Security State Bank v. Gray

• Decision Date: 02 December 1929
• Citation: 25 S.W.2d 512,224 Mo.App. 980
• Parties: SECURITY STATE BANK, RESPONDENT, v. F. A. GRAY, APPELLANT
• Court: Kansas Court of Appeals

25 S.W.2d 512

224 Mo.App. 980

SECURITY STATE BANK, RESPONDENT, v. F. A. GRAY, APPELLANT

Court of Appeals of Missouri, Kansas City

December 2, 1929

Rehearing Denied 224 Mo.App. 980 at 989.

Appeal from Circuit Court of Jackson County.--Hon. Ralph S. Latshaw Judge.

REVERSED.

Judgment reversed.

Omar E Robinson and Henry L. Jost for respondent.

William B. Dickinson, Alfred D. Hillman and Martin B. Dickinson for appellant.

BARNETT, C. Boyer, C., concurs. Bland and Arnold, JJ., concur. Trimble, P. J., absent.

OPINION

BARNETT, C.

This is a suit on a guaranty. There was a verdict and judgment for plaintiff in the sum of $ 3,593.27. Defendant has appealed.

On April 23, 1917, Security National Bank of Kansas City, Missouri, received a letter from defendant, one of its stockholders, which was as follows:

"One of my clients, Mr. J. O. Young of the Kawnear Cabinet Company, tells me he wants to change his account to your bank and wants to get a loan of $ 5000 for four months at five per cent. . . .

"I will personally see that this note is paid if the loan is made to the Kawnear Cabinet Company."

On or about March 1, 1921, C. W. Sheldon became vice-president of the Security National Bank. In going over the notes held by that institution he found an unpaid note dated January 7, 1921, executed by the Kawnear Cabinet Company by J. O. Young, president, and bearing the endorsement of J. O. Young. This note was for $ 4547, payable ninety days after date. Mr. Sheldon requested the defendant to execute a new guaranty, and in compliance with that request the defendant executed an instrument which reads as follows:

"Kansas City, Mo.,

"March 7, 1921.

"Security National Bank, of Kansas City, Mo.

"The undersigned hereby requests you to give and continue to The Kawnear Cabinet Company (hereinafter styled the borrower) credit from time to time for five thousand dollars; and in consideration of your doing so, and for value received, and for the purpose of enabling the borrower to obtain such credit, the undersigned hereby promises and agrees to make to you prompt payment, as they severally mature, of all overdrafts by the borrower, of all loans made of which may be made by you to the borrower, and of all notes, acceptances and other paper which have been or may be by you discounted for the borrower, whether made, drawn, accepted, endorsed or not endorsed by the borrower, as well as any and all renewals thereof. This is intended to be a continuing promise and agreement, and shall apply to and cover any and all such over-drafts, loans, discounts, and renewals made prior to notice in writing, given to your cashier that the undersigned will not be liable upon any such overdrafts, loans or discounts made after the receipt of such notice. When any such overdrafts, loans or paper, or any renewal thereof, shall become and remain due and unpaid, the undersigned will on demand, pay the amount due thereon.

"Notice of the making or renewal of any such overdrafts, loans or paper, protest for non-payment, thereof, and notice of acceptance hereof are hereby expressly waived.

"(Signed) F. A. GRAY."

On April 13, 1921, the Security National Bank renewed this note by taking a new note dated April 13, 1921, for the sum of $ 4598.80, payable on May 7th after date, signed by J. O. Young, and endorsed on the back as follows: "Kawnear Cabinet Company, by J. O. Young, president." In the Spring of 1921 the stockholders of the Security National Bank formulated a plan to liquidate the bank and surrender its charter and to organize a new bank under the laws of Missouri, to be known as the Security State Bank. The defendant participated in the organization of the state bank and gave power of attorney to one Eaton to represent him at a meeting of the stockholders for the purpose of carrying out the plan. Defendant signed an instrument designated "Stockholders consent and agreement" wherein he agreed to the liquidation of the old bank and the formation of the new, the assignment of part of the assets of the old bank to the new, and agreeing to take twenty-five shares of the capital stock in the new bank for twenty-five of his shares in the old. Part of the assets of the old bank were to be taken over by a corporation known as the Security Mortgage Company. This plan was executed, defendant received twenty-five shares of stock in the new bank, and a part of the assets of the old bank were conveyed to the new, including the note of April 13, 1921, signed by J. O. Young and endorsed by the Kawnear Cabinet Company.

