Powers v. Woolfolk

• Decision Date: 29 June 1908
• Citation: 111 S.W. 1187,132 Mo. App. 354
• Parties: POWERS v. WOOLFOLK.
• Court: Missouri Court of Appeals

111 S.W. 1187

132 Mo. App. 354

POWERS v. WOOLFOLK.

Kansas City Court of Appeals. Missouri.

June 29, 1908.

1. BANKS AND BANKING—AUTHORITY OF CASHIER—TRANSFER OF BANK'S PAPER AS COLLATERAL SECURITY.

A cashier, having the general charge and management of a bank, has authority to transfer the bank's paper as collateral security for the bank's debts.

2. SAME.

The transfer of a note, owned by a bank as collateral security, for a note executed by the father of the cashier of the bank, by one of the owners of the bank, and by the cashier individually, payable to the bank, and indorsed and substituted by the bank for a certificate of deposit issued by it, was not an attempt to transfer the note owned by the bank as security for the cashier's private debt, for the transaction was that of the bank, and for the bank.

3. PLEDGES — CONSIDERATION — EXECUTED TRANSACTION.

Where a debtor, with or without request, gives the creditor collateral security after the indebtedness has been incurred, and the latter accepts it, the transaction is valid as between them, irrespective of the question of consideration.

4. SAME.

A promise of forbearance, though for an indefinite time, if a reasonable time be given, is a sufficient consideration to support the giving of collateral security.

5. PRINCIPAL AND SURETY—DISCHARGE OF SURETY—ASSENT TO EXTENSION OF TIME.

Where the assent of a surety is given to an extension of time to the principal, the surety is not discharged.

6. PLEDGES—CONSIDERATION—SURRENDER OF COLLATERAL PREVIOUSLY RECEIVED.

A surrender of collateral security theretofore received is a valid consideration for the giving of new collateral.

7. BILLS AND NOTES—PAYMENT—PERSONS TO WHOM PAYMENT MAY BE MADE.

Rev. St. 1899, § 4488 (Ann. St. 1906, p. 2459), providing that in an action on an assigned nonnegotiable instrument defendant shall be allowed every just set-off or other defense existing in his favor at the time of his being notified of such assignment, does not apply to negotiable paper, though past due, and the maker of a negotiable note is not protected in paying it to the payee, who has sold and indorsed it to another, though without the maker's knowledge.

8. SAME.

The duty of a maker of a negotiable note to see that the payee bank had it in its possession before making payment to the bank was not affected by the fact that the note was payable at the bank.

9. PLEDGES—SUBSTITUTION OF COLLATERAL— AUTHORITY OF PLEDGOR TO COLLECT NOTE SURRENDERED FOR PLEDGEE.

Where notes, pledged as collateral security for another note, were surrendered from time to time on the statement that the makers desired to pay, and new notes were substituted as collateral security, there was no authority to collect the collateral for the creditor.

10. BILLS AND NOTES—ACTIONS—SET-OFF OR COUNTERCLAIM.

In Missouri, where a negotiable note is transferred by the payee as collateral security for another note, and the transferee brings suit thereon against the maker, there can be no setoff or counterclaim, or other defense, to the note, that does not arise out of the note itself or inhere therein.

11. BANKS AND BANKING—AUTHORITY OF CASHIER—TRANSFER OF BANK'S PAPER AS COLLATERAL SECURITY.

Rev. St. 1899, § 1294 (Ann. St. 1906, p. 1054), forbidding a cashier to transfer notes of the bank as collateral security, unless such power shall have been given him by the board of directors, and making transfers, without such authority, null and void, which section, so far as applicable, by section 1301, Rev. St. 1899 (Ann. St. 1906, p. 1058), governs private banks, does not apply to a private bank which has no board of directors.

Appeal from Circuit Court, Jackson County; W. A. Powell, Judge.

Action by John Powers against J. L. Woolfolk. Judgment for plaintiff, and defendant appeals. Affirmed.

Fyke & Snider, for appellant. C. C. Cickinson, Peyton A. Parks, and Paxton & Rose, for respondent.

ELLISON, J.

Plaintiff's action is based on a negotiable promissory note for $1,500. He obtained judgment in the trial court, less $132, which was allowed by that court as a credit, the circumstances of which we need not state, since plaintiff is not complaining. There was a private banking house in Clinton, Mo., known under the name of Salmon & Salmon, which did a general banking business. The bank was practically under the exclusive management and control of T. M. Casey, who was its cashier. The plaintiff made a time deposit with the bank of $10,000, at 5 per cent. interest, and, as evidence thereof, received a certificate of deposit. He afterwards concluded he could get a higher rate of interest by loaning the money to individual borrowers, and so expressed himself to Casey. The latter told him that the bank could not pay a higher rate, but that he would get him a note, payable on demand, for the amount and accrued interest, being $11,100, bearing 7 per cent., signed by his father, G. M. Casey, himself, and one of the Salmons, payable to Salmon & Salmon, and by them indorsed to plaintiff, notice and protest waived. This was satisfactory to plaintiff. Afterwards G. M. Casey became known to be insolvent, and failed in business, and plaintiff began to demand payment of his note from T. M. Casey, who, as already stated, was manager of the bank, and who had also signed the note individually. The latter stated to plaintiff that, if he would not press for payment, he would turn over to him notes of the bank as collateral, so as to make the note as good as it was before G. M. Casey's failure. This was done, and these collateral notes were indorsed by the bank, through T. M. Casey, to plaintiff, who put them in his private box, along with the principal note. This box was kept locked by plaintiff, and placed by him in the bank's vault. Afterwards T. M. Casey said to plaintiff that the collateral notes would be falling due from time to time, and that he would like for plaintiff to let him have them when payment would be offered, and that he would give him other collateral in their place. Plaintiff had no objection to this, provided the substituted collateral was satisfactory to him. In pursuance of this several substitutions were made, plaintiff putting the new ones in his box. In January, 1905, defendant gave the note in suit to the bank, for $1,500. In April thereafter Casey gave to plaintiff this note (indorsed by him for the bank) as collateral, to be substituted for some then received from plaintiff. Plaintiff took the note, and placed it in his box. Afterwards, on June 10, 1905, after banking hours, defendant, having a check on the bank for $1,000, and not knowing that his note had been transferred to plaintiff, went into the bank and said to the paying and receiving teller: "I want to pay you $1,000 on that note of mine. Get the note." The teller replied that it was locked up. Defendant then stated to him that he was going away, and that: "I want to leave this check with you to pay on that note." The teller then made a memorandum to that effect. It was stated that Casey heard this conversation, and we will assume that he did. A few days thereafter, on the 21st of June, 1905, the bank failed, and its doors were closed.

1. The first question is, did T. M. Casey, as general manager and cashier of the bank, have authority to transfer the note in controversy to the plaintiff as collateral security for the note of $11,100 held by plaintiff? The law is well settled that a cashier, having the general charge and management of a bank, has authority to transfer the bank's paper as collateral security for the bank's debts. Sloan v. Bank, 158 Mo. 431, 438, 439, 57 S. W. 1056; Bank v. Hughes, 62 Mo. App. 581, 582. Conceding this statement of the law, defendant makes two distinct claims in avoidance. The first is that the transfer of the note against defendant to the plaintiff by Casey as collateral, though in the name of the bank, was merely an attempt to transfer the bank's note as security for his private debt. The statement that the principal note was T. M. Casey's is true, yet it is not the whole truth....