Globe Indem. Co. v. Mississippi Valley-Merchants' State Trust Co.

• Decision Date: 15 September 1931
• Citation: 41 S.W.2d 962,226 Mo.App. 92
• Parties: GLOBE INDEMNITY COMPANY, A CORPORATION, RESPONDENT, v. MISSISSIPPI VALLEY-MERCHANTS STATE TRUST COMPANY, A CORPORATION, AND HATTIE F. KAUFFMAN (DEFENDANTS), HATTIE KAUFFMAN, APPELLANT. *
• Court: Missouri Court of Appeals

41 S.W.2d 962

226 Mo.App. 92

GLOBE INDEMNITY COMPANY, A CORPORATION, RESPONDENT, v. MISSISSIPPI VALLEY-MERCHANTS STATE TRUST COMPANY, A CORPORATION, AND HATTIE F. KAUFFMAN (DEFENDANTS), HATTIE KAUFFMAN, APPELLANT. *

Court of Appeals of Missouri, St. Louis

September 15, 1931

Appeal from the Circuit Court of the City of St. Louis.--Hon Granville Hogan, Judge.

Reversed and remanded. (with directions).

Jones Hocker, Sullivan & Angert and W. A. McCaleb for appellant.

(1) An instrument is not negotiable unless its terms comply with the statute, and, in the absence of such requirements, words of the parties declaring that the instrument shall be negotiable are ineffective. R. S. 1929, sec. 2630; Bailey v Smack, 61 Mo. 213; St. Louis Continental Coal Co. v. Southern Coal Co., 194 Mo.App. 598; Aufderheide v. Moller, 221 Mo.App. 442; Kirkpatrick v. Libus, 211 S.W. 572; Bank of California v. National City Co., 251 P. 561; American National Bank v. Somerville, 216 P. 376. (2) The bonds involved in this action are not negotiable, because: (a) They are not complete in themselves. They expressly incorporate, by reference, the provisions of the deed of trust given to secure their payment, with the same force and effect as though the terms of the deed were written therein. Such reference is made not merely for the purpose of describing the security, but also for the purpose of determining "the terms and conditions upon which said bonds are or may be issued and secured." Reetz v. Pontiac Realty Co., 316 Mo. 1261; Robertson v. Kochtitzky, 217 S.W. 543 (Mo. App.); King Cattle Co. v. Joseph, 198 N.W. 798 (Minn.), and cases cited; Old Colony Trust Co. v. Stumpel, 247 N.Y. 22; Cornish v. Wolverton, 81 P. 4; Garrett v. Myers, 91 N.W. 400; Brooke v. Struthers, 68 N.W. 270; Enoch v. Brandon, 164 N.E. 45; Warren v. Grunwell, 48 P. 205; Wistrand v. Parker, 52 P. 59; Iowa National Bank v. Carter, 123 N.W. 237. (b) The bonds are not for the payment of a sum certain. The provision of the deed of trust by which the maker agrees and covenants to pay all taxes which may be assessed against the bonds renders to sum payable uncertain. Coolidge & McClaine v. Saltmarsh, 165 P. 508; Smith v. Myers, 60 N.E. 858, and cases cited; Vancouver National Bank v. Starr, 211 P. 746; Garnett v. Myers, 91 N.W. 400; Walker v. Thompson, 66 N.W. 584; Brooke v. Struthers, 68 N.W. 275; Lockran v. Cline, 46 P. 720; Smith v. Marlin, 13 N.W. 852; Mechanics Bank v. Johnson, 104 Conn. 696, 134 A. 231; Peterson v. Metropolitan Life Ins. Co., 19 F.2d 74; Des Moines Nat'l Bank v. Stanley, 220 N.W. 80. (c) The trust deed (Art. 9, sec. 5, Rec., p. 72) precludes any holder from suing on the bonds, but provides that "all rights of action hereunder and on account of the bonds and coupons hereby secured being (are) vested exclusively in the trustee." Reetz v. Pontiac Realty Co., 316 Mo. 1261; St. Louis Continental Coal Co. v. Southern Coal Co., 194 Mo.App. 598; Mullen v. Southern Coal & Mining Co., 177 Mo.App. 600; Bailey v. Railroad, 64 Ill.App. 313. (d) The deed gives the City of Oklahoma City the option to purchase the property of the Oklahoma Railway Company and if the option is exercised the city is given the right to call the bonds for payment in 1932, or at the end of any fifteen-year period thereafter. This provision renders the time of payment of the bonds uncertain and contingent and destroys negotiability. R. S. 1929, sec. 2633. (3) As the bonds in issue were not negotiable the plaintiff's predecessors in interest having acquired only the interest of a thief could not pass title to plaintiff. 9 C. J. 63, 64, and cases cited: 1 A. L. R. 717, note; Chester County Guarantee Co. v. Securities Co., 150 N.Y.S. 1010.

Jeffries, Simpson & Plummer for respondent.

