Hoeley v. South Side Bank of St. Louis
| Decision Date | 06 January 1920 |
| Citation | 217 S.W. 504,280 Mo. 336 |
| Parties | MARIA HOELEY v. SOUTH SIDE BANK OF ST. LOUIS, Appellant |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Thos. E. Hennings Judge.
Affirmed.
Walter Diehm for appellant.
(1) If one not a party to or liable on a note pays the holder of the note out of his own funds and acquires possession of and title to the same, the transaction is a purchase and not a payment. Wing v. Union Central Life Ins. Co., 181 Mo.App. 391; Van Hoose v. Machine Co., 169 Mo.App 54; Vansaudt v. Hobbs, 84 Mo.App. 629; Swope v Leffingwell, 72 Mo. 348; Marshall v. Meyers, 96 Mo.App. 643. (2) When Krembs acquired possession of the note and the deed of trust securing it from Moellenhoff, he did not have it marked "paid" or "cancelled," nor did he release the deed of trust of record, but, in fact, subsequently negotiated the same, and his conduct in thus negotiating the same amounted to a re-issuance of the note. The fact that he did not have the note cancelled and did in fact negotiate it is conclusive proof of his intention that the note and deed of trust should be kept alive. Sater v. Hunt, 66 Mo.App. 530. (3) The true owner of a negotiable promissory note indorsed in blank by the payee, cannot complain if he clothed the apparent owner with all the indicia of ownership and full power of disposition so that third persons are led into dealing with him. Such third parties will be protected even though they bought after maturity, where they purchased in good faith, for value and without notice. It is but an application of the principle that where one of two innocent persons must sustain a loss occasioned by the fraud of a third, it must fall upon the one who puts it in the power of the third person to commit the fraud. International Bank v. German Bank, 71 Mo. 197; Lee v. Turner, 89 Mo. 494; Neuhoff v. O'Reilly, 93 Mo. 169; Turner v. Hoyle, 95 Mo. 346; Wright Invst. Co. v. Frisco Realty Co., 179 Mo. 80; Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 283; Geradi v. Christie, 148 Mo.App. 75; Miller v. Peoples Savings Bank, 193 Mo.App. 507. (4) The holder of a negotiable promissory note indorsed in blank by the payee, is prima-facie the owner thereof, and is presumed to have taken it in good faith, for value, before maturity and without notice. Keim v. Vette, 167 Mo. 389; Horton v. Bayne, 52 Mo. 531; Johnson v. Murry, 72 Mo. 278; Fitzgerald v. Barker, 85 Mo. 13; Mayes v. Robinson, 93 Mo. 122. (5) While it is true that the transferee or indorsee of a negotiable promissory note transferred after maturity takes it subject to all equities attached to it in the hands of the payee, yet the equities are such as are connected with the note itself and not such as grow out of distinct and independent transactions between the original parties. Gullett v. Roy, 15 Mo. 399; Unseld v. Stephenson, 33 Mo. 161; Mattoon v. McDaniel, 34 Mo. 138; Arnot v. Woodburn, 35 Mo. 99; Cutler v. Cook, 77 Mo. 388; Knaus v. Gibbons, 110 Mo. 58; Kelly v. Staed, 136 Mo. 430; Hunleth v. Leahy, 146 Mo. 408; Gennel v. Hueben, 71 Mo.App. 291; Crawford v. Johnson, 87 Mo.App. 478; Annan v. Houck, 4 Gill. 325, 45 Am. Dec. 133; Young v. Shriner, 80 Pa. 463. In this connection it is to be borne in mind that the respondent is not a maker of the note in question nor even liable on the same because she acquired the property merely subject to the deed of trust.
Karl M. Vetsburg and Charles H. Franck for respondent.
