Lipscomb v. Talbott

• Decision Date: 31 May 1912
• Parties: JOHN H. LIPSCOMB, Appellant, v. LEANDER J. TALBOTT and NATIONAL BANK OF COMMERCE
• Court: Missouri Supreme Court

147 S.W. 798

243 Mo. 1

JOHN H. LIPSCOMB, Appellant, v. LEANDER J. TALBOTT and NATIONAL BANK OF COMMERCE

Supreme Court of Missouri, First Division

May 31, 1912

Appeal from Jackson Circuit Court. -- Hon. W. A. Powell, Judge.

Reversed and remanded (with directions).

Gage Ladd & Small and Joseph S. Rust for appellant.

(1) The deed of Talbott to White was absolute in form, but, as alleged by the bank in its answer and shown by unmistakable and uncontroverted evidence, made to secure the note sued on without any claim or pretense of any extrinsic condition and is in law a mortgage. Wilson v. Drumorte, 21 Mo 325; Langdon v. Buel, 9 Wend. 80; Swift v. Bank, 114 F. 644; Bank v. Bank, 203 U.S. 306; Carpenter v. Longan, 16 Wall. 271; 27 Cyc. 1287; Sheppard v. Wagner, 240 Mo. 439. (2) The sale of the Talbott note to plaintiff constituted an assignment of the mortgage as a necessary and inseparable incident to the note secured. This is true, although the note was not indorsed and was transferred by delivery. Boeka v. Nuella, 28 Mo. 180; Bennett v. Pound, 28 Mo. 598; Davis v. Carson, 69 Mo. 609; 27 Cyc. 1287, 1288, 1290, 1293 and 1307, and note 67; Hagerman v. Sutton, 91 Mo. 531; Inv. Co. v. Vette, 142 Mo. 573; Martin v. Nowlin, 2 Burr, 969; Jones on Mortgages, 1377; Pickett v. Jones, 63 Mo. 195; Johnson v. Johnson, 81 Mo. 331. (3) The authority of the agent, the Barr-Widen Mercantile Agency, to sell the note to the plaintiff was complete and perfect: (a) Because such is the legal construction of the offer of Lipscomb transmitted to the bank by the agent in its letter of January 5, 1907 (the lost letter), and the acceptance of that offer by this bank contained in the letter of W. S. Woods, president, of January 12, 1907. (b) Because the bank in the interview between W. S. Woods, president, and Joseph S. Rust, attorney for plaintiff, ratified the action of its agent in making the sale. (c) Because the bank still further ratified the sale by its agent by retaining the proceeds of the sale after being specially notified that the transaction was a sale in the interview between W. S. Woods, president, and Talbott and Bruun. (d) Because the bank ratified the action of its agent in selling the notes by retaining the proceeds of the sale after receiving information of the fact of the sale by the petition in this case until October 18, 1908, when it filed its amended answer herein and for the first time offered to return the proceeds. Mechem on Agency, secs. 149, 169 and 181; Kirkpatrick v. Pease, 202 Mo. 490; Beagles v. Robertson, 135 Mo.App. 327; Clarke & Sykes, Agency, 149a. (4) The statements of plaintiff regarding Talbott's insolvency were untrue and the fact was as well known to the bank as to Lipscomb, and these statements were never communicated to the bank; and the bank determined for itself by its letter of January 12, 1907, to its agent, to close the deal and in so doing was entirely uninfluenced by any representations of plaintiff. (5) The bank and plaintiff in the sale and purchase of the note were dealing at arm's end and Lipscomb was under no obligation to disclose to the bank any material information he might have as to the value of the note or any matter affecting its value; much less was he under obligation to disclose to the bank any surmises or suspicions he might have or entertain as to the reasons the bank might have for intrusting the note to such a concern as the Barr-Widen Agency. (6) The bank is itself responsible for the disposition of the note for a trifling consideration; it placed the note in the hands of the Barr-Widen Agency knowing its character as a wrecking concern, a junk shop of worthless paper, its methods well known, widely advertised in every way, on all its letter-heads, as "Publishers of delinquent debtors who can but do not pay their just debts and who are consequently unworthy of trust or confidence. Reporters of how people pay their bills -- expert adjusters of debts throughout the United States, Canada and Europe. Correspondents everywhere; the world our territory." The bank by taking these notes from its own collecting department here where Talbott resided and placing it in the hands of the Barr-Widen concern effectually condemned it as the toughest of tough debts and practically made it of no value whatever. If it is material to the case to know why the bank did this, the bank, not Lipscomb, must be asked. When Lipscomb's attention was drawn to the matter and he found the notes in these agents' hands thus depreciated, he was not bound to inquire why the bank had done this or speculate upon its motives. (7) The plan of disposing of this Talbott note for the poor pittance that could be obtained for it through the Barr-Widen Agency was devised by the bank and not suggested by Lipscomb. The note called for (face and interest) nearly $ 160,000, and the notes along with it made the amount disposed of nearly, if not quite, $ 200,000. The amount to be expected from this source was not sufficient to have led the "biggest bank in the west" to take such a course. The evident purpose was to put this note out of sight and reach, where it never would be seen or heard from again. The bank officers cannot say that they did not know that the White deed was a mortgage. They were not inexperienced or imbeciles; if this deed should be forever lost and its loss could be accounted for the White deed would be in fact absolute and any arrangements built upon it would stand. This is a fairer suspicion than any that attaches to Lipscomb for having obtained the note for an inconsiderable consideration or his failure to question the bank as to what it meant by sending its notes to the junk shop. (8) The plaintiff in purchasing the note was in no confidential relation to defendant, and was under no obligation to disclose to defendant his suspicion, if he had any, that defendant was disposing of the note without any reference to the security, and without any intention, by reason of forgetfulness or mistake of law, that the security should pass to plaintiff along with the note as incident thereto. The parties were dealing "at arm's end." Nor was Lipscomb bound to remind the bank as to the existence of the security. Fox v. Mackreth, 2 Bro. C. H. 420; Wood v. Boynton, 64 Wis. 265; Dambmann v. Schulting, 75 N.Y. 55; 1 Story's Eq. Juris. (12 Ed.), 205 and 244; Kerr on Fraud, 73, 75, 90, 100, 103, 404, 432; Benj. on Sales, 355; Birch v. Shelton, 14 Barb. 73; Paul v. Hadley, 23 Barb. 521; Paul v. Keys, 12 East. 637; 9 Cyc. 397. (9) The bank is not entitled to relief from a mere oversight or ignoring on its part of what it knew. That did not rise even to the dignity of a mistake, and the only mistake it made, if any, and the only mistake anyone made, if any, was that the bank made a mistake of law, and a mistake of law such as this would have been affords no relief in equity. Clark v. Carter, 234 Mo. 100; Kennedy v. Mill Co., L. R., 2 Q. B. 580; 9 Cyc. 395. (10) A party will not be given relief against a mistake induced by his own negligence, and he must show due diligence to investigate alleged false statements. Jones v. Foster, 175 Ill. 459. (11) In cases where third parties have advanced money and taken up notes or judgments and it is contended on one hand that the transaction is a payment and on the other hand a purchase, the party taking the security being under no obligation to pay the debt, the construction to be put on the transaction depends largely on the intention of the party taking up the security. If the instrument taken up be a note, it does not matter that the transfer is by delivery without indorsement of the paper. Prather v. Hairgrove, 214 Mo. 142; Campbell v. Allen, 38 Mo.App. 28; Harbeck v. Vanderbilt, 20 N.Y. 398.

