Pierce v. National Bank of Commerce in St. Louis

Decision Date06 November 1920
Docket Number5587.
Citation268 F. 487
PartiesPIERCE v. NATIONAL BANK OF COMMERCE IN ST. LOUIS.
CourtU.S. Court of Appeals — Eighth Circuit

Thomas W. White and Henry S. Priest, both of St. Louis, Mo. (Alton B. Parker, of New York City, and John F. Green, S.W. Fordyce Jr., and John H. Holliday, all of St. Louis, Mo., on the brief), for appellant.

George L. Edwards, of St. Louis, Mo. (Edward J. White, of St. Louis Mo., on the brief), for appellee.

Before SANBORN and CARLAND, Circuit Judges, and MUNGER, District judge.

SANBORN Circuit Judge.

Henry Clay Pierce brought a suit in equity against the National Bank of Commerce in St. Louis for a discovery concerning, and an accounting by it for, $750,000 par value of the mortgage bonds of the Tennessee Central Railroad Company and $250,000 par value of the bonds of the Nashville Terminal Company which had been pledged to the bank to secure the payment to it of three promissory notes of the Tennessee Construction Company, a corporation, aggregating $700,000, the payment of the principal of which had been guaranteed by J. C. Van Blarcom, and the payment of interest upon which had been guaranteed by Pierce, for the discovery and accounting by the bank for moneys collected from the bonds of the terminal company and the Van Blarcom estate, for a redemption by Pierce of the $750,000 of railroad bonds still held by the bank for the $700,000 debt, and for an injunction until this relief could be had against the collection of a judgment of $700,000 which the bank had recovered in the circuit court in the city of St. Louis against Pierce for a conversion of 10,000 shares of stock of the Nashville Terminal Company, which had also been pledged to the bank to secure the payment of the $700,000 debt due it. The complainant applied for an interlocutory injunction, the defendant moved to dismiss the complaint for its failure to state a cause of action, and the court entered a decree that the application for the injunction be denied, and that the complaint be dismissed without prejudice. From this decree the plaintiff has appealed, and this appeal presents two questions:

First. Did the complaint state facts sufficient to constitute a cause of action, either at law or in equity, for if it stated a cause of action at law, this case should have been transferred to the law side of the court, and there proceeded with. The fact that a complainant in equity has an adequate remedy at law is no longer sufficient ground for the dismissal of the suit. Equity rule 22 (198 F. xxiv, 115 C.C.A. xxiv); section 274b, Judicial Code, amendment of March 3, 1915, 38 Stat. 956 (Comp. St. Sec. 1251b); Goldschmidt Thermit Co. v. Primos Chemical Co. (D.C.) 216 F. 382, 383; Goldschmidt Thermit Co. v. Primos Chemical Co. (D.C.) 225 F. 769, 772; Corsicana National Bank v. Johnson, 218 F. 822, 823, 134 C.C.A. 510, 511; Id. 237 F. 1016, 150 C.C.A. 665; Id. 251 U.S. 68, 40 Sup.Ct. 82, 64 L.Ed. 141; United States v. Utah Power Co. (D.C.) 208 F. 821; A. G. Wineman & Sons v. Reeves et al., 245 F. 254, 257, 258, 157 C.C.A. 446, 449, 450. And if the complaint stated a cause of action in equity, the motion to dismiss it should have been denied, and the defendant should have been required to answer.

Second. Did the denial of the application for the injunction constitute a violation of the principles or rules of equity established for the guidance of the trial court in the exercise of its judicial discretion in granting or refusing the injunction or any abuse of that discretion? The answer to the first question is conditioned by the material facts alleged in the complaint, and they are these:

In the year 1902, the construction company, for value, gave to the bank its three promissory notes, aggregating $700,000, and pledged with it as collateral security for the payment of this debt only, $750,000 par value of the bonds of the Tennessee Central Railroad Company, and $250,000 par value of the bonds of the Nashville Terminal Company. J. C. Van Blarcom guaranteed the payment of these notes, and Pierce guaranteed the payment of the interest thereon, and has paid large amounts on this guaranty, concerning which there has been no accounting. On November 17, 1908, the construction company for value gave its promissory note to Pierce for $600,000, and by the terms of that note pledged to him to secure the payment thereof the $750,000 of mortgage bonds of the railroad company and the $250,000 mortgage bonds of the terminal company, subject, as declared in said note, 'to a prior pledge thereof to the National Bank of Commerce in St. Louis as collateral to a loan of $700,000,' and authorized him to sell these securities at public or private sale, with or without notice thereof, and to become the purchaser thereof himself, upon the failure of the construction company to pay the $600,000 note. That company failed to pay it. In January 1913, Pierce foreclosed upon these bonds, purchased them at the sale on January 3, 1913, and has ever since been the owner thereof, subject to the pledge of them to the bank.

