Greer v. Lafayette County Bank

• Decision Date: 18 March 1895
• Parties: GREER v. LAFAYETTE COUNTY BANK et al.
• Court: Missouri Supreme Court

30 S.W. 319

128 Mo. 559

GREER v. LAFAYETTE COUNTY BANK et al.

Supreme Court of Missouri, Division No. 2.

March 18, 1895.

CONVERSION BY PLEDGEE — EVIDENCE OF DAMAGE.

1. A transfer of corporate stock by one to whom it has been hypothecated by a bank to which it had previously been pledged, made by order of its president before the maturity of the debt for which it was hypothecated, and without any price being fixed on for the stock or any agreement by the owners, does not constitute a sale of the stock, and the title thereto remains in the pledgee bank.

2. A note payable in three months becomes payable on demand where the time fixed for its payment is extended indefinitely.

3. A sale, by the payee of a note, of corporate stock pledged to secure the note, without demand on or notice to the pledgor, is invalid, and may be treated as a conversion, though the contract of pledge authorized such sale on default at the maturity of the note.

4. A recovery for conversion of corporate stock by a pledgee may be had on proof of its actual value by its dividend-earning capacity, though no market value is shown.

5. The giving of an incorrect instruction is not ground for reversal where no other verdict could have properly been rendered under the evidence.

Appeal from circuit court, Ray county; E. J. Broaddus, Judge.

Action by Kittie J. Greer against the Lafayette County Bank and George Wilson for damages for the conversion by defendants of bank stock pledged as collateral security for a note, and alleged by plaintiff to have been fraudulently conveyed for an alleged default in the payment of a note, when no such default had been in fact made. From a verdict and judgment for plaintiff, defendants appeal. Affirmed.

Action by plaintiff for damages because of the fraudulent conversion by defendants of 20 shares of stock in the State National Bank of El Paso, Tex., of the face value of $100 each. The record discloses that: In 1881, plaintiff became the owner of 20 shares of the capital stock of the State National Bank of El Paso, Tex. The stock of this bank was $55,000, fully paid up, as required by the act of congress. There was $35,000 surplus fund, and $12,906 undivided profits. In addition to the accumulation of this $35,000 and of $12,906, the stock had paid an annual interest of $240, or 12 per cent. In the latter part of March, 1888, Robert Greer applied to George Wilson, as president of the defendant bank, for a loan of $1,500 for his wife, offering as collateral the 20 shares aforesaid, which Wilson, by correspondence with the First National Bank of El Paso, ascertained to be ample security for the loan. Greer testifies that when the loan was made — that is, April 21, 1888 — it was distinctly understood between Wilson and himself that though the note was drawn payable in 3 months, yet that so long as "we kept the interest paid it would be satisfactory"; that Wilson said: "Just run it as long as you need it, so you keep the interest up. The collateral is good enough for me." On the date last mentioned, plaintiff borrowed of the defendant bank $1,500, for which she and her husband executed their note, payable three months after date, with interest after date at 8 per cent., by which she also hypothecated, as security, these 20 shares of stock in the State National Bank of El Paso, Tex., authorizing their sale in case of nonpayment, without notice, at public or private sale; providing, further, that said bank, on payment of the amount loaned, as specified therein, and at any time before said collateral security shall have been sold, should surrender the same. At different times plaintiff paid the interest upon the note, and part of the principal, but the defendants insisted on continuing the loan, as it was well secured, and the evidence shows that plaintiff could have procured the money at any time on the collateral for that purpose; also, letters of defendants acknowledging partial payments. No demand or request for payment was ever made. The only thing testified to by Wilson was that, on some of these partial payments being made, the note was laid down on the counter, and which he states he regarded as a "demand," but the evidence, on the contrary, is clear that from time to time the loan, by the assent and agreement of the parties, was extended. January 5, 1892, plaintiff notified the defendants by letter that she did not desire to continue the loan longer, and to send the note and stock to the Aulville Bank for payment. In answer to this request, she received from defendant Wilson a letter dated the 6th of that month, which was the first intimation she had received of the alleged sale of her stock and its purchase by defendant Wilson. In this communication he stated: "The Lafayette County Bank some time ago found it had too much loaned out, and sold off some of its outside paper (by `outside' we mean the notes of persons who do not keep a regular and constant deposit with us). The note of Kitty J. Greer and R. L. Greer, along with other paper, was sold in St. Louis. The purchaser afterwards wanted the bank to buy back your note; but, as the bank has entered on a policy of lending only to those who keep good deposits with us, it did not suit the bank to do this. I arranged the matter by buying for myself the stock, which had gone along with the note when it was sold. The stock thus became my property. * * * I call your attention to the laws of this state as to debts owed to bankers. If a banker cannot pay his depositors what is owing to them, he stands in the law on the same footing as if he had stolen that much money, and must go to prison; but, if any one else owes the banker, he can quietly tell the banker that he is not able to pay, and there is an end to it. This being the case, I ask you to put yourself in my place, and say if you would miss a chance to get back a thousand or so out of any member of a family, if the rest were owing you nearly $5,000. * * * But in the purchase of this stock I have acted strictly according to law and the contract, and under the best legal advice, at every step, and the result cannot now be changed." On May 21, 1891, Wilson, as president of the defendant bank, began a correspondence with the Franklin Bank of St. Louis. These banks had long been doing business with each other. The correspondence and its incidents, as shown by the deposition of Garrels, the cashier, taken in narrative form, are as follows:

