National City Bank of Chicago v. Wagner

• Decision Date: 14 April 1914
• Docket Number: 2061,2070.
• Citation: 216 F. 473
• Parties: NATIONAL CITY BANK OF CHICAGO et al. v. WAGNER et al. ROGERS v. NATIONAL CITY BANK OF CHICAGO et al.
• Court: U.S. Court of Appeals — Seventh Circuit

216 F. 473

NATIONAL CITY BANK OF CHICAGO et al. v. WAGNER et al.

ROGERS v. NATIONAL CITY BANK OF CHICAGO et al.

Nos. 2061, 2070.

United States Court of Appeals, Seventh Circuit.

April 14, 1914

On Rehearing July 1, 1914. [Copyrighted Material Omitted]

Benj. C. Bachrach and A. R. Hulbert, both of Chicago, Ill., for appellant Rogers.

H. H Barnum, of Chicago, Ill., for appellees E. W. Wagner & Co. and another.

Before BAKER, KOHLSAAT, and MACK, Circuit Judges.

MACK Circuit Judge.

These cases grow out of the remarkable career in high financing of a youth just approaching manhood, one Butler Storke. It is unnecessary to detail his swindling operations. Suffice it to say that he managed, by a series of more or less plausible misrepresentations and deceptions, to become indebted to the appellant bank in a large sum of money and also fraudulently to secure possession, under a trust receipt, of a stock certificate indorsed in blank, theretofore pledged by him with appellees Wagner and Tietgens, stockbrokers, doing business as E. W. Wagner & Co. This certificate was delivered by him on the same day, March 1, 1913, to the bank as collateral security for his then indebtedness and for future advances. The bank, through its agents, on March 3 and 4, 1913, obtained conveyances of real and personal property from appellee, Laura G. Rogers, Storke's indulgent and confiding grandmother, as security for the joint collateral 15-day note of $30,000 executed by Storke and Mrs. Rogers on March 3, 1913, and then and there delivered to the bank to cover Storke's indebtedness to it.

On March 12, 1913, appellee Rogers, at the request of Storke and one Barnum, the attorney for Wagner & Co., executed and acknowledged before a notary public at Milwaukee, Wis., her residence, and then and there delivered to Barnum the following document:

'Whereas, Butler R. Storke is indebted to E. W. Wagner and Paul Tietgens on a certain promissory note on which there remains due and unpaid the principal sum of ten thousand ($10,000.00) dollars and interest; and whereas, the said Butler R. Storke is indebted to the National City Bank of Chicago to the extent of some twenty-eight thousand ($28,000.00) dollars for which said bank holds certain bonds, stocks and other collateral; and whereas, I, the undersigned, have heretofore conveyed to the said bank certain real property at Oconomowoc, Wisconsin, and Milwaukee, Wisconsin, and Oak Park, Illinois, in order to secure the said bank against any losses on account of the said obligations of the said Butler R. Storke to the said bank and on account of certain guaranties made by him to the said bank, and have heretofore also delivered to the said bank certain personal property for the same purpose:

'Now, therefore for and in consideration of the sum of one dollar and other good and valuable considerations, the receipt whereof is hereby acknowledged,

I, the said Laura Rogers, widow, do hereby convey, grant, set over and assign unto E. W. wagner and Paul Tietgens, all of my right, title and interest in and to all of the said real estate so conveyed by me to the said bank for the purposes aforesaid, and all of the said personal property so pledged or delivered by me to the said bank for the purposes aforesaid, and all equity which I may have in any of the said property, real or personal, so conveyed or delivered to the said bank for the purpose of securing payment of the said note to the said E. W. Wagner and Paul Tietgens, and hereby authorize and direct the said National City Bank of Chicago to convey and deliver to them any and all of said property, real or personal, or the proceeds thereof which may remain in its hands or under its control after the adjustment and satisfaction of any claims which it may have against the said Butler R. Storke, and hereby empower said bank or its officers to execute all assignments, deeds, and other papers or instruments necessary to accomplish this purpose.

'It being the intention of the undersigned to hereby convey to the said E. W. Wagner and Paul Tietgens all her right, title and interest in and to all of said property, real and personal, including the release and waiver of the right of homestead, under and by virtue of the Homestead Exemption Laws of the state of Illinois and Wisconsin.

'In witness whereof, I have hereunto set my hand and seal this 12th day of March, A.D. 1913.

Laura G. Rogers. (Seal.)'

