Richardson v. Ashby

• Decision Date: 28 January 1896
• Citation: 33 S.W. 806,132 Mo. 238
• Parties: Richardson, Administrator, Appellant, v. Ashby
• Court: Missouri Supreme Court

33 S.W. 806

132 Mo. 238

Richardson, Administrator, Appellant, v. Ashby

Supreme Court of Missouri, First Division

January 28, 1896

Appeal from St. Louis City Circuit Court. -- Hon. D. D. Fisher Judge.

Affirmed.

R. M Nichols for appellant.

(1) As the pledgee came rightfully into possession of the property pledged, he is not liable for conversion until that element of right has been removed. Therefore, to lay the ground of an action for conversion, which action is based upon actual possession, or the right to the present possession, the lien of the pledgee must first be discharged, either by payment or tender. Donald v. Suckling, L. R. 1 Q. B. 602; Holliday v. Holgate, L. R. 3 Exch. 299; Jones on Pledges, sec. 422; Talty v. Bank, 93 U.S. 321; Jarvis v. Rodgers, 15 Mass. 389; Henry v Eddy, 34 Ill. 508; Hopper v. Smith, 63 How. Pr. 34; Butts v. Burnett, 6 Abb. Pr. (N. S.) 303; Bank v. Bryce, 78 Ky. 42; Thompson v. Bank, 113 N.Y. 325; Williamson v. McClure, 37 Pa. St. 42; Doke v. Bank, 6 Iredell (N. C.), 309; 3 Sutherland on Damages, p. 488; Cooley on Torts [2 Ed.], p. 530, sec. 453; Comnock v. Inst., 142 Mass. 342. (2) An unauthorized subpledge or illegal sale by the pledgee does not render the pledge contract void ab initio, and is, therefore, not of itself a conversion, but it is the refusal to redeliver the pledge after payment, or a tender of payment, and demand and refusal by the pledgee to return the collateral. Consequently, the cause of action for conversion does not arise until he discharges the lien by a payment or a tender, and demands a return of the pledge and the pledgee neglects or refuses to return it, and the refusal to return is the cause of action. Butts v. Burnett, supra, and cases above cited; Colebrooke on Collateral Security, sec. 344, page 457. (3) Conceding that the testimony shows (which it does not) that respondent offered to pay her note if appellant would produce the collateral, such offer is not equivalent to an actual tender. Talty v. Bank, 93 U.S. 321; Lewis v. Mott, 36 N.Y. 395; McClintock v. Bank, 120 Mo. 133; Comnock v. Inst., 142 Mass. 342. (4) Nor is the tender excused by the fact that the pledgor's note is in the hands of her pledgee; the note has matured; its negotiable character is gone, and she could safely pay the amount or tender the amount to the second pledgee. Talty v. Bank, 93 U.S. 321; Lewis v. Mott, 36 N.Y. 395; Williamson v. McClure, 37 Pa. St. 402; Jarvis v. Rodgers, 15 Mass. 389. (5) The note in suit being due and the collateral being negotiable securities, and the conditions of the pledge not restricting Simpson to any manner of disposition, he had a right to subpledge the collateral, and if he did so for a greater amount than the sum which he advanced, such excess would be the only damage respondent could suffer, and is the proper measure of damages in this case. Colebrooke on Coll. Sec., secs. 80 and 83; Story on Bailments, secs. 296 and 324; Bank v. Voice, 78 Ky. 42; Thompson v. Bank, 113 N.Y. 330; Gross v. Emerson, 23 N.H. 38; Donald v. Suckling, supra.

Collins & Jamison for respondent.

(1) When collateral securities are wrongfully assigned to a third person without authority of the debtor, the pledgor may be charged with the value thereof. Hawks v. Hincliff, 17 Barb. 472; Nabring v. Bank, 58 Ala. 204. (2) The lien of a pledge can not be separated, either from the possession of the pledge or from the debt, so that to make an effectual sale both must pass to the assignee. In the case at bar Simpson held Mrs. Ashby's note to him but parted with the collateral securities by pledging them to Mrs. Miller. Whitney v. Peay, 24 Ark. 22; Johnson v. Smith, 11 Humph. (Tenn.) 396; Bullard v. Billings, 2 Vt. 309; Goss v. Emerson, 23 N.H. 38; Baily v. Colby, 34 N.H. 29; Stiger v. Bank, 6 F. 569. (3) A sale of collateral securities without demand for payment of the pledgor or notice of the time and place of sale is improper and makes pledgee liable for value of the collaterals. Chouteau v. Allen, 70 Mo. 290; Kilpatrick v. Dean, 3 N.Y.S. Ct.; Hope v. Lawrence, 1 Hun. (N. Y.) 317; Ainsworth v. Bowen, 9 Wis. 348.