After the new bank was opened for business Mr. Sheldon, who had become vice-president of the new state bank, at the direction of the board of directors of plaintiff, wrote defendant a letter asking that defendant's note be given in place of Young's. In response to this letter defendant wrote Sheldon on June 18, 1921, as follows:

"Your letter of the 16th recd. I do not care to assume the Young debt, or sign a note for it.

"Mr. Young told me he turned over to Mr. Woods real estate enough to cover it.

"When you and Mr. Young settle up, if he still owes you a part of the loan I will settle it up, but I do not care to become involved now."

Thereafter, on June 23, 1921, plaintiff renewed the note dated April 13, 1921. The renewal note was made payable August 21st after date and was executed by Kawnear Cabinet Company as maker and endorsed on the back by J. O. Young. This renewal note was taken up by another renewal note which in turn was renewed. After a number of renewals a note dated February 17, 1922, was executed by Kawnear Cabinet Company and endorsed by J. O. Young. It was payable ninety days after date and bore interest at the rate of eight per cent per annum and was payable in the sum of $ 3617.14, that being the unpaid balance at the time of the last renewal. In nearly every instance when the loan was renewed the former note was marked "paid by renewal" and in every instance the old note was surrendered when the new note was taken. Plaintiff, the new state bank, reduced this note to judgment by suit and then brought suit against defendant as guarantor.

In plaintiff's petition it is alleged that defendant for value received executed the guaranty dated March 17, 1921, and that theretofore Security National Bank had loaned to the Kawnear Cabinet Company approximately $ 5000, pursuant to a written request executed by defendant to said bank dated April 23, 1917; that after the execution and delivery of the guaranty dated March 17, 1921, the Security National Bank and its successors in interest, the Security State Bank, from time to time renewed the note of Kawnear Cabinet Company which had theretofore been executed to Security National Bank, and did on June 30, 1922, extend to Kawnear Cabinet Company the privilege of again renewing said indebtedness amounting to the sum of $ 2463.45, and did on that day take a renewal note from the Kawnear Cabinet Company whereby said company, for value received, agreed to pay the Security State Bank said sum of money, ninety days after date with interest. It is also alleged that defendant was a stockholder and had shares of capital stock in the Security National Bank; that on June 1, 1921, defendant with other stockholders of said bank voted to surrender said stock and to place said Security National Bank in voluntary liquidation, and said bank was voluntarily liquidated and its charter surrendered; that defendant and other stockholders of said bank organized the Security State Bank, plaintiff herein, and applied for and obtained a charter from the State of Missouri for said state bank, and the defendant and other stockholders of the Security National Bank transferred the assets of the national bank, including the note of the Kawnear Cabinet Company and the guaranty contracts executed by defendant to the state bank, and that the state bank thereupon became the owner of the note and the guaranty. It was further alleged that on June 18, 1921, defendant again in writing agreed and promised to pay the indebtedness of the Kawnear Cabinet Company. It was alleged that by reason of the facts therein stated the Security State Bank succeeded to and became the owner of the note and the guaranty.

The answer was a general denial, together with allegations that on June 30, 1921, the Security National Bank paid all of its obligations and was duly dissolved on June 31, 1921; that the note dated April 13, 1921, for $ 4598.80 payable to the Security National Bank and signed by J. O. Young and endorsed by the Kawnear Cabinet Company was paid on June 23, 1921, and no further credit was extended to Kawnear Cabinet Company or to J. O. Young by the Security National Bank. There was a specific denial that defendant ever signed any promise or agreement to guarantee any indebtedness whatever to Security State Bank.

OPINION.

This action may not be maintained on the first guaranty executed by defendant. That guaranty merely bound the defendant to pay a loan of $ 5000 for four months at five per cent made by Security National Bank to Kawnear Cabinet Company. There was no agreement that the terms of such a loan might be altered, and when that loan was renewed the alteration of the principal contract released the guaranty. Furthermore, it conclusively appears that the second guaranty was substituted for the first.

The guaranty dated March 7, 1921, was addressed to Security National Bank. It requested that bank to give and continue credit to the Kawnear Cabinet Company for $ 5000. The defendant agreed "to make to you prompt payment, as they severally mature of all overdrafts by the borrower, of all loans made or which may be made by you to the borrower." It provided for a termination of the continuing guaranty by...