Hughes v. Community Bank of Dawn

• Decision Date: 07 January 1935
• Citation: 78 S.W.2d 98,336 Mo. 305
• Parties: Margaret Hughes, Administratrix of the Estate of David E. Hughes, Appellant, v. Community Bank of Dawn
• Court: Missouri Supreme Court

78 S.W.2d 98

336 Mo. 305

Margaret Hughes, Administratrix of the Estate of David E. Hughes, Appellant, v. Community Bank of Dawn

Supreme Court of Missouri

January 7, 1935

Rehearing Overruled December 1, 1934.

Motion to Transfer to Banc Overruled January 7, 1935.

Appeal from Livingston Circuit Court; Hon. Ira D. Beals Judge; Opinion filed at May Term, 1934, June 19, 1934; motion for rehearing overruled December 1, 1934; motion to transfer to Court en Banc filed; motion overruled at September Term January 7, 1935.

Judgment as modified affirmed.

Davis & Ashby for appellant.

(1) Petition states a cause of action in trover for converting a certificate of deposit of the Community Bank, issued by it. Withers v. Bank, 67 Mo.App. 115. (2) Trover may be brought for converting a certificate of stock of a bank or corporation. Harbaugh v. Ford Roofing Co., 281 S.W. 686; Good Roads Mach. Co. v. Broadway Bank, 267 S.W. 40, 21 A. L. R. 390. (3) The face value of the certificate of deposit is the measure of plaintiff's damages. K. C. Gas Co. v. Bank, 191 Mo.App. 287; Shewalter v. Wood, 183 S.W. 1127; Good Roads Mach. Co. v. Bank, 267 S.W. 40. (4) The party for whose benefit accommodation paper has been made, acquired no right against the accommodating party, who may set up the want of consideration as a defense to an action by the accommodated party, since as between them there is no consideration, a fact which is always a defense to a suit on negotiable paper between the immediate parties. He is not liable to the party accommodated although he also signs for the accommodation of another party. 8 C. J. 259, sec. 409. The law as laid down by Corpus Juris is fully sustained by the authorities in this State. Chicago Title, etc., Co. v. Brady, 165 Mo. 197; Central Natl. Bank v. Walterscheid, 204 Mo.App. 179; Farmers Bank v. Harris, 250 S.W. 946; Schelp v. Nichols, 263 S.W. 1017; Peoples Bank v. Yager, 221 Mo.App. 955, 288 S.W. 954; Peoples Bank v. Yager, 6 S.W.2d 633; Wolfinbarger v. Metcalf, 282 S.W. 749; St. Francois County Bank v. Allbright, 20 S.W.2d 290; Peoples Trust Co. v. Arthaud, 22 S.W.2d 860; Cox v. Heagy, 184 S.W. 497; St. Louis Union Trust Co. v. Laughlin, 254 S.W. 844; Natl. Bank of Commerce v. Laughlin, 305 Mo. 8, 264 S.W. 706.

Chapman & Chapman for respondent.

(1) Accommodation party is one who signed the instrument as maker, drawer, acceptor, or endorser, without receiving value therefor, and for the purpose of lending his name to some other person. Sec. 2658, R. S. 1929; 8 C. J., sec. 398, p. 352. (a) The accommodated party is he to whom the credit of the accommodation party is loaned and not necessarily the payee, since the inquiry always is as to whom did the maker of the paper loan his credit as a matter of fact. And the fact that one derives some incidental benefit from the paper will not make it accommodation paper as to him. 8 C. J., sec. 401, p. 254; Bank v. Laughlin, 264 S.W. 714. (b) The mere fact that one signs a note for the accommodation of another at the request of a third person will not establish the relation of accommodation and accommodated parties between the accommodation maker and such third party. 8 C. J., sec. 401, p. 255; Neal v. Wilson, 213 Mass. 336, 100 N.E. 544; Nalitzky v. Williams, 237 F. 802; Federal Reserve Bank v. Crothers, 289 F. 777; Skagit State Bank v. Moody, L. R. A. 1916A, 1215. (2) The certificate of deposit of the defendant bank could be pledged to it as security for note in suit. 6 Michie, Banks & Banking, pp. 176, 177, 178; Fisher v. Continental Bank, 64 F. 707; Thompson v. Hazelwood Savings Co., 234 Pa. 492, 83 A. 284; 5 Michie, Banks & Banking, sec. 164, p. 317. (3) The defendant as pledgee of commercial paper had a right to proceed in equity to establish its pledge lien and foreclose same. Commission Co. v. Albers Comm. Co., 244 Mo. 48; Swan v. Tabor, 266 S.W. 754; Williams v. Schmeltz, 14 S.W.2d 967; Potter v. Whitten, 161 Mo.App. 129; Troll v. Real Estate Co., 186 Mo.App. 196; Cleghorn v. Minn. Trust Co., 59 N.W. 320; Bank v. Trust Co., 107 Am. St. Rep. 759; Hodges v. Lake Summit Co., 152 S.E. 664; Holt v. Guaranty Co., 296 P. 856; Queen v. Fryer, 249 N.Y.S. 654; Donohol v. Gamble, 99 Am. Dec. 399; Schouler, Personal Property (5 Ed.), sec. 407, p. 610; Pomeroy's Eq. Jur. (4 Ed.), secs. 164, 1231. (a) In a suit to establish lien of pledgee and the foreclosure thereof, against the pledgor, his original debtor, after establishing his case, the pledgee is entitled to an order for sale of the property pledged and to a personal judgment for the deficiency. 49 C. J., sec. 285, p. 1017; Potter v. Whitten, 161 Mo.App. 139; Swan v. Tabor, 266 S.W. 754; Troll v. Real Estate Co., 186 Mo.App. 196; Bank v. Grant, 103 N.W. 69. (b) Answer and counterclaim of the defendant states a good cause of action in equity for establishment of pledge lien and foreclosure of same. 49 C. J., sec. 281, p. 1015; Swan v. Tabor, 161 Mo.App. 129; Troll v. Real Estate Co., 186 Mo.App. 196; See cases cited Point 3, supra. (4) Where the pledgee assigned or transferred the principal debt with the collateral there was no conversion. Hornsby v. Knorpp, 207 Mo.App. 319; Fitzwilliams v. Trust Co., 10 S.W.2d 337; Williston on Contract, sec. 1044; Waddle v. Owen, 43 Neb. 489, 61 N.W. 731. (5) The answer and counterclaim of the defendant converted the action into one in equity and the case was properly heard by the court and not by a jury. Carter v. Insurance Co., 275 Mo. 95; Koehler v. Rowland, 275 Mo. 581; Swan v. Tabor, 266 S.W. 755; Troll v. Real Estate Co., 186 Mo.App. 196; Potter v. Whitten, 161 Mo.App. 129; See authorities cited Point 2, supra.

