People's Bank v. Stewart

• Decision Date: 03 January 1911
• Parties: PEOPLE'S BANK v. STEWART.
• Court: Missouri Court of Appeals

133 S.W. 70

152 Mo. A. 314

PEOPLE'S BANK v. STEWART.

Springfield Court of Appeals. Missouri.

January 3, 1911.

1. GUARANTY (§ 7)—REQUISITES—NOTICE OF ACCEPTANCE—NECESSITY.

Where a guaranty is merely a proposal, notice of acceptance is necessary, but where it is a direct promise to pay or an original undertaking, notice is unnecessary.

2. GUARANTY (§ 7)—NECESSITY—PRIMARY OBLIGATION.

An order to a bank, in the following terms, "cash checks for Roley & Co. till next week will see it pade," is a primary undertaking, and requires no notice of acceptance.

3. GUARANTY (§ 7)—NOTICE OF ACCEPTANCE —NECESSITY—PREVIOUS ARRANGEMENT.

Where a guarantor made arrangements with a bank to honor overdrafts of a mining partnership, on his order notice of the bank's acceptance of an order was unnecessary.

4. GUARANTY (§ 7)—NOTICE OF ACCEPTANCE— NECESSITY—CUSTOM.

Where orders of a guarantor to honor overdrafts of a third person have been accepted for a long time, such guarantor is not entitled to notice of the acceptance of later orders.

5. GUARANTY (§ 46)—OPERATION—NOTICE OF DEFAULT—PRIMARY LIABILITY.

A guarantor who is primarily liable is not entitled to notice of default of the principal.

6. GUARANTY (§ 90)—RIGHTS AND REMEDIES OF CREDITORS—EVIDENCE—MATERIALITY.

In an action on a guaranty, evidence offered by defendant to the effect that plaintiff had taken demand notes from the principal debtor, though inadmissible if the guaranty is to be regarded as a primary obligation, is material for the purpose of showing that plaintiff relied on the principal debtor and treated the guaranty as collateral.

7. PAYMENT (§ 63)—PLEADING—PROOF.

Under a guarantor's general plea of payment, evidence that the principal debtor gave the creditor a demand note is not admissible.

8. PAYMENT (§ 16)—PAYMENT BY NOTES— DEBTOR'S NOTES.

In order that the taking of a note shall operate as a payment of a prior indebtedness, there must be an express agreement to that effect.

9. GUARANTY (§ 59)—DISCHARGE OF GUARANTOR —TAKING NOTES OF PRINCIPAL.

An order on a bank to honor the checks of a third person does not prohibit the bank from taking the demand notes of the principal debtor for the amount of the advances, and such notes do not constitute payment as between the bank and the guarantor.

10. GUARANTY (§ 59)—DISCHARGE OF GUARANTOR —PAYMENT.

A guarantor was not discharged by payment of the amount of the guaranty obligation to the principal debtor with directions to pay the same to the creditor, where such payment was not made, and the creditor had no knowledge of the transaction.

Appeal from Circuit Court, Dade County; B. G. Thurman, Judge.

Action by the People's Bank against Peter W. Stewart. From a judgment for defendant, plaintiff appeals. Reversed and remanded.

Neale & Newman and McPherson & Hilpirt, for appellant. McNatt & McNatt, for respondent.

GRAY, J.

On the 5th day of December, 1910, an opinion was filed herein reversing the judgment and remanding the cause for a new trial. The appellant filed a motion to modify the opinion; and the respondent, motions for rehearing and to transfer to the Supreme Court. The motions for rehearing and to transfer have been overruled. The motion to modify has been sustained, and the original opinion is withdrawn and the following filed in lieu thereof:

This suit originated in the circuit court of Lawrence county, and on a trial in that county a judgment was rendered in favor of the defendant. The plaintiff appealed, and the judgment was reversed by the St. Louis Court of Appeals. 136 Mo. App. 24, 117 S. W. 99. When the cause was remanded, an amended petition and answer were filed, thereby changing the issues in the case so that the former opinion throws but little light on the present controversy. Before the cause was retried, the plaintiff applied for and obtained a change of venue and the cause was sent to the Dade county circuit court, and there tried, before a jury, resulting in another judgment in favor of the defendant, and the plaintiff appealed.

