Smith v. American Nat. Bank, 893.

• Decision Date: 12 September 1898
• Docket Number: 893.
• Parties: SMITH v. AMERICAN NAT. BANK.
• Court: U.S. Court of Appeals — Eighth Circuit

89 F. 832

SMITH v. AMERICAN NAT. BANK.

No. 893.

United States Court of Appeals, Eighth Circuit.

September 12, 1898

Thomas G. Frost (Albert S. Marley, on the brief), for plaintiff in error.

Sanford B. Ladd (John C. Gage and Charles E. Small, on the brief) for defendant in error.

Before BREWER, Circuit Justice, SANBORN, Circuit Judge, and RINER District Judge.

RINER District Judge.

This was an action at law, brought by Charles C. Smith, plaintiff in error, against the American National Bank of Kansas City Mo., defendant in error, to recover damages for the value of certain mortgage coupon bonds and mortgages, alleged to have been wrongfully converted by the defendant bank. It appears from the record that the Kansas Loan & Investment Company, a corporation organized under the laws of the state of Kansas, engaged in the business of loaning money upon bonds secured by mortgages upon real estate in Kansas and elsewhere, having made a number of loans, sold its bonds and mortgages securing the same in the East; that John Kerley, the agent of the company at New Haven, Conn., sold the bonds and mortgages (which were issued at different times from 1886 to 1890) to the plaintiff in error, Charles C. Smith, and to other parties, who lived in the vicinity of New Haven. The bonds were substantially in the form of negotiable promissory notes with interest coupons attached. The greater part of them matured in five years, and bore interest at the rate of 7 per cent. per annum. When sent to Kerley for sale, both the bonds and the mortgages securing the same bore the indorsement or assignment of the Kansas Loan & Investment Company. The indorsement on the bonds was as follows: 'For value received, I hereby assign the within bond to--, without recourse. ' The indorsement on the mortgages was in the same form. In each case the indorsement was executed by the proper officer of the loan and investment company. The interest, as it matured upon the several bonds and mortgages sold by Kerley to purchasers in the East, was forwarded by the Kansas Loan & Investment Company to Kerley, and by him paid to the purchasers of the bonds and mortgages, the purchaser in each case surrendering to him the coupon representing the interest paid. This method of transacting the business was continued until June, 1892, when the Kansas Loan & Investment Company failed, and a receiver was appointed to take charge of its affairs. Thereupon some of the purchasers of the bonds and mortgages in controversy in this action selected the Union Trust Company, a corporation organized under the laws of the state of Iowa, and having offices at Sioux City, Iowa, Manchester, N.H., and Kansas City, Mo., as their agent for the purpose of collecting interest and looking after their loans generally, by giving them such attention as they might, from time to time, require. The principal office of the Union Trust Company was at Sioux City, Iowa, and its business was that of handling Western mortgages and other securities. E. M. Donaldson was its secretary and its principal managing officer. He had practically the entire supervision and control of its business. John Morse was the agent of the trust company in New Haven. The Union Trust Company continued to collect the interest for the plaintiff in error, and others who had intrusted their business to it, for several months, conducting the business substantially as it had been conducted by the Kansas Loan & Investment Company prior to its failure. In December, 1892 Donaldson, the secretary of the Union Trust Company, went to New Haven for the purpose of negotiating, on behalf of the trust company, a trade for the bonds and mortgages owned by the plaintiff in error and other parties whose bonds and mortgages the Union Trust Company already held for collection, and with others who owned similar securities, which they had purchased from the Kansas Loan & Investment Company. The negotiations between Donaldson, the plaintiff in error, and other owners of bonds and mortgages, resulted in a written contract between the Union Trust Company and certain of the holders of bonds and mortgages purchased from the Kansas Loan & Investment Company for the transfer of their bonds and mortgages to the Union Trust Company. The contracts were all prepared by Donaldson, or under his supervision, after his return to Sioux City, were signed in duplicate by the Union Trust Company, and all forwarded to Morse, the agent of the company, at New Haven, who secured the signatures of the holders of the bonds and mortgages thereto. One copy of the agreement, after being signed, was forwarded to the Union Trust Company, at Sioux City, and the other retained by the other party to the contract. The contracts were printed, blank spaces being left for the insertion of the names and a description of the securities to suit each case. The printed portions of the contract were alike, and, with the exception of the name and a description of the securities, were all in the form of the one entered into between the trust company and the plaintiff in error, as follows:

'No.L.D. 17.