Cooley, C. Westhues and Fitzsimmons, CC., concur.

OPINION

COOLEY

This case, coming to the writer on reassignment, is a suit for conversion of a certificate of deposit. Defendant denied the alleged conversion and asserted a lien on the certificate, which it sought to have foreclosed. The circuit court rendered judgment for defendant, from which the plaintiff appealed. Plaintiff sues as administratrix of the estate of her deceased husband, David E. Hughes, who died about November 15, 1924. Her petition alleges in substance that on June 16, 1924, her decedent deposited in defendant bank $ 9000 on time deposit, for one year, receiving from the bank a certificate of deposit for the amount, drawing interest at five per cent per annum; that decedent at the time of his death was the owner and entitled to possession thereof; that she, as his administratrix, had demanded same of the bank, which demand had been refused, and that the bank wrongfully withheld same from her and had converted it to its own use. Judgment is prayed for said sum of $ 9000 and interest at five per cent per annum from June 16, 1924.

By its answer the bank admitted the deposit by Hughes and the issuance by it to him of the certificate of deposit and pleaded that on September 29, 1924, said Hughes, under the name of D. E. Hughes, together with one Herbert Hughes, had executed to the bank a note for $ 9000 and as collateral security therefor David E. Hughes had endorsed and pledged to the bank the said certificate of deposit; that the note was past due and remained unpaid; and that the bank held and was entitled to hold said certificate as such security. By way of counterclaim or cross-action the bank pleaded the execution of the note by Hughes and the pledging of the certificate as collateral security therefor, that the bank thereby became entitled to and had a lien on said certificate and the money it represented to secure the payment of the note and prayed judgment for the amount of the note and interest, that same be decreed to be a lien on the certificate and the "funds represented thereby," that the plaintiff's equity of redemption be foreclosed, for an order of sale of the collateral and application of the proceeds to payment of the debt due the bank and for such other and further relief as to the court might seem proper.

Plaintiff by verified reply denied that Hughes had executed the note pleaded by defendant or that he had pledged the certificate of deposit. Further replying she pleaded that on March 2, 1923. Herbert Hughes was indebted to the bank in the sum of $ 9000, and on said date gave to the bank his note for said amount, due six months thereafter; that one Abner Cunningham was cashier of defendant bank and that said Cunningham "requested, urged and influenced said David E. Hughes to sign said note . . . for its (the bank's) use, benefit and accommodation and without consideration, benefit or detriment accruing to or from him," further promising and agreeing that he, Cunningham, would get Luther Williams and James Baxter to sign the note, as well as Herbert Hughes, who had not yet signed; that Cunningham did get Herbert Hughes to sign, but failed to get Williams or Baxter to sign; that said note of March 2, 1923, was thereafter renewed for the same amount on September 2, 1923, March 29, 1924, and September 29, 1924, each time without consideration as to David E. Hughes "and upon the promises and agreement aforesaid that the said above named other parties would sign said renewal notes and each of them." There are further allegations to the effect that Hughes was mentally and physically weak and relied upon Cunningham to advise him in business matters, but that question is not presented on this appeal and need not be noticed.

Plaintiff asked a jury trial, claiming that the action was one at law. The court held that defendant's answer and cross-bill converted the case into one in equity, and so tried it, refusing plaintiff's request for a jury trial. We shall dispose of this question before considering the case on the merits.

We think the court's ruling on this question was correct. The...