National Bank of Commerce In St. Louis v. Laughlin

• Decision Date: 31 July 1924
• Docket Number: 24093
• Citation: 264 S.W. 706,305 Mo. 8
• Parties: NATIONAL BANK OF COMMERCE IN ST. LOUIS, Appellant, v. HENRY D. LAUGHLIN
• Court: Missouri Supreme Court

264 S.W. 706

305 Mo. 8

NATIONAL BANK OF COMMERCE IN ST. LOUIS, Appellant, v. HENRY D. LAUGHLIN

No. 24093

Supreme Court of Missouri

July 31, 1924

Appeal from St. Charles Circuit Court; Hon. Edgar B Woolfolk, Judge.

Judgment modified and affirmed.

George L. Edwards for appellant; Charles J. Daudt of counsel.

(1) It was the plain duty of the court to have sustained the bank's motion to referthis case and to have referred it to some suitable referee for trial.Sec. 1426, R. S. 1919.(2)The court erred in permitting Laughlin to testify that when he endorsed the Kern note and when he took up the renewal of that note, giving therefor his own demand collateral promissory note, he had an understanding with the bank when this endorsement was made and discharged by the giving of his own note that he was not to be required to pay the indebtedness represented thereby to the bank, and that if he did pay such indebtedness it was to be considered in the nature of a savings deposit made by him, to be returned by the bank upon his demand, together with interest thereon at the rate of six per cent per annum, an understanding directly in contradiction of his written contract of endorsement and of his written note.This was a flagrant violation of the fundamental rule that parol evidence is inadmissible to vary or contradict a written agreement.State ex rel. v. Hoshaw,98 Mo. 358;Bass v. Sanborn,119 Mo.App. 103;England v. Houser,178 Mo.App. 70, 82;Bank v. Richmond,235 Mo. 532.(3) When the bank offered in evidence the note sued upon and Laughlin admitted its execution and that it had not been paid, principal or interest, the bank, of course, made a prima-facie case entitling it to judgment as prayed.Laughlin undertook to overcome this prima-facie case by testifying that, notwithstanding his written contract of endorsement and the written contract in his own note whereby he agreed to pay the balance of the Kern indebtedness represented by the note sued upon, contemporaneous with making said endorsement and giving his own note he had an understanding with the bank that he was not to be held liable thereon and was not to be required to pay said indebtedness or any part thereof, and that if he did voluntarily pay the same, or any part thereof, it was to be treated by the bank in the nature of a savings deposit to be returned by the bank to Laughlin upon his demand, with interest thereon at six per cent per annum.(a) Such testimony was wholly incompetent and it was not permissible for Laughlin to set up or claim such a contemporaneous understanding.(b) The bank submitted evidence, oral and documentary, in the main the written admissions of Laughlin, that he had no such understanding or agreement with the bank.If it were permissible even for Laughlin to show such agreement, the burden of proof was upon him to establish it.The only evidence which he offered to that effect was his own testimony.His testimony on the subject was denied by the bank's officers and by his repeated written admissions in pleadings filed by him, asserting the contrary.Laughlin also attempted to overcome such prima-facie case by claiming that the bank had wasted and dissipated Kern's collateral to his damage.But he had agreed in writing that the bank should not be charged with the duty of preserving Kern's collateral.Laughlin, therefore, failed to establish his defense, by the greater weight of the evidence.Downs v. Horton, 287 Mo. 414.

Abbott, Fauntleroy, Cullen & Edwards and Rassieur & Long for respondent.

