National Bank of Commerce of Kansas City, Mo., v. Rockefeller

• Court: U.S. Court of Appeals — Eighth Circuit
• Citation: National Bank of Commerce of Kansas City, Mo., v. Rockefeller, 174 F. 22 (8th Cir. 1909)
• Decision Date: 15 October 1909
• Docket Number: 2,861.
• Parties: NATIONAL BANK OF COMMERCE OF KANSAS CITY, MO., et al. v. ROCKEFELLER.

174 F. 22

NATIONAL BANK OF COMMERCE OF KANSAS CITY, MO., et al. v. ROCKEFELLER.

No. 2,861.

United States Court of Appeals, Eighth Circuit.

October 15, 1909

This was a suit in equity, brought by Frank Rockefeller against the National Bank of Commerce of Kansas City, to secure the cancellation and surrender of a certain promissory note dated August 16, 1901, for $36,229.05 (hereafter referred to as the $36,000 note), executed and delivered by him to the bank, and to secure the delivery to him of certain notes secured by chattel mortgages which the bank had taken from the Siegel-Sanders Live Stock Commission Company, a corporation, as collateral security for the payment of debts due it from that company, and which Rockefeller claimed to have paid, and therefore to be entitled to be subrogated to the rights of the bank with respect to them. The Circuit Court entered a decree in favor of complainant, both for the cancellation of the note, and subrogating him to the rights of the bank to the collateral notes and mortgages as claimed. The bank appeals.

Rockefeller was a stockholder and director in the commission company whose business consisted of buying and selling live stock on commission at Kansas City, Mo., and loaning money on cattle taking notes secured by chattel mortgages to evidence the loans. He lived in Cleveland, Ohio, and had not, prior to the transactions involved in this suit, taken any active part in the conduct of the business of the commission company. That was left to Frank Siegel, the president, and R. D. Swain, the secretary and treasurer. The company, not having sufficient capital to carry on business of the magnitude desired by its officers, attempted to borrow money from banking institutions for that purpose; but the banks exacted as a condition to such accommodations the personal guaranty of the officers of the company and of Rockefeller that its debts should be paid. One of these banks was the defendant the National Bank of Commerce, and the guaranty exacted by it and executed by Rockefeller and others was in the following words:

'For a valuable consideration to us in hand paid by National Bank of Commerce of Kansas City, Missouri, we, the undersigned, do hereby agree to make and guarantee to the National Bank of Commerce of Kansas City, Missouri, any and all debts which the Siegel-Sanders Live Stock Commission Company, a corporation doing business in Kansas City, Missouri, may from time to time contract or become liable for to said bank, however said debts may be contracted or evidenced. This guaranty shall be an open one and cover debts aggregating two hundred thousand ($200,000) dollars at any one time, and shall continue at all times unconditional until revoked by us; and for the consideration aforesaid we hereby waive all notice to us or either of us of the beginning or ending of credit which said bank may give to said company under this guaranty, or of the state of its indebtedness at any or all times. Witness our hands this 21st day of January, 1901.

'(Signed) Frank Siegel.

'R. D. Swain.

'Frank Rockefeller.'