Soon after the pledge of these securities to him in 1908, he notified the bank thereof, and soon after he acquired title to them by his purchase at the sale in 1913, and before the subsequent proceedings mentioned herein, he informed the bank that he had become the absolute owner thereof, subject to the pledge of them to the bank. Since the bank received these notices, it has sold to third parties, without notice to Pierce and without his knowledge, and without notice to the construction company and without any foreclosure of the pledge to it, the $250,000 par value of the bonds of the terminal company for an unknown amount in excess of $220,000, and has refused to apply the proceeds thereof to the payment of the $700,000 debt of the construction company which they were pledged to secure, or to account for the same to Pierce, the owner thereof, subject to the pledge to the bank. The bank still holds the $750,000 par value of the mortgage bonds of the terminal company as security for the $700,000 debt of the construction company, and Pierce offers to pay into the court the amount justly due and owing to the bank on that debt, and seeks a decree for a redemption of these bonds and the transfer of them to him upon such payment.

In the year 1908 J. C. Van Blarcom died. Thereafter the bank proved a claim against his estate, founded on his guaranties and indorsements of the notes evidencing the $700,000 debt to the bank, and received large amounts of money and securities from that estate upon this claim, which in equity and good conscience should be applied to the payment of the $700,000 debt to the bank; but the bank has refused so to apply it, or to account for it, and the complainant seeks an accounting for and an application of the moneys and securities which the bank has thus obtained from the Van Blarcom estate to the payment of the $700,000 debt.

By the promissory note of the construction company to Pierce for $600,000, dated November 17, 1908, the construction company, in addition to the collateral securities which have been mentioned, also pledged to Pierce 10,000 shares, of the par value of $1,000,000, of the capital stock of the Nashville Terminal Company, and delivered to him the certificates thereof. In 1911, for the first time, the bank notified Pierce that it claimed that this stock had been pledged to it by the construction company in 1904 to secure the latter's $700,000 debt to it. Pierce denied the existence of this prior pledge. The bank then sued him in the circuit court for the city of St. Louis for the conversion of this stock. There was a trial. That court found that the bank had the prior pledge of the stock to secure its $700,000 claim; that Pierce, by refusing to deliver the stock to the bank, had converted it to his own use; that the value of it was $700,000; and rendered a judgment against Pierce for this amount, which was subsequently affirmed by the Supreme Court of the state of Missouri on January 6, 1920. It was not until after this affirmance of that judgment, and on March 18, 1920, that Pierce first learned that the bank had sold the $250,000 mortgage bonds of the Nashville Terminal Company without notice to him or the construction company, and without a foreclosure of its pledge.

The facts which have now been stated are alleged in the plaintiff's complaint. If they are true, and in determining the sufficiency of the complaint they must be so considered, the bank holds as collateral security for the $700,000 debt of the construction company to it, the $700,000 judgment against the complainant, the proceeds of the $250,000 of the mortgage bonds of the terminal company, whose stock was found by the state court to be worth 70 cents on the dollar, $750,000 of the mortgage bonds of the railroad company, and whatever securities and moneys it collected from the Van Blarcom estate. Mr. Pierce prays an accounting of these securities and an equitable application of them and their proceeds to the payment of the $700,000 debt of the construction company to the bank, offers to pay the remainder of that debt, if any, and prays that the remainder of the securities of which he is the owner, subject to the pledge to the bank, be adjudged and delivered to him as such owner.

The averments of this complaint on their face bring it far within the jurisdiction of a court of equity to marshal mortgaged or pledged securities and to decree an accounting for and application thereof to the payment of the debt they secure to adjudge a redemption of pledged or mortgaged securities, to fix the terms upon which such redemption may be made, and to decree and enforce a trust at the suit of one having title or interest in property that is...

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