National Bank v. Maryland Casualty Co.

• Decision Date: 19 March 1925
• Docket Number: No. 23940.,No. 23939.,23939.,23940.
• Citation: 270 S.W. 691
• Parties: NATIONAL BANK OF COMMERCE IN ST. LOWS v. MARYLAND CASUALTY CO.
• Court: Missouri Supreme Court

270 S.W. 691

NATIONAL BANK OF COMMERCE IN ST. LOWS v. MARYLAND CASUALTY CO.

No. 23939.

No. 23940.

Supreme Court of Missouri, Division No. 2.

March 19, 1925.

Appeal from St. Louis Circuit Court; H A. Hamilton, Judge.

Action by the National Bank of Commerce in St. Louis against the Maryland Casualty Company. Judgment for plaintiff, and both parties appeal. Affirmed on plaintiff's appeal and reversed and remanded on defendant's appeal.

Edw. J. White, of St. Louis, and Geo. L. Edwards, of Kansas City, for appellant-respondent.

Boyle & Priest, Fordyce, Holliday & White, Judson, Green & Henry, and Holland, Rutledge & Lashly, all of St. Louis, for respondent-appellant.

DAVID E. BLAIR, J.

These cases are cross-appeals in the same case below. They were argued and submitted together. To avoid confusion, we will refer to the parties as "bank" and "casualty company."

The present case is a continuation of long drawn out litigation between the bank and Henry Clay Pierce. Facts, other than those necessary to be stated to understand the issues here involved, may be found in the following cases: National Bank of Commerce v. Pierce, 280 Mo. 614, 219 S. W. 578; Pierce v. National Bank of Commerce (C. C. A.) 268 F. 487; Pierce v. National Bank of Commerce (C. C. A.) 282 F. 100. Each of the three cases involved different phases of such litigation. Our writs of mandamus and in prohibition were also sought in connection with the present case. No opinions were filed by the court en banc when such writs were denied.

The present case is an aftermath of the case of Bank v. Pierce, 280 Mo. 614, 219 S. W. 578. In that case the bank recovered a judgment against Pierce for $700,000 for the conversion by Pierce of $1,000,000 par value of the stock of Nashville Terminal Company, alleged to have been deposited with the bank by the Tennessee Construction Company, as collateral security upon three notes of said company, aggregating $700,000. Upon appeal said judgment was affirmed by this court (280 Mo. 614, 219 S. W. 578). Pierce, as principal, and the casualty company, as surety, executed an appeal bond in that case in the sum of $900,000.

After that judgment was affirmed by this court, Pierce filed suit against the bank in the United States District Court at St. Louis, seeking an accounting and a discovery and marshaling of securities held by the bank and an application thereof to the payment of the $700,000 notes of the Tennessee Construction Company, held by the bank. Be prayed for an injunction to prevent the bank from suing out an execution to collect its $700,000 judgment against him and from bringing suit upon the appeal bond and for other relief. The federal District Court denied such injunction and dismissed the bill filed by Pierce. He appealed to the United States Circuit Court of Appeals for the Eighth Circuit.

Pierce then applied to said Court of Appeals for an injunction to preserve the status quo. An order was there made restraining the bank for 60 days from taking steps to collect its judgment or bringing suit upon the appeal bond. Said order also provided that, if Pierce should pay off part of the $700,000 judgment, together with interest and costs, and reduce same to $300,000, within such period of 60 days, and should give a bond in the sum of $350,000 to secure the payment of the remainder of said judgment and any damages and costs the bank might sustain, by reason of the granting of said injunction, the bank would then be further restrained in the premises, during the pendency of the appeal in the federal Court of Appeals.

Thereupon, Pierce paid over $467,000 upon such judgment, interest, and costs, and reduced the unpaid portion of such judgment to $300,000. Thereafter, by agreement between Pierce and the bank, the giving of the $350,000 bond, required in the order of the federal Court of Appeals, was waived and Pierce was permitted to give to the bank a bond in the same amount and the bank waived the giving of the bond required in the order of the federal Court of Appeals. The casualty company signed said bond as surety. Thereupon the $900,000 appeal bond was released by the bank. The $350,000 bond thus given is the one sued on in this case.