(1) All the evidence shows that the transaction between Krembs and Moellenhoff was intended as a payment and discharge of the paper and not a purchase. Girardi v. Christie, 148 Mo.App. 75. (2) Regardless of intention, one who owes a duty to discharge an obligation cannot purchase it and continue it in force. Such an attempted purchase would in fact be a payment and a discharge. Powers v. Fouche, 14 N.Y. 406; Comstock v. Buckley, 141 Wis. 228. (3) A note, paid by one who has no right to call on other parties for repayment, is no longer a valid contract, and has no legal existence. 8 Corpus Juris, sec. 815, p. 582. (4) Krembs, by reason of his having secured the consideration for the execution of said note and deed of trust, and by reason of his fraudulent conduct, was the principal debtor in the transaction and payment by him to Moellenhoff discharged the note and extinguished the lien of the deed of trust. The obligation of Krembs' "straw man," Miller, was in law and fact the obligation of Krembs. Comstock v. Buckley, 141 Wis. 228; Houtz v. Hellman, 228 Mo. 655; R. S. 1909, sec. 10089. (5) The note in suit being executed by Krembs' straw man, or alter ego, Krembs was not a stranger to the note, but was in law and fact the actual maker and the principal debtor in the transaction. Van Raalte v. Epstein, 202 Mo. 173; Houtz v. Hellman, 228 Mo. 655; Comstock v. Buckley, 141 Wis. 228; Hoffman v. Habighorst, 49 Ore. 394; Arnold v. Green, 116 N.Y. 573. (6) One who acquires negotiable paper after maturity, takes it subject to the defense of payment, even though he is an innocent holder for value. R. S. 1909, secs. 10022 and 10028; Girardi v. Christie, 148 Mo.App. 75; Kelly v. Staed, 136 Mo. 437; Williams v. Gerber, 75 Mo.App. 30; Vandagrift v. Investment Co., 144 Mo.App. 84. (7) The payment by Krembs to Moellenhoff was a discharge of the note and deed of trust, and the subsequent deposit of the same by Krembs with the defendant bank as collateral passed no title or interest to the bank. Vandagrift v. Investment Co., 144 Mo.App. 84; Williams v. Gerber, 75 Mo.App. 30; R. S. 1909, sec. 10089; Comstock v. Buckley, 141 Wis. 228; Jackson v. Johnson, 248 Mo. 680; Bishop v. Chase, 156 Mo. 158.
WHITE, C. Railey and Mozley, CC., concur.
The plaintiff in this action seeks to enjoin the negotiation of a certain promissory note and deed of trust securing the same on her property, and prays for a cancellation of the note and the removal of the deed of trust as a cloud upon the title. There was a judgment in the Circuit Court of the City of St. Louis for plaintiff, and the defendant appealed.
The facts of the case are all contained in an agreed statement signed by the parties, in substance as follows:
Maria Hoeley, of German birth, was, at all the times mentioned in the statement, a widow, spoke the English language indifferently, and was unable to read or write it. One Herman J. Krembs was a real estate agent and notary public in the City of St. Louis, for many years had been the agent of the plaintiff's husband before the latter's death, and thereafter acted as agent of the plaintiff in certain real estate transactions. Krembs was indebted to plaintiff in matters arising out of various business transactions other than the one under consideration. All business which he had in charge for the plaintiff was conducted in the German language.
On or about the twenty-second day of December, 1905, the plaintiff employed Krembs to purchase for her, free and clear of incumbrance, the property in suit. She provided Krembs with six thousand dollars with which to make the purchase, the same being the proceeds of collections which Krembs had made for her.
Krembs on that day caused a contract of purchase to be made with the owner of the real estate mentioned, for the sum of six thousand dollars, payable in cash, and caused one Franz Richard Miller to sign the contract as purchaser. Miller was unknown to plaintiff and was at the time in the employ of Krembs and acted for him in the capacity of a "straw man."
Afterwards, on the eighth day of January, 1906, without the knowledge, consent or authority of plaintiff, Krembs caused the owner to execute a deed conveying the property to Miller for a consideration of six thousand dollars. The deed, a general warranty, is set out in the statement, and recites a consideration of six thousand dollars. Krembs at that time paid the vendor, owner of the land, the purchase price of six thousand dollars. On the same day, without the knowledge or consent of the plaintiff, Krembs caused Miller to execute a note for four thousand dollars and interest and a deed of trust on the property to secure the same. The note was payable in three years.
Krembs, thereupon, without the knowledge or consent of the plaintiff, sold and delivered the deed of trust and note to H. Moellenhoff for the sum of four thousand dollars, which was paid to Krembs and which Krembs retained.
Four days later, on the twelfth of January, 1906, Krembs caused Miller to execute a warranty deed conveying the said property to the plaintiff for a recited consideration of six thousand dollars. The deed contains this clause: "This conveyance being subject to an incumbrance of four thousand dollars executed by the party of the first part duly filed for record." The plaintiff was unaware of such recital and was in ignorance of the existence of the deed of trust; the knowledge of its existence was falsely and fraudulently concealed from the plaintiff by Krembs; she believed her property to be clear of any incumbrance whatever.
After the plaintiff acquired title she took possession of the property, collected the rents, paid the taxes, insurance, water license and repairs; all without knowledge of the existing deed of trust. Krembs, at no time after purchase the real estate for plaintiff, as aforesaid, acted as her agent for the purpose of managing the property, but said Maria Hoeley managed the same herself.
Krembs without the knowledge of plaintiff, paid Moellenhoff the interest on the four-thousand dollar-note and when it fell due, January 8, 1909, he paid Moellenhoff the sum of one thousand dollars and caused it to be extended for three years. Thereafter he continued to pay the interest on the remaining...
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