(1) The action does not involve a long account, and hence the order denying reference was proper.Ice Co. v. Tamm,138 Mo. 389.(2) Oral testimony was properly admitted to show that the delivery of the note was conditional and for a special purpose only.R. S. 1919, sec. 803;Chandler v. Hedrick,187 Mo.App. 664;Norman v. McCarthy,56 Colo. 290;Rubel v. Honig,178 A.D. 53, 164 N.Y.S. 219;Hodge v. Smith,130 Wis. 326.(3) Oral testimony tending to prove that the defendant was an accommodation maker for the bank was admissible.St. Louis Union Trust Co. v. Laughlin,254 S.W. 846;Chicago Title & Trust Co. v. Brady,165 Mo. 197;Central Natl. Bank v. Walterscheid,204 Mo. 179;Davis v. Brown,94 U.S. 423;Rankin v. Bank,208 U.S. 541;Woodbury v. Glick,151 Iowa 648;First Natl. Bank v. Felt,100 Iowa 680;First State Bank v. Morton,146 Ky. 287.(4) The oral testimony offered was referred to in the letter written and was consistent therewith, hence admissible.Minnesota Mfg. Co. v. Grant City Co.,81 Mo.App. 255;State v. Cunningham,154 Mo. 161;Work v. Beach,59 Hun, 625, 129 N.Y. 651;Ruggles v. Swanwick,6 Minn. 526.(5) The same defense that exists against a former note exists against a renewal of said note.Comings v. Leedy,114 Mo. 478;Murphy v. Gay,37 Mo. 537;Johnson v. Grayson,230 Mo. 380, 398;3 R. C. L. 1106;8 C. J. 781.(6) When a note is made or given by a surety, or indorsed by a surety on account of misrepresentations relating to the amount of collateral held by the payee, the liability of the surety never attaches.Third Natl. Bank v. Owen,101 Mo. 558;Home Savings Bank v. Traube,6 Mo.App. 221;Harrison v. Lumbermen & M. Co.,8 Mo.App. 37;Savings Bank v. Dinker,275 Mo. 632;Milan Bank v. Richmond,235 Mo. 532;Magee v. Manhattan Ins. Co.,92 U.S. 93;Griswold v. Hazard,141 U.S. 260;Wooley etc. v. Louisville Bkg. Co.,81 Ky. 537;Page on Contracts(2 Ed.) sec. 369.(7) A surety who pays money under the mistaken belief induced by the payee of the note that the payee holds collateral is entitled to recover back the money so paid.Chester v. Bank of Kingston,16 N.Y. 336;Girardi v. Gardner,255 Mo. 538;Martin v. Hutton,36 L. R. A. (N. S.) 602;Clifford Banking Co. v. Donovan Commission Co.,195 Mo. 262.(8)The defendant being an accommodation indorser had the status of a surety for the bank, and like any other surety he could recover back any sums that he paid out for his principal.Priest v. Watson,75 Mo. 315;Weimar v. Shelton,7 Mo. 237;Havlin v. Continental Natl. Bank,253 Mo. 300;Osborne v. Frederick,134 Mo.App. 449;Noll v. Oberhellmann,20 Mo.App. 340;32 Cyc. 250, 276, 278, 835, 836.(9) Limitations do not run against a counterclaim after suit is commenced in which such counterclaim is pleaded, hence no item of the counterclaim was barred.R. S. 1919, sec. 1344;Turnbull v. Watkins,2 Mo.App. 235;Lowenstein v. Ins. Co.,227 Mo. 120;McDougald v. Hewitt,132 Cal. 154;Lewy v. Wilkerson,135 La. 105;Spear v. Brownell,124 Ill. 27.(10) Under the proof, the money recovered on the counterclaim was money held for defendant's use, and he was entitled to collect interest from the time it fell due.R. S. 1919, sec. 6491;Jefferson City Savings Assn. v. Morrison, 28 Mo. 273.

OPINION

Graves, J.

In its origin (taking plaintiff's petition as the origin) this suit apparently involved a simple suit upon a note for $ 3000, dated April 24, 1918, payable to National Bank of Commerce, and signed by Henry D. Laughlin.Said note was due and payable on July 23, 1918, and bore interest from such date at eight per cent.

Defendant plead by way of answer and counterclaim, which were met by a reply.The simple suit upon the $ 3000 note, supra, finally resulted in a verdict of the jury, in these words:

"We, the jury, find for the defendant on plaintiff's cause of action; and we further find for the defendant on defendant's counterclaim and assess the amount of his recovery thereon in the sum of $ 8381.65 with interest at six per cent.Interest $ 2011.59.Total $ 10393.24."

Defendant's answer and counterclaim contain a wealth of detail, but the transactions between the parties to this suit seem to justify the pleading, and there is evidence upon the part of defendant tending to show all the well pleaded facts in his answer and counterclaim.The answer and counterclaim are in these words: "1.Now comes the defendant, and by leave of court, files this his amended answer and counterclaim.

"Defendant denies all and singular the allegations in plaintiff's petition contained, and prays to be hence dismissed with his costs.

SECOND DEFENSE.

"2.And for another and further answer and defense to plaintiff's petition, the defendant says that the note sued on was by him made for the accommodation of the plaintiff and for no other purpose; that it was and is wholly without consideration, and was never given for value received, and only to aid the bank, at its request, to collect the debt of Robert H. Kern to said bank; that no consideration ever passed from plaintiff to defendant, and said note has no consideration to support it.Wherefore, defendant says the plaintiff is not entitled to recover on it.

THIRD DEFENSE.

"3.For another and further answer and defense, defendant says that prior to February 6, 1908, the National Bank of Commerce, hereinafter called the bank, had loaned to one Robert H. Kern, large sums of money, and at that time held various notes against the said Kern which had previously aggregated nearly one hundred thousand dollars, but then stood at a less amount; that said Kern was not at that date solvent and many of the notes held by the plaintiff were not adequately secured by collateral or otherwise and the official bank examiners were criticising said bank and its president, and insisting that said notes be either adequately secured or deducted from the assets of the bank; that at that time, the said Kern had title to, and owned, about two thousand acres of land in Macon County, Missouri, which was encumbered by a deed of trust for about twenty-five thousand dollars, and the value of said land over and above said encumbrance was in excess of twenty-five thousand dollars.

"4.That a short time prior to February...