(1) Bonds containing the statement "this bond is negotiable" will be held to be negotiable, if possible. Payne v. Cummins, 207 Mo.App. 64; Jones on Corporate Bonds and Mortgages (3 Ed.), p. 219, sec. 196-A; Enoch v. Brandon, 164 N.E. 45. (2) The bonds involved in this action are negotiable under the provisions of the Negotiable Instrument Law. R. S. 1929, secs. 2630, 2631, 2632, 2633, 2634 and 2638. (3) The negotiability of corporate bonds claimed to be negotiable is to be determined entirely from the face of the instruments themselves. Owings v. McKenzie, 133 Mo. 323; Utah Lake Irrigation Co. v. Allen, 231 P. 818; Enoch v. Brandon, 249 N.Y. 263, 164 N.E. 45; Williamson v. Craig, 215 N.W. 664; Waterbury Wallace Co., Inc., v. Ivey, 163 N.Y.S. 719; 8 C. J. 113. (4) Corporate bonds and the deed of trust securing them are executed for distinct and separate purposes. The contract contained in the bond is original and absolute and the contract in the deed of trust is collateral and by way of security. They are not, therefore, to be read together as one instrument. Owings v. McKenzie, 133 Mo. 323; City National Bank v. Goodloe-McClelland Com. Co., 93 Mo.App. 123. (5) The bonds involved in this case refer to the deed of trust securing them only for the purpose of identifying said deed of trust and referring to the nature of the security created thereby. This therefore, does not incorporate all of the provisions of the deed of trust into the bond for all purposes and does not impair their negotiability. Enoch v. Brandon, 249 N.Y. 263, 164 N.E. 45; Higgins v. Hockings Valley Railway Co., 177 N.Y.S. 444; Bank of California v. National City Co., 244 P. 690; Guilford v. Minn. S. Ste. M. & A. Ry. Co., 51 N.W. 658. (6) It is only where bonds refer to a deed of trust securing them in such a way as to expressly make the bonds subject to the provisions of the deed of trust that they are thereby rendered non-negotiable. Brinsmade v. Johnson, 192 Mo.App. 684; Enoch v. Brandon, 249 N.Y. 263, 164 N.E. 45; Higgins v. Hockings Valley Ry. Co., 177 N.Y.S. 444; Bank of California v. National City Co., 244 P. 690; Guilford v. Minn. S. Ste. M. & A. Ry. Co., 51 N.W. 658. (7) Bonds which provide that the principal and interest therein provided shall be paid without deduction for any taxes, etc., are negotiable. 14-A C. J., sec. 2571, p. 617; Higgins v. Hockings Valley Ry. Co., 177 N.Y.S. 444; Chavelle v. Washington Trust Co., 226 F. 400. (8) Since the bonds in this case do not incorporate all of the provisions of the deed of trust therein, and do not purport to make themselves subject to the provisions of said deed of trust, the negotiability of the bonds is not impaired by provisions of the deed of trust alone which might purport to qualify or alter the absolute provisions of the bond. Owings v. McKenzie, 133 Mo. 323; Guilford v. Minn. S. Ste. M. & A. Ry. Co., 51 N.W. 658; 8 C. J. 113, sec. 206. (9) Corporate bonds that have definite maturities but are subject to call upon the happening of conditions prior to that time are not thereby rendered non-negotiable. First Nat'l Bank v. Skeen, 101 Mo. 683; Fogg v. School District, 75 Mo.App. 159; Independent School District v. Hall, 113 U.S. 134, 28 L.Ed. 954.

SUTTON, C. Haid, P. J., and Becker and Nipper, JJ., concur.

OPINION

SUTTON, C.

--This is an action in replevin, for the recovery of seven bonds issued by the Oklahoma Railway Company, each for the sum of $ 1,000, with interest coupons attached. The trial was had before the court, without a jury, on an agreed statement of facts, and resulted in a judgment for plaintiff for the recovery of the bonds sued for. Defendant Hattie F. Kauffman appeals.

The agreed statements of facts on which the cause was tried, is as follows:

"1. Under the date of the 3rd day of January, 1911, the Oklahoma Railway Company made, issued, executed and sold a series of its bonds, with interest coupons attached, secured by deed of trust of that date upon certain of its properties. A true copy of this deed of trust is hereto attached as a part of this agreed statement of facts; and the terms of the bonds and coupons so issued and sold by the Railway Company are correctly set forth therein.

"2. The defendant, Hattie F. Kauffman, purchased from the Oklahoma Railway Company, through the Mississippi Valley Trust Company, and became the owner of seven of these bonds with interest coupons attached, in the principal sum of $ 1,000 each, numbered 2195, 2196, 2197, 2198, 2199, 2201 and 2202. These bonds and coupons (so far as the latter still remain unpaid and attached to the bonds) are the bonds and coupons in controversy in this case.

"Their date is as above set forth, and their terms are correctly set forth in the copy of the deed of trust hereunto attached.

"3. None of these bonds were ever registered as provided by their terms and the terms of the deed of trust.

"4. In December, 1926, the safe in which the bonds were kept by the defendant Hattie F. Kauffman, in Champaign, Illinois, where she then resided and still resides, was burglarized, and the bonds and coupons attached were stolen. They have never been in her possession since that date.

"5. About February 28, 1929, Boettger, Newton & Company, a firm of brokers in Denver, Colorado, purchased the bonds and coupons attached (no overdue coupons being attached) at their office in the usual course of business from a man named Norris, who had been previously introduced to them and vouched for by one of their clients. They paid Norris $ 4,384.50 for the bonds, which was a fair price, and they had no knowledge or notice that the bonds had ever been stolen or that there was any question as to the title of Norris thereto.

"6. The plaintiff subsequently purchased the bonds and coupons from Boettger, Newton & Company and have their title and rights.

"7. After the purchase of the bonds by plaintiff, it had them forwarded to defendant, Mississippi Valley Merchants State Trust Company, trustee under the mortgage, for registration, and...