On January 9, 1901, prior to the giving of the guaranty, the commission company had borrowed $45,000 from the bank and executed its promissory note therefor, pledging as collateral security for its payment various notes secured by chattel mortgages. The bank claims this indebtedness was covered by the terms of the guaranty when properly interpreted, and also that it was contracted on the strength of an oral agreement made by Rockefeller to guarantee its payment or to execute a written guaranty to that end. This note matured after the giving of the guaranty, and, $1,000 only being paid thereon, was twice renewed for the balance of $44,000; the last renewal falling due April 16, 1901. On January 29, 1901, after the execution of the guaranty, the commission company borrowed $30,000 more from the bank, and executed its note therefor, maturing in 30 days, and pledged certain collateral for its payment. At the maturity of this note it was not paid, but renewed for another term of 30 days. On March 11, 1901, the commission company borrowed $30,000 more from the bank, and gave its note therefor, maturing about April 11, 1901, and also pledged certain collateral for its payment. Some time in April, 1901, the commission company failed, and on April 22d of that year, after crediting the company with the amounts collected on collateral pledged for the payment of the three notes, it was found that it owed the bank the aggregate sum of $59,204.19 and for this sum Swain, as treasurer of the company, executed its note (hereafter referred to as the note for $59,000) to the bank, payable in 30 days. Siegel had disappeared, and Rockefeller, at the instance of Swain, went to Kansas City, saw Dr. Woods, the president of the bank, and told him he intended to remain until the affairs could be straightened out, and assured him that his guaranty was good for any legal liability against him. Dr. Woods answered that the company owed the bank $59,204.19, represented by the consolidated note just mentioned, and that he felt safe because he had Rockefeller's guaranty back of it. Under the impression that all of the indebtedness of the company to the bank had been incurred since the execution of the written guaranty, and also that the bank held collateral security enough belonging to the company to fully pay the indebtedness, Rockefeller returned to Cleveland, and later was advised by the bank that it desired settlement of his obligation, and that unless settlement was speedily made it would be obliged to sell the collateral held by it. On August 10th Rockefeller returned to Kansas City, and, after settling other accounts not necessary now to be considered, took up the settlement of the $59,000 note, and found that it was entitled to credits arising from collections of collateral by the bank which reduced the amount due to $45,852.60. This was settled by Rockefeller paying $10,000 in cash and giving the $36,000 note in controversy for the balance. All the collateral which the commission company had pledged to secure the payment of its note for $59,000, which had not already been paid and credited upon the company's obligation to the bank, was allowed to stand as collateral security for the payment of Rockefeller's new note for $36,000, and was listed on the back of that note.

Rockefeller had never given personal attention to the details of the business of the commission company and knew little of its financial transactions. He intrusted such matters to his friend, Swain; but as trouble came his first impulse was to learn the amount of his obligation and have it settled as soon as possible. He seems to have taken the implications, if not the statements and representations, of the officers of the bank, to the effect that the entire amount of the $59,000 note fell under his guaranty, as true, and to have relied upon them without making any special examination of the books of the commission company or of the bank to inform himself independently concerning the matter. Some time after he had given the $36,000 note, and prior to its maturity, his suspicions became aroused, and he ascertained as a result of considerable investigation that $44,000 of the first loan for $45,000 made by the bank to the commission company, less such collections of collateral pledged for its payment as had been made by the bank, had been embraced in the amount claimed to be guaranteed by him. He also learned that, after crediting the two notes of $30,000 given by the commission company to the bank with the net proceeds of collections of collateral properly pertaining to them, the total amount due on them on October 28, 1901, was only $10,811.09. This appears to have been stipulated as a fact in the progress of the trial below. Rockefeller then paid this sum to the bank and demanded the surrender of his $36,000 note of date August 16th, and this demand was refused by the bank. It results that, unless Rockefeller in some manner became liable for what remained unpaid on the first loan of $45,000 made before the written guaranty was executed, he had paid all he owed the bank by reason of his guaranty, and his note should be canceled.

O. H. Dean (Robinson, Carkener & Robinson, on the brief), for appellant.

Sanford B. Ladd (John C. Gage and Charles E. Small, on the brief), for appellee.

Before SANBORN and ADAMS, Circuit Judges, and RINER, District Judge.

ADAMS Circuit Judge (after stating the facts as above).

We think Rockefeller did not become liable for the $45,000 loan of January 9, 1901, by the terms of the guaranty afterwards signed by him. It is a rule of very general application that all guaranties are prospective and not retrospective in operation, unless the contrary appears by express words or by necessary implication. Brandt on Suretyship and Guaranty (3d Ed.) Sec. 108; People v. Lee, 104 N.Y. 441, 449, 10 N.E. 884; Pritchett, Baugh & Co. v. Wilson, 39 Pa 421. A most critical reading of the guaranty in question discloses no purpose, either express or implied, to give it any retrospective operation. It is couched in plain and simple language, and is an agreement on the part of the signers to guarantee all debts which the commission company may from time to time contract or may become liable for to the bank. These words, in our opinion, clearly look to the future and not to the past. Did either one or both of the renewal notes given for $44,000 of the original $45,000 loan, after the execution of the guaranty, amount to the contracting or becoming liable for a debt within the meaning of the written guaranty? We think not. There is nothing in this record showing that the renewal notes were intended to be given or received in...