pledged to the Gate City National Bank, "a corporation, which now holds the legal title thereto and is alone authorized to sue thereon."

Defendants then took a change of venue from Lawrence county to Dade, and in the Dade circuit court the Gate City National Bank filed its application to be made a party plaintiff, alleging that it held the notes in suit, as well as the deeds and contracts described in the petition and answer, as collateral security for a debt due it from the individual plaintiffs in the sum of $8,500. The application was sustained, and plaintiffs joined the Gate City National Bank, filing amended petitions, setting...