Sedgwick v. National Bank of Webb City

• Decision Date: 19 June 1922
• Docket Number: No. 22846.,22846.
• Citation: 243 S.W. 893,295 Mo. 230
• Parties: SEDGWICK v. NATIONAL BANK OF WEBB CITY.
• Court: Missouri Supreme Court

243 S.W. 893

295 Mo. 230

SEDGWICK v. NATIONAL BANK OF WEBB CITY.

No. 22846.

Supreme Court of Missouri, Division No. 2.

June 19, 1922.

Motion for Rehearing Denied August 28, 1922.

Appeal from Circuit Court Jasper County; Joseph D. Perkins, Judge.

Action by Prank L. Sedgwick against the National Bank of Webb City. From a judgment for plaintiff, defendant appeals. Reversed.

This is an action for damages. On March 18, 1920, plaintiff (respondent) fled his petition against defendant (appellant) for damages growing out of "misrepresentations, concealments and breach of warranty as herein alleged." Upon a trial of the issues joined he was awarded a verdict for $35,831.12, and after an unsuccessful motion for a new trial defendant has prosecuted its appeal to this court.

The petition alleges that defendant was a national banking corporation and engaged in its appropriate business at Webb City; that on the 7th day of February, 1919, respondent was a depositor in said bank; that one R. L. Walker on said date, and for a long time prior and subsequent thereto, was president and bad the management and control of its business, "made loans and discounted paper for it, and was, during all of said time, held out by said defendant as having full authority therefor, and all of his acts in that behalf as herein set out or referred to were fully authorized, acquiesced in, and ratified by defendant; that defendant held and had rediscounted the notes of one B. H. Williams of Garvin county, Okl., for large sums of money which it was desirous of protecting itself upon and profiting as herein

It was further alleged that the defendant held seven promissory notes of the said B. H. Williams, payable to one C. B. Avent, "three for the principal sum of $2,575 each, three for $10,300 each and one for $5,150," which notes were dated January 23, 1919, and payable six months after date with interest from maturity at the rate of 10 per cent. per annum, with 10 per cent, penalty, if placed in the hands of an attorney for collection, after maturity; "that all of said notes were indorsed by said Avent, without recourse; that the three $2,575 notes were also indorsed by defendant without qualification, condition, or restriction; that the three $10,300 notes were indorsed, by the said Walker without qualification, condition, or restriction; and that defendant was the owner of all of said notes and was desirous of disposing of the same to this plaintiff for the purposes herein alleged."

Respondent further alleged in his petition that on account of his business relations with appellant it "had gained his confidence and he relied on its recommendations as to securities which defendant well knew; that the defendant knowing of plaintiff's said confidence in it and that he had in its bank large deposits, and knowing that he would loan the same on what defendant recommended as safe securities, or would purchase the same, and at a low rate of interest, and knowing that by reason of plaintiff's long experience with it as a banking institution he had, as aforesaid implicit confidence in it and relied solely upon its recommendations and" representations, defendant represented to plaintiff that said Williams and his wife were solvent; that said notes were secured by chattel mortgage on 1,800 head of cattle and 55 head of horses and mules then belonging to said Williams on his farm where he lived; * * * that said mortgage was a first lien of record on said property worth many thousand dollars more than the amount of said notes, and that the said Walker was solvent"

Respondent then alleged that on or about February 7 and April 23, 1919, relying upon the "recommendations, representations, and statements of defendant," he purchased all of said notes except one for $5,150 and one of the $10,300, and paid therefor the sum of $27,593.75, and thereupon appellant delivered said notes to him.

Respondent then alleged that Williams, the maker, and Walker, the indorser; were insolvent; that the security was not as represented; that the defendant had the exclusive management and control of the mortgaged property; that Williams had sold a portion of said property without his knowledge and consent and had applied the proceeds to the payment of the notes held by appellant; and that appellant concealed all knowledge thereof from respondent.

Respondent further alleged that the negotiable instrument law of Oklahoma, where said notes were executed, was the same as the negotiable instrument law of Missouri; that upon discovery of the "misrepresentations, concealments, and breach of warranty as herein alleged, he offered to surrender said notes to the defendant upon its payment to him of the amount due him thereon, as herein alleged, and now brings said notes into court and renews said tender."