The plaintiff, at the times hereinafter mentioned, was a banking corporation in Aurora, Lawrence county, and the defendant was the owner of a tract of land, upon which a partnership known as Roley & Co. was mining for lead and zinc ores. The arrangement between the defendant and the partnership was, that the latter should conduct the mining operations, pay all the expenses, and when the ore was cleaned and ready for market, it was to be sold in the name of the defendant, who was to receive the pay therefor. The company was entitled to a certain per cent. of the proceeds of the ore in payment for mining the same and preparing it for market. When the ore check was given to the defendant, he deducted the amount due him as the owner of the land, and wrote a check payable to the company for the amount due it. About the time Roley & Co. got the mine in shape to operate, its funds were exhausted, and the defendant went to the plaintiff and borrowed $1,000, and deposited it to the account of Roley & Co., so the company could meet expenses and finish the mining plant, and be able to begin operations.

The testimony shows that it was customary to pay the laborers in the mine on Saturday, but the ore produced during the week was not sold and delivered, so that a settlement could be made until the first of the week, and sometimes the ore was not sold weekly, and further delays in receiving pay for the ore were caused thereby. The company was without funds in the bank to meet its weekly pay rolls, and applied to the plaintiff bank for credit, and asked the bank to permit it to overdraw its account by writing checks on the bank in excess of the funds on deposit. The bank refused the credit, for the reason it did not deem the copartnership good for the money advanced. The plaintiff claims that shortly after its refusal to extend credit to the company, the defendant called at the bank, and an agreement was entered into by which the bank agreed, if the defendant would send orders, to cash the checks of the copartnership. In a short time an order was presented to the bank, the plaintiff claims, reading as follows: "Aurora, Mo. People's Bank. Cash checks for Roley & Co. till next week will see it Pade. P. W. Stewart." It is the contention of plaintiff that the order was accepted, and that the copartnership was permitted to overdraw its account; that soon after another order was presented, and this practice continued from some time in 1905, until the 14th day of July, 1906. Roley & Co. deposited in the bank until January 6, 1906, sufficient funds to square its account so that no liability accrued on the orders of the defendant given prior to that time. Previous to January 6, 1906, when an order was presented, the bank put it in the cash drawer and honored the checks of the copartnership, regardless whether it had any funds on deposit to meet them. And when the copartnership received a check for ore, the same was deposited to the copartnership account, and was sufficient not only to take up all outstanding checks, but to show a balance in favor of the copartnership. When the order of January 6th was presented, the cashier of the plaintiff requested the copartnership to give a demand note for the amount the proposed checks would overdraw the account. The evidence shows that the bank remained open Saturday evenings after the usual closing hour, but the Saturday evening's business was transacted as a part of the business of the following Monday. When the business of Monday was finished, and it was ascertained the amount the copartnership had overdrawn its account, a demand note was given for the amount. The plaintiff claims that on January 6, January 27, March 13, and July 14, 1906, on orders of the defendant, it paid to the copartnership $940.

The petition is in four counts, but as the counts are the same except as to dates and amounts, it will not be necessary to refer to more than one of them. The first count, after alleging the organization of the plaintiff and that Roley & Co. was a mining partnership, states: "On or about the 6th day of January, 1906, the defendant, by his written order of that date, duly executed by him and delivered to the plaintiff, ordered and requested the plaintiff to then and there cash checks of Roley & Co. in such sum as the said Roley & Co. might draw on plaintiff; that on or about the said date, the said Roley & Co. drew checks upon the plaintiff bank in the sum of $300, and the plaintiff paid the same solely on account of the said order of defendant, which said order it accepted; that the defendant had knowledge of the acceptance by plaintiff of the said order, and of its payment of said checks, and that it did so relying solely on his credit; that no portion of the sum so paid on the defendant's order has been paid to plaintiff by defendant, or by the said partnership, but the whole remained due and unpaid after demand."

In the first, second, and third counts of the petition it is alleged that the orders given were lost, so that the same could not be filed; but with the fourth count there was filed an order reading as follows: "Aurora, Mo., July 14th, 1906. People's Bank. Cash checks for Roley & Co. till next week will see it Pade. P. W. Stewart." The answer admitted the signing of the order described in the fourth count, but denied the execution of the others; further denied plaintiff accepted any of the orders; that plaintiff ever gave the defendant any notice of the acceptance of the orders, or of any notice of the failure of Roley & Co. to repay. The answer further alleged: "That the orders alleged to have been executed by the defendant and upon which the plaintiff alleges it advanced the money to the said Roley & Co., only requested the plaintiff to permit the said Roley & Co. to overdraw and check at the plaintiff bank for the particular week to meet the pay roll of the said Roley & Co., and that the plaintiff refused to...