George v. Somerville

• Decision Date: 12 December 1899
• Court: Missouri Supreme Court
• Parties: GEORGE et al. v. SOMERVILLE et al.

54 S.W. 491

153 Mo. 7

GEORGE et al. v. SOMERVILLE et al.

Supreme Court of Missouri, Division No. 1.

December 12, 1899.

NOTES — SECURITY — RELEASE — SURETIES — INDORSERS.

1. Though a national bank is forbidden to lend money on real-estate security, it can enforce such security, if taken; and, where it takes a note without knowledge that it is so secured, it may claim and enforce the same when afterwards discovered.

2. One who indorses a note secured by deed of trust has a right to the security, if he is obliged to pay the note.

3. Where one, having a note secured by deed of trust, assigns the note, he thereafter has no right, though retaining the deed, to release it.

4. Where there was assigned to a bank a note, which, unknown to it, was secured by a deed of trust, and, after such deed was fraudulently released by the person with whom it was left, the land was conveyed by absolute deed to D., in trust for the bank, and D., at the direction of the bank, sold the land to an innocent party, and conveyed it by deed, declaring that the grantee should hold the land free from any claim of right or title, the bank cannot afterwards assert any claim, under the deed of trust, against the title so conveyed by D.

5. Where a bank has cut itself off from asserting any claim against land under a deed of trust securing a note held by it, the sureties on the note are not, after paying it, entitled, by subrogation, to assert any such claim.

6. Indorsers of a note, having paid it, though they were not obliged to, the holders thereof having released lands by which it was secured, cannot assert a claim against the land in the hands of innocent holders.

Appeal from St. Louis circuit court; Selden P. Spencer, Judge.

Suit by Gilbert J. George and others against William Somerville and others. Judgment for plaintiffs, and defendants appeal. Reversed.

Lubke & Muench and Kehr & Tittmann, for appellants. T. K. Skinker and C. R. Skinker, for respondents.

VALLIANT, J.

This is a suit in equity to set aside a deed of release of a deed of trust. The facts of the case are as follows: On July 22, 1892, one McDonald, being then the owner of certain real estate in the city of St. Louis, described in the petition, executed his promissory note for $5,500, payable six months after date to his own order, which he indorsed and delivered to one Alonzo K. Florida, and at the same time executed a deed conveying the real estate mentioned to defendant Penny, in trust to secure the note, which deed was delivered, with the note, to Florida. The plaintiffs then, at the request of Florida, for his accommodation, also indorsed the note. Then Florida, on July 29, 1892, sold and delivered the note, for value, to the St. Louis National Bank. At the time the note was delivered to the bank it seems the bank knew nothing of the deed of trust, but took the note on the faith of the indorsements, but plaintiffs were informed, when they indorsed it, that it was secured by the deed of trust. This deed was never in the bank's possession nor that of plaintiffs. The next day after the bank discounted the note the deed of trust was filed for record. By whom it was delivered for record does not appear, except by inference that it was Florida, as it was in his hands at last information. The defendant Boucher was named in the deed of trust as the party of the third part to whom the debt secured was due, but it does not appear that he ever really had any interest in it, or that the note was ever in his possession. He was a mere employé of Florida, and seems to have done his bidding. On October 12, 1892, while the note was still in the hands of the bank, Penny, the trustee, and Boucher, the nominal beneficiary, executed a deed referring to the deed of trust above mentioned, reciting that McDonald had paid the note therein secured, and then formally releasing the deed of trust. This deed was recorded on the day of its date, and is the gravamen of plaintiff's petition. On October 10, 1892, McDonald executed five principal notes, payable three years after date, for $3,750 each, with interest notes to suit, and a separate deed of trust to secure each of the notes on several parcels of the land above mentioned, which were duly recorded on October 12, 1892. These notes were payable to the order of Florida, who, on the date last named, for value, indorsed and delivered them, with the deeds of trust securing them, to the defendant the Mississippi Valley Trust Company. Of these notes four sets have been paid, and one set is still held by the last-named defendant unpaid. When the Mississippi Valley Trust Company negotiated these notes, it was on a certificate of title showing no prior incumbrance, and it had no notice of the deed of trust first above mentioned. On October 10, 1892, McDonald executed another deed of trust on the real estate first above mentioned to secure a note of his to Florida for $5,500. This deed was recorded October 20, 1892. After the execution by McDonald of the above-described deeds of trust, he, on October 11, 1892, made an absolute deed conveying all the land mentioned to Florida, subject to the incumbrances, which deed was recorded January 7, 1893. On January 9, 1893, Florida and wife, by deed of that date, filed for record the day following, conveyed the real estate to Joseph Dickson for the nominal consideration of $35,000. The real consideration was indebtedness to that amount which Florida owed the St. Louis National Bank. Dickson was the bank's attorney, and took the title in reality as trustee for the bank. On January 21, 1893, Dickson and wife, at the request of the bank, for the consideration of $45,000, executed a deed whereby they remised, released and quit-claimed unto Leroy P. Curtis the land above mentioned, without reference to any incumbrance. The habendum of this deed was: "To have and to hold the same, with all the rights, immunities, privileges, and appurtenances thereto belonging, unto the said party of the second part and his heirs and assigns, forever, so that neither the said parties of the first part, nor their heirs, nor any other person or persons for them or in their names or behalf, shall or will hereafter claim or demand any right or title to the aforesaid premises, or any part thereof, but they, and every of them, shall, by these presents, be excluded, and forever barred." This deed was recorded March 1, 1893. The title conveyed by the last-named deed passed by mesne conveyances to defendant Somerville, to whom it was conveyed April 29, 1893, and he now holds the same. The second $5,500 deed of trust above mentioned — the one from McDonald to Florida's trustee, of date October 10, 1892 — was foreclosed February 21, 1894, and Somerville became the purchaser at the foreclosure sale, and holds that title also. Returning now to the $5,500 note first mentioned, — the one indorsed by the plaintiffs, and discounted by the St. Louis National Bank, — this note was not paid at maturity, but was protested, and notice given the plaintiffs as indorsers. Afterwards Florida paid $500 on it. On March 1, 1894, plaintiff George paid $1,000, and on April 15, 1894, the plaintiffs Albert O. and Theodore T. Terry paid $4,550 to the bank in full, and took up the note. This note was in the possession of the bank as owner from the day it discounted it, July 29, 1892, until its payment by the indorsers, as above stated, April 15, 1894; but the bank never had the deed of trust in its possession, and seems to have had no knowledge of it, and it was never in plaintiffs' possession, but plaintiff's were informed of its existence at the time they indorsed the note, although it was not then recorded. Plaintiffs claim that the deed of Penny and Boucher of date October 12, 1892, whereby they falsely recited that the note was paid, and purported to release the deed of trust, was a fraud on their rights, and they bring this suit in equity to cancel the deed of release and reinstate the deed of trust. To give the plaintiffs the relief they claim would be to incumber defendant Somerville's land with plaintiffs' debt, and make the deed of trust for $3,750, held by the defendant Mississippi Valley Trust Company, a second lien. The decree of the...