Security Trust Co. v. Sherwood Homes, Inc.

• Decision Date: 17 December 1968
• Docket Number: No. 32940,32940
• Citation: 436 S.W.2d 776
• Parties: SECURITY TRUST COMPANY, a Corporation, Plaintiff-Appellant, v. SHERWOOD HOMES, INC., Defendant-Respondent.
• Court: Missouri Court of Appeals

Page 776

436 S.W.2d 776

SECURITY TRUST COMPANY, a Corporation, Plaintiff-Appellant, v. SHERWOOD HOMES, INC., Defendant-Respondent.

No. 32940.

St. Louis Court of Appeals, Missouri.

Dec. 17, 1968.

Motion for Rehearing or to Modify Denied Jan. 23, 1969.

Coburn, Croft, Kohn & Herzog, John R. McFarland, St. Louis, for plaintiff-appellant.

Norman Begeman, St. Louis, for defendant-respondent.

WILLIAM H. BILLINGS, Special Judge.

Replevin action with a counterclaim for conversion. The case was submitted to the court upon a stipulation of facts and various documents as exhibits, a jury having been waived. Judgment was entered for defendant on plaintiff's petition for replevin and in favor of defendant and against plaintiff on the counterclaim with defendant's damages being assessed at $4,500.00. Plaintiff has appealed and the parties will be referred to herein as plaintiff and defendant.

On March 7, 1963, defendant executed and delivered its promissory note to plaintiff in the sum of $j,982.00. The note was in the sum of $4,982.00. The note was with the first installment of $406.00 due April 15, 1963, and the remaining installments of $416.00 due each month thereafter. Securing this note was defendant's chattel mortgage on a fork-lift truck. The mortgage was duly filed. The consideration for the note, $4,700.00, was by plaintiff credited to defendant's checking account and defendant authorized plaintiff to charge this account for the monthly payments. Defendant also maintained a payroll account with plaintiff.

Defendant's checking account was debited by plaintiff for the April, May, June and July installments. On August 14 plaintiff charged the account for the August installment and this resulted in an overdraft of the account. Deposits by defendant extinguished the overdraft and left a credit balance. On September 16 and October 15, respectively, plaintiff debited the account. The November charge by plaintiff resulted in the account again being overdrawn but a subsequent deposit by defendant left the account with a credit balance. The December debit by plaintiff caused the account to be overdrawn but defendant's later deposits extinguished the overdraft. On January 14, 1964, when plaintiff debited the account for the January installment, the account was already overdrawn $5,498.18 and this entry increased the amount of the overdraft. On February 16 the debit entry increased the overdraft to a total of $12,949.03. As in the past, debit slips for the January and February installments marked 'paid' were forwarded by plaintiff to defendant. From January 6 to February 19 the account was overdrawn and never had a credit balance.

In addition to the overdraft of the checking account defendant's payroll account was also overdrawn $2,233.16 on February 19, 1964. On this date the defendant executed and delivered to plaintiff its thirty-day note in the sum of $15,182.00. This note was individually endorsed by officers of defendant who also guaranteed payment. Thereupon, plaintiff credited defendant's overdrawn checking account in the sum of $12,949.03 and defendant's payroll account in the sum of $2,233.16, leaving the accounts with zero balances. On March 16, 1964, plaintiff again debited the checking account, leaving the account with a credit balance of $772.23 which was reduced to $274.70 two days later. On the due date of the thirty-day note, March 19, this latter note was not paid and no payment was made by defendant until April 3 when a partial payment of $2,067.23 was made on this note. No further payments were made by defendant on this note and it is the subject of other litigation between the parties.

Plaintiff instituted the replevin suit in January of 1965 and filed its bond in the sum of $4,160.00. Possession of the fork-lift truck was obtained by plaintiff and this chattel was sold at private sale for the sum of $4,200.00. Defendant alleged payment of the original note in its answer to the replevin petition and sought damages by way of counterclaim for plaintiff's wrongful conversion of the fork-lift truck.

On this appeal it is the defendant's contention that the debit charges by plaintiff against the checking account and issuance of 'paid' debit memos, the acceptance by plaintiff of the thirty-day note in February, 1964, and crediting of defendant's checking account 'along with other attending circumstances', evidence a recognition and agreement of the parties that the note secured by the chattel mortgage was paid prior to the institution of the instant proceedings.

As previously stated, the issues herein were submitted to the trial court upon a stipulation of facts and documentary evidence and our review of the facts and law is not limited. The trial court made no findings and gave no reasons for its action and there is no question of credibility of witnesses. Civil Rule 73.01(d), V.A.M.R.; Mueller v. Larison, Mo., 355 S.W.2d 5; Hanover Ins. Co. v. Abchal, Mo.App., 375 S.W.2d 605; Sadlon v. Richardson, Mo.App., 382 S.W.2d 9.

We rule that the debit entries to defendant's checking account and credits to defendant's chattel note account for the January and February, 1964, installments did not constitute payment because the checking account was overdrawn and had a debit balance at the time these entries were made. The applicable rule is stated in 70 C.J.S. Payment § 32, p. 243, as follows: '* * * a mere paper or bookkeeping entry of debits or credits is not payment or cancellation of a debt unless payment or cancellation is actually made thereby.' (Our emphasis.)

In G.F.C. Corp. v. Nesser, Mo., 273 S.W.2d 264, the debtor had given a lender personal checks in payment of amounts due on several notes and credits had been given the debtor on lender's ledger sheets. The checks were returned unpaid and in holding the notes had not been paid the Supreme Court said (l.c. 268): 'The fact that the ledger accounts were first credited with the amount of the checks received, then debited when the checks were returned unpaid, is not indicative of an intention to accept the checks as absolute payment.' The court further ruled that clear and convincing evidence of an express agreement that the checks were accepted by plaintiff as absolute payment was required.

This court held in Gill v. Mercantile Trust Co., Mo.App., 347 S.W.2d 420, that a check did not constitute payment even though the lender had made an entry on its books that the installment had been paid at the time when it received the check. In Gill the debtor-mortgator sought damages from the lender-mortgagee for wrongful conversion of an automobile. In affirming the action of the trial court in setting aside a jury verdict for the plaintiff we said (l.c. 424): 'For a check to be payment the debtor must have funds to his credit in the bank upon which the check is drawn and the bank must be in a position...