In due time the federal Court of Appeals handed down its opinion affirming the order of the District Court in so far as it denied an injunction against the bank, and reversing that part of the order which dismissed Pierce's bill. It remanded the case for further proceedings in the District Court. That opinion is reported in 268 F. at page 487. Thereafter, the bank instituted the suit which resulted in the appeals now before us. The casualty company was made a party defendant, but Pierce was not joined as such.

In substance, the petition alleged the execution of the $350,000 bond and the aforesaid facts relating to the execution and release of the $900,000 appeal bond and that the casualty company had breached such $350,000 bond by failure to satisfy and pay the remainder of the $700,000 judgment. The bank prayed judgment for the penalty of the bond. Recovery was asked for the unpaid portion of the judgment in the sum of $300,000, and interest thereon, and for $25,377.03, as attorneys' fees and costs incurred by the bank in dissolving the said injunction, together with a penalty of 10 per cent, upon the sum of the foregoing items, by way of penalty for vexatious refusal of the casualty company to pay and for reasonable attorneys' fees in this case, in the sum of $25,000.

The case was tried below without the intervention of a jury. The trial judge found for the bank and entered judgment in its favor for the penalty of the bond, such judgment to be satisfied upon the payment of the sum of $337,923.09, which represented the unpaid balance on the $700,000 judgment, together with interest thereon. The trial judge denied the bank's claim for attorneys' fees and costs in dissolving the injunction, as well as the penalty for vexatious refusal to pay and attorneys' fees in this case.

Thereupon the bank appealed from said judgment, in so far as it denied damages incurred in dissolving the injunction, penalty for vexatious refusal to pay, and attorneys' fees in this case. The casualty company appealed from the judgment for the penalty of the bond. The bank's appeal is numbered 23,939 in this court and the appeal of the casualty company is numbered 23,940. We will first consider the appeal of the casualty company.

Numerous assignments of error are made, but they all depend upon one main proposition, to wit, whether the matters and things involved in the suit of Pierce against the bank, pending in the federal District Court, constitute any defense in the present suit of the bank against the casualty company, and, as incidental to such main proposition, whether the casualty company is entitled to make such defenses or is entitled to have Pierce brought in as a party defendant, in order that he may make such defenses, or whether Pierce is entitled to be made a party defendant upon his own application. This requires the statement of further facts. Before going into such facts, however, a further history of the litigation in the federal court, should be outlined briefly, in order to make the instant case entirely clear.

As above stated, the present suit was instituted after the federal Court of Appeals entered its order affirming the action of the District Court in denying an injunction and reversing the order of the District Court in dismissing the bill of Pierce. Thereupon, Pierce filed an amended bill in the federal District Court, setting up the payment on the state court judgment, interest, and costs of $467,141.67, the pendency of the case at bar, and other matters not necessary to notice here, and renewed his prayer for an injunction to prevent the bank from prosecuting its suit upon the $350,000 bond. His prayer was again denied, and again he appealed to the federal Court of Appeals and there again prayed for a temporary injunction during the pendency of such appeal. His prayer was again denied.

It appears that the casualty company, by appropriate notice to the bank, under sections 12687, 12688, and 12689, R. S. 1919, required the bank to institute suit against Pierce upon the bond here sued on. Pierce removed that suit to the United States District Court and there filed a cross-complaint alleging the same matters involved in his prior suit in the federal District Court against the bank. From an order denying his application for an interlocutory injunction and striking out certain parts of his cross-complaint, Pierce appealed to the federal Circuit Court of Appeals. There it was held that the order, striking out portions of the cross-complaint, was not a final judgment and that no appeal was allowable therefrom. It was again held that Pierce was not entitled to an injunction upon the facts alleged in his cross-complaint, and the order of the federal District Court denying such injunction was affirmed. This opinion is reported in 282 F. at page 100.

The matters here complained of as error were raised in various ways. Portions of the answer and the amended answer of the casualty company were stricken out. Its motion to require Pierce to be made a party defendant was overruled. The application of Pierce to that end was likewise denied. One part of the answer so stricken out set up the matters involved in the case of Pierce v. Bank, pending in the federal District Court and pleaded by Pierce in that case. In substance, the defenses sought to be made there were that the 10,000 shares of the capital stock of the Nashville Terminal Company, found to have been converted by Pierce, had been held by the bank as collateral security for the payment of the $700,000 in notes of the Tennessee Construction Company and that the $700,000 state court judgment was thereafter merely collateral security upon the same notes; that the bank held, as additional collateral security upon said...