Robinson, J. Brace, C. J., and Macfarlane, J., concur. Barclay, J., concurs in result.

OPINION

Robinson, J.

This action was instituted by appellant as public administrator of the city of St. Louis, having in charge the estate of Jeptha H. Simpson, deceased, to recover upon a promissory note payable to the order of Jeptha H. Simpson and signed by the defendant. Petition in the usual form.

The answer, after admitting the execution of the note in suit, avers that the defendant delivered to said Simpson as collateral to secure the payment of her note, sixteen negotiable notes, secured by deed of trust on real estate, of the aggregate value of $ 10,000; that soon after the delivery of said collateral to said Simpson he unlawfully disposed of and converted the same to his own use and benefit, by rehypothecating same to secure a loan of $ 5,000, and that said loan had not been paid off by the said Simpson, but that same had been probated against his estate, and remains yet unpaid; that by the unlawful conversion of said collateral by said Simpson his representatives are now unable to deliver up to her said collateral when this defendant shall pay her note now in suit, and that defendant has offered to pay to plaintiff the amount of her note upon delivery to her of the collateral left with the said Simpson, but that on account of the wrongful and unlawful conversion of same by said Simpson, plaintiff is unable to deliver them to defendant, to her damage in the sum of $ 10,000. Wherefore she prays judgment against the estate of said Simpson, deceased, in the sum of $ 10,000, less the amount due on her note now in suit.

Plaintiff filed his reply denying the new matter set up as defense and counterclaim and asks judgment in accordance with the prayer of his petition.

Upon the issues as thus made up without further objection, the case was tried by the court without the intervention of a jury, resulting in a finding for plaintiff on his note for $ 3,708 and a finding for defendant on her counterclaim for the sum of $ 6,925 and an entry of judgment therein in favor of defendant for the sum of $ 3,217, and ordering same classified against Simpson's estate, to reverse which plaintiff has prosecuted this appeal.

At the close of the testimony plaintiff asked three declarations of law embracing his views of the case, all of which were refused by the court; whereupon the court made the findings and rendered its judgment thereon as above indicated, without the giving of any declarations of law whatever, and, as none was asked by the defendant, we must conclude from the proof made and the result ascertained that the case was tried upon the theory that if plaintiff's intestate disposed of the collateral notes left with him by defendant in a manner not within the purview of any power delegated to him expressly, and not within the manner prescribed by the policy and rules of law for the disposition and use of such collateral when left with a pledgee as security for a prescribed debt, and that the pledgee was answerable as for a conversion of the collateral, and that as the wrongful conversion was a violation of the contract of pledge and was a part of the transaction that lead up to the making of the original indebtedness, and that as it was a wrong growing out of the same transaction that resulted in the making, signing, and delivery of the principal note, it was a proper matter of set-off against the note in suit, and that the true measure of damages to defendant by way of set-off, when the facts show as in this case that the collateral was not worth its face value, was its actual value at the time of the disposition of the same by the pledgee. This conclusively follows from the finding of the court on the undisputed facts as shown in evidence, which finding and conclusion we in this opinion indorse.

The following are the declarations of law asked by plaintiff, that were refused by the court, and for which this appeal was prosecuted.

"1. The court declares the law to be, that although it may find from the evidence that the defendant pledged with the plaintiff's intestate the Hellman notes and deed of trust securing the same, and the said Totten notes and deed of trust securing the same, shown in evidence, and although the court may further believe from the evidence that the said plaintiff's intestate, during his lifetime, and on or about, to wit: the twenty-second day of August, 1892 pledged the said collateral with one Henry Schmidt, for an amount greater than the sum borrowed from him by defendant, and to secure which said defendant pledged said collateral security with plaintiff's intestate, yet if the court further believe from the evidence that when defendant pledged said above described collateral notes and deeds of trust with plaintiff's intestate that there was no restriction in said contract of pledge prohibiting the said pledgee, plaintiff's intestate, from repledging said securities upon the maturity of the note given by defendant to plaintiff's intestate, said pledgee, then the verdict must be for the plaintiff, and the damages must be for the full amount of said note upon which suit is brought * * *.

"2. The court declares the law to be, that although it may believe from the evidence that the defendant pledged with plaintiff's intestate the notes shown in evidence made by the defendant and Totten to secure the payment of defendant's note upon which this suit is brought, and although the court may further believe from the evidence that the said plaintiff's intestate rehypothecated...