Elijah Robinson and Harris Robinson for respondents.

(1) Plaintiff acquired no title to the Talbott notes. Authority to collect was not authority to sell, and there is no pretense that Barr & Widen had any authority other than that of an agent to collect. Mechem on Agency, sec. 383. (2) Even if Barr & Widen had had authority to sell, the transaction was invalid and not binding on the bank, because plaintiff procured the notes by fraud and false representations. Dambman v. Schulling, 75 N.Y. 55; Laidlaw v Organ, 2 Wheat. 178. (3) Even if Barr & Widen had had authority to sell, the transaction was not binding on the bank for the further reason that the minds of the parties did not meet, and there was, therefore, no contract. Talbott thought the notes carried with them a lien on the real estate, when he knew that Barr & Widen had no information as to any such lien. Green v. Cole, 103 Mo. 70; Cockrell v. McIntyre, 161 Mo. 69; Scott v. Davis, 141 Mo. 225; Egger v. Nesbitt, 122 Mo. 675; Taylor v. Van Shraeder, 107 Mo. 206; Perkins v. School Dist., 99 Mo.App. 483; Lowery v. Danforth, 95 Mo.App. 450; Chapline v. Stone, 77 Mo.App. 529; Barton v. Hunter, 59 Mo.App. 610; Robison v. Estes, 53 Mo.App. 582; 9 Cyc. 396, note 97. (4) By agreement of the parties, as shown by their conduct, the defeasance had been canceled and the title became absolute in the bank. Shubert v. Stanley, 52 Ind. 46; Vennum v. Babcock, 13 Iowa 194; Harrison v. Academy, 12 Mass. 456; Trull v. Skinner, 17 Pick. (Mass.) 213; Stall v. Jones, 47 Neb. 706; Haggerty v. Brown, 105 Iowa 395; Carpenter v. Carpenter, 70 Ill. 457. (5) There was no ratification by the defendant bank of the transaction between Barr and Widen, if that transaction is to be considered as a sale of the notes in question to plaintiff Lipscomb. Ratification consists of the acceptance of the results of an act with intent to ratify, and with full knowledge of all the material circumstances. Ansonia v. Cooper, 64 Conn. 544; Curnane v. Scheidel, 70 Conn. 13; Blen v. Mining Co., 20 Cal. 613; ...