On April 26, 1913, Mrs. Rogers filed her petition in the District Court to set aside all of her hereinabove recited conveyances on the ground of duress, undue influence and want of consideration. Wagner and Tietgens, by answer and cross-bill, sought to recover from the bank both the stock certificate and all of the property conveyed by Mrs. Rogers. The chancellor found that the conveyances by Mrs. Rogers to the bank had been procured through fraud, duress, undue influence, and compulsion; that the instrument of March 12th was executed without any duress or threats and constituted a valid assignment to secure the indebtedness of Storke to Wagner & Co.; that although the bank was an innocent holder of the stock certificate, it had paid no new consideration therefor, either by making advances at the time of receiving it or thereafter, and thereupon decreed that the appellants in case No. 2061 should transfer the property received by them from Mrs. Rogers as well as the stock certificate to Wagner & Tietgens, to be held by them as collateral security for Storke's indebtedness in the sum of $10,000.

Mrs. Rogers, appellant in case No. 2070, contests the finding of the court, both that the instrument of March 12th was executed without duress and, inasmuch as no present consideration was paid therefor, that it constituted a valid assignment.

The bank and its officers, appellants in case No. 2061, seek to reverse the decree on the grounds: First. That the conveyances of March 3d and 4th were executed voluntarily and without any duress or wrongdoing. Second. That the instrument of March 12th was, in any event, a ratification thereof. Third. That the bank made advances after the receipt and on the faith of the stock certificate, but that even as the bona fide recipient of the certificate to secure a pre-existing debt, it is to be protected as against Wagner & Co., the defrauded pledgees thereof.

As to case No. 2070, the decree, in so far as it holds that the instrument of March 12th was executed without duress, and constituted a valid assignment of the property therein referred to, must be affirmed for the following reasons:

First. Storke was concededly indebted to Wagner & Co. in the sum of $10,000. He had swindled them out of this stock certificate, which had theretofore been given to him by his grandmother, Mrs. Rogers, to be used for the very purpose for which he deposited it with the stockbrokers. When his wrongful act was discovered, he went with the brokers' attorney, Barnum, to Milwaukee, and explained the situation to Mrs. Rogers. According to her own testimony, she clearly understood that Barnum had no connection whatsoever with the bank, and that his object was to get the equity in the property, theretofore conveyed to the bank, for his clients, Wagner & Co. No threats of any kind were used; Mrs. Rogers acted solely because of her confidence in Storke, a confidence which continued so absolute and implicit even at the time of the trial that, as she testified, she was entirely willing to risk her last dollar as surety for him. The fact that she had conveyed these properties to the bank eight or nine days earlier as collateral for Storke's indebtedness was mentioned by all parties during the interview; nothing, however, was said by any of them about duress or wrongdoing of any kind theretofore practiced upon her; she expressed no desire or intention to repudiate the original transfers; she knew that the document then executed by her specifically set out the fact of the earlier conveyances.

There is not a word of testimony to justify any inference that the mental state produced by the duress, alleged to have been practiced on behalf of the bank, continued at the later date, or that Wagner, Tietgens, or Barnum had ever had any knowledge thereof.

Second. The instrument of March 12th is not a contract, but a grant, a conveyance under seal. It is elementary that an executed conveyance of real or personal property, whether absolute or as collateral security for a debt, pre-existing or new, and either of the grantor or of another person, freely and voluntarily made, cannot be revoked. If a consideration agreed to be given be not paid-- if there be, not a want, but a failure of consideration-- equity will, under certain circumstances, aid in a rescission of the transaction.

'While a person who signs an instrument of writing under seal is not allowed to show that it was without consideration, the rule has long prevailed that he has the right to show failure of consideration. ' Koster v. Welch, 57 S.C. 95, 35 S.E. 435.

When the conveyance is in effect a mortgage, there must, of course, be an obligation to be secured thereby. But no new consideration, either to the debtor or to the mortgagor is required in order to validate the mortgage as an executed grant. Perkins v. Trinity Realty Co., 69 N.J.Eq. 723, 61 A. 167, and cases cited therein, affirmed 71 N.J.Eq. 304, 71 A. 1135.

Payment of consideration is, moreover, recited in the document, a recital not subject to contradiction for purposes of revocation, in the absence of proof of fraud or other wrongdoing. Consideration has to do with contracts, not with executed conveyances. Equity looks behind the forms, when its aid is sought to enforce executory rights; it does not, however, lend its assistance to revoke...