'Whereas, the Union Trust Company of Sioux City has purchased of C. C. Smith the following described securities, to wit: (Here follows a concise description of fifty-seven loans, with the mortgages securing them, aggregating about $59,000), and in full payment therefor has issued its certificate of deposit No. L.D. 17, for thirty-five thousand and no one-hundredths dollars, dated the first day of March, 1893, maturing the first day of March, 1898, bearing interest as evidenced by the coupons thereto attached: Now, this instrument witnesseth that the Union Trust Company of Sioux City will undertake judiciously to handle the securities above enumerated, exercising entire selection as to the manner, method, and time of the procedure, and will, at the maturity of the certificate of deposit above referred to, or prior thereto, at its election, render a true account thereof, and pay over to the legal holder of said certificate one-half of the residue, if any, remaining out of the securities above described, after making deductions from the whole sum realized as follows, to wit:

'First. The face of the certificate of deposit number L.D. 17, above referred to, together with the interest paid thereon.

'Second. All taxes, legal expenses, court costs, or costs of insurance in each of the securities above referred to, or those derived in exchange therefor, or in the investment of funds realized therefrom.

'Third. All costs incurred in improvements, betterments, repairs, additions to, or superintendence of the property which may be derived directly from the securities above enumerated, or indirectly growing out of the exchanges or purchases.

'Fourth. All sums of money, together with the interest thereon at six per cent. per annum, which may be advanced in direct purchase or exchange, wherein such exchange or purchase was made in the interest of or for the benefit of the holder of this certificate, or expended in the payment of taxes, insurance, court costs, or other necessary expenses incurred in improvements, additions, betterments, repairs, or superintendence.

'This agreement shall in no wise affect the fee-simple and indisputable ownership of the Union Trust Company of Sioux City in and to said above-

described securities, or its full right to sell or convey the same, or any properties acquired in lieu thereof, by process of law, negotiation, or purchase. But the obligation of the Union Trust Company of Sioux City to undertake, pursuant to the conditions heretofore recited, to procure a residue to be paid over to the holder of said certificate, shall be binding alike on its successors and assigns.

'In witness whereof, the Union Trust Company of Sioux City has hereunto affixed its official seal and signature this 17th day of January, 1893.

'Executed in duplicate.

'The Union Trust Company of Sioux City, 'By E. M. Donaldson. 'C. C. Smith.'

When these contracts were executed, some of the bonds and mortgages were then in the possession of the Union Trust Company for collection. Those which were not delivered prior to the execution of the contracts were, in each case, delivered to Morse, the agent of the Union Trust Company, at the time the contract was signed. None of the bonds or mortgages were assigned by the holders thereof, but, when delivered by them to the trust company, carried the same indorsement in blank as when they were delivered by Kerley to purchasers. At the time the contracts were signed and delivered, Morse, the agent of the trust company, delivered to each of the holders of the bonds the obligation of the trust company, designated a 'Certificate of Deposit,' for about 60 per cent. of the face value of the bonds. The obligation so executed and delivered to the plaintiff in error was as follows:

Certificate of Deposit.

The Union Trust Company.

Kansas City, Mo., March 1st, 1898. No. L.D. 17.

Payable in New York Exchange. Not Subject to Check.

Will pay to the order of C. C. Smith $35,000.00 (thirty-five thousand and no-100 dollars) on the return of this certificate properly indorsed, with interest at the rate of six per cent. per annum, payable semiannually, as evidenced by 10 interest coupons hereto attached. E. M. Donaldson, Sec.

No interest after maturity.

The first of the interest coupons attached to this instrument is as follows:

The Union Trust Company.

No. 1. At Kansas City, Mo., Sept. 1st, 1893.

Will pay to bearer ten hundred and fifty dollars, being six months' interest on its certificate of deposit numbered L.D. 17, payable in New York exchange if desired. E. M. Donaldson, Sec.

The record further shows that when these bonds and mortgages...