He claimed that he had been damaged in the sum of $500 for expenses incurred in personal investigation of said mortgaged property and the further sum of $28,325, "together with an amount equal to the interest thereon at the rate of 10 per cent. per annum from July 23, 1919, and 10 per cent. of said total of principal and interest." " He prayed judgment accordingly.

The answer was a general denial. The evidence on the part of the respondent tended to show that he was engaged in the furniture and undertaking business at Webb City, and about December 1, 1918, "commenced closing out" his business, whereupon he noted that he was "accumulating a balance in the bank" and called on Walker, the president, with respect to the purchase of securities as an investment, at which time he said to Walker:

"I will expect you people to furnish the paper out of your files if it is good and all right, something you folks can stand back of and gilt edge. He said they thought they could take care of me."

That about two weeks thereafter, while at the bank, Walker "told me they had been handling some paper for a ranchman in Southern Oklahoma and he might be in a position that they could turn me some of that before long. About the 5th of February, 1919, following, I was there, and he said he had some of the notes that they had gotten from the ranchman that he had mentioned before, and he showed me several notes and a mortgage and offered to sell me some of them. He said they had done business for this party for years and handled his notes, and that he had gone down there personally and he had seen the cattle described in the mortgage. * * *" He said:

"We will sell you some of these notes." "He also said there was a profit in it, but he did not get it personally; that he was not the kind of a man to take any commission for himself in a deal of that sort, but that the profits would accrue to the bank. I looked these notes over and noticed there were two $10,300 notes. * * * I believe it was the 14th of February I took the two $10,300 notes and mortgage to cover."

It further appeared that about the middle of April respondent had accumulated the further sum of about $8,000 and again went to the bank and asked for additional securities or investment from Walker and obtained the three notes for $2,575 each. These notes were all dated January 23, 1919, and matured for payment July 23, 1919. In like manner he subsequently obtained two $1,500 notes executed by the same maker and secured by the same property, both of which were paid by Walker. The latter notes, however, were not specifically described in the mortgage, but were included in the language, "and all other indebtedness, owing by party of the first part to the party of the second' part before or after maturity of said notes." The two $10,300 notes were indorsed "without recourse on me" over the signature of O. B. Avent, the payee, and R. L. Walker, and the three $2,575 notes were in like manner payable to O. B. Avent, indorsed by him "without recourse on me," and then on the back thereof appeared the following: "The Natl. Bank of Webb City, Mo., by R. L. Walker, Pt."

About July 1st respondent was in appellant bank and again talked with Walker, who asked him if he would need the money on the notes falling due July 23d. "I told him I was not in any business yet and did not figure on being for some time, but for him to 'ascertain whether they would be good after they were due, to run on overdue paper; to see Mr. Forlow and investigate them and see whether it was all right. In about two weeks he spoke to me again and said he had attended to it and that everything was all right."

In January, 1920, Walker told respondent that he was afraid the mortgagor had sold some of the cattle. Respondent then consulted his attorney, and about 3 o'clock of the same day went to "the bank and asked Mr. Walker to put a protest waiver on the back. Mr. Walker said it was not necessary. I demanded it, and he went back to his desk and looked over two or three papers and came back and said he could not find it." Later respondent put the notes in the hands of his attorney for collection, and on the day he did so talked with Mr. Walker, who told him to bring in the three notes that had the bank's indorsement and get his money on them. At that time Walker told respondent "that the two notes that had his indorsement on the back he could not pay because he did not have it." Thereafter respondent had an interview with the maker of the notes and made an inspection trip to Oklahoma regarding the property mortgaged.

Appellant bank acquired the note for $5,150, and respondent's sister acquired the other $10,300 note. In payment for these securities respondent drew checks payable to the order of R. L. Walker, and such checks bore the indorsement of R. L. Walker. On February 7, 1919, respondent gave one check for $5,900 payable to the order of R. L. Walker on which there appeared the notation, "Money loaned." This check bore the indorsement of R. L. Walker. On the same day check No. 66 for $2,300 was made payable to the order of R. L. Walker and contained the notation, "Money...