"`Lexington, Missouri, May 20th, 1891. Franklin Bank, St. Louis: We wish to use some money on outside discounts. I prefer to sell them outright, and will make you a separate and formal bond or guaranty that we will pay them in four months if the makers do not. Our reason for this is that they need not then appear as rediscount in our statement to the secretary of state. If this suits you, place the proceeds to our credit. No. 2,963 is on sixty-five acres of land two miles from town, worth only, say, 50 per cent. over the note. We expect to get par and interest for it, and the value of the No. 2,963 balance and interest on it. Does this suit you? Respectfully, [Signed] G. Wilson, President.'

"Accompanying this letter was plaintiff's note for $1,500, which had indorsed thereon the authority to sell the stock heretofore mentioned, without notice, at public or private sale, etc. On the back of said note the following credits appear:

"`February 5, 1889. Interest paid to date ($95), and $105 paid on principal.'

"`Paid $25 interest to April 26, 1889 (on June 22, 1889).'

"`July 17, 1889. Paid interest to July 16, 1889 ($25), and $95 on principal.'

"`March 3, 1890. Paid interest to date, and $55 on principal (interest, $65), leaving balance, $1,245.'

"`July 18, 1890. Paid interest to date, and $87.65 on principal. Balance, $1,157.35, due.'

"`January 15, 1891. Interest, $49.25, paid to date, and $74.25 paid on principal. (Paid by draft on St. Louis.) $1,083 balance due.'

"`Pay Franklin Bank or order. Lafayette County Bank, Pr. Geo. Wilson, President.'

"The further indorsements appear on the back of the note:

"`Paid on this note July 21st, 1891, $1,118, by sale of twenty shares stock mentioned therein.'

"`Pay Lafayette County Bank, or order, without recourse. Franklin Bank.'

"This letter offered to us for sale two pieces of negotiable paper, — No. 2,963, being the collateral note of Kittie J. Greer and R. L. Greer, to which I have referred, marked `Exhibit A.' The other item, mentioned as No. 2,900, was a real-estate note secured by deed of trust. We received these securities at the same time we received the letter Exhibit B. We bought them on the terms stated in Exhibit B, and credited the account of the Lafayette County Bank therefor in certain amounts stated in my letter to Geo. Wilson, president, of date May 23rd, 1891, of which letter I produce a letterpress copy, and the same is hereto attached:

"`Geo. Wilson, Esq., Pr., Lexington, Mo. — Dear Sir: We would have preferred to discount your note with paper sent as collaterals, but, as you wished it, shall comply with your request. We shall credit the note at face and accrued interest, and instruct our attorney to draw up a paper to cover the case, which we shall mail to you for your signature as soon as received. Yours, truly, [Signed] G. W. Garrels.

                To your credit. $1,083.10. 4m, 8d, 30-80. $1,112.90
                                $2,084.63. 10m, 5d, 140-82. $2,225.45.'
                

"The bank held this note until the interest on the real-estate note of a Mr. Francisco became due, and then we wrote to Francisco that we would foreclose on the land unless the interest was paid. Thereupon Mr. Francisco arranged with the Morrison-Wentworth Bank to take up that real-estate note, which bank paid us principal and interest, whereupon we turned that real-estate paper over to it. That ended our connection with security No. 2,900, in the letter Exhibit B. The collateral note of the Greers was still in the possession of the Franklin Bank, but about...