State Bank of Wellston v. Hafferkamp

• Decision Date: 30 July 1926
• Docket Number: 25492
• Citation: 287 S.W. 331,315 Mo. 465
• Parties: State Bank of Wellston v. G. C. Hafferkamp, C. F. Blanke, George W. Maxwell and George R. Collett, Appellants
• Court: Missouri Supreme Court

287 S.W. 331

315 Mo. 465

State Bank of Wellston v. G. C. Hafferkamp, C. F. Blanke, George W. Maxwell and George R. Collett, Appellants

No. 25492

Supreme Court of Missouri

July 30, 1926

Motion for Rehearing Denied October 11, 1926.

Appeal from St. Louis County Circuit Court; Hon. G. A Wurdeman, Judge.

Affirmed.

Borders & Davis and Alphonso Howe for appellants.

(1) In equity cases, it is the right and the duty of the appellate court to review the facts, as well as the law. The present case is a suit in equity, because, when a defendant files an answer to a suit at law containing an equitable defense and asking for affirmative relief, it is converted from an action at law to a suit in equity. Betzler & Clark v James, 227 Mo. 390; Pitts v. Pitts, 301 Mo 356; Schneider v. Schneider, 224 S.W. 4; Wendover v. Baker, 121 Mo. 289; Koehler v. Rowland, 275 Mo. 591. (2) The court committed error in refusing to sustain the contention of these appellants that they had been discharged and released of all liability on account of the notes in suit, by operation of a novation substituting Joseph Maxwell as the sole and only debtor in place of these appellants. Pursuant to an agreement entered into between all of the parties to the notes, one of the indorsers, Joseph Maxwell, went to the plaintiff bank and gave his notes to the plaintiff in place of the notes in suit. This was accepted by the plaintiff bank, and acted as a novation and a discharge to these appellants of any liability they had on the notes in suit. 29 Cyc. 1130, 1136; Western Auction & Storage Co. v. Shore, 179 S.W. 771; Appleton v. Kennon, 19 Mo. 637; Riggs v. Goodrich, 74 Mo. 108; Leabo v. Goode, 67 Mo. 126. (3) The court committed error in not sustaining the contention of these appellants that the plaintiff was estopped to assert any claim which it might have had against these appellants and to deny that any liability of theirs on account thereof had been discharged and released. The plaintiff bank, by its action in accepting Joseph Maxwell as its sole and only debtor and by its silence led these appellants into a belief that any liability which they might have had on the notes in suit was completely discharged. They, therefore have changed their position and it would be unfair and unjust to now enforce any liability against them. The plaintiff is, therefore, estopped to deny that their liability has been discharged. 8 C. J. 455; Bank v. Lee, 182 Mo.App. 192; Bank v. Lee, 193 Mo.App. 537; Cantrell v. Davidson, 180 Mo.App. 410. (4) The court committed error in refusing to sustain the contention of these appellants that they were discharged and released of all liability on the notes in suit, because the plaintiff granted to Joseph Maxwell an extension of time for the payment of the indebtedness, without notice to or consent of these appellants. By the acceptance of the notes of Joseph Maxwell, together with the payment by him of interest in cash, in advance, the plaintiff bank agreed with him to extend the time of payment of the notes without notice to or consent of these appellants, and such an agreement operated as a discharge of these appellants. (a) Such an agreement, under the statutes and decisions, releases those parties who are secondarily liable and these appellants are secondarily liable. Sec. 906, R. S. 1919; Bank v. Hanlon, 183 Mo.App. 243; Canada v. Shutte, 235 S.W. 824; Walker v. Dunham, 135 Mo.App. 396; Long v. Todd, 226 S.W. 262; Overland Auto Co. v. Winters, 277 Mo. 425; Sunflower State Bank v. Bowman, 243 S.W. 403; Bank v. Koehler, 204 N.Y. 174; Bank v. Bashor, 160 P. 208; Bank v. Mutual Exchange, 92 S. E. (Va.) 918; Greenburg v. Ginsburg, 143 N.Y.S. 1017; Deahy v. Choquet, 28 R. I. 338; Motor Co. v. Bank, 226 S.W. 428; Brannon on Neg. Instrument Law, 329-331. (b) There clearly existed such an agreement as is necessary to release these appellants. 8 C. J. 425-429; Bank v. Leavitt, 65 Mo. 562; Russell v. Brown, 21 Mo.App. 51. (c) It is not necessary that such an agreement be made with the maker of the notes. Laumeier v. Hallock, 103 Mo.App. 116; Bank v. Russell, 48 P. 242. (5) The court committed error in not finding and holding that any liability which appellants George W. Maxwell and George R. Collett had on account of the notes in suit was discharged by the renegotiation of the notes back to Joseph Maxwell. The notes in suit were renegotiated back to Joseph Maxwell upon their maturity and, therefore, the liability of subsequent indorsers was discharged. Sec. 836, R. S. 1919; Bank v. Evans, 176 Mo.App. 704; Comstock v. Buckley, 124 N.W. 414; Bank v. Gridley, 98 N.Y.S. 445; Schwartzman v. Post, 84 N.Y.S. 922.

Thompson & Thompson for respondent.

(1) Even though this were properly called an equity case the court will defer to the findings of the lower court. Rawlins v. Rawlins, 102 Mo. 567; Nevins v. Moore, 221 Mo. 351; Waddington v. Love, 202 Mo. 416; Taylor v. Cayce, 97 Mo. 249; Bartlett v. Brown, 121 Mo. 364; Judy v. Farmers & Traders Bank, 81 Mo. 410. (2) There was no novation. Night & Day Bank v. Rosenbaum, 191 Mo.App. 559; Chattanooga Bank v. Lovely, 185 Ill.App. 111; Bank v. Butterworth, 45 Barb. 476. (3) There is no estoppel or laches. Mercantile Trust Co. v. Donk, 178 S.W. 113; 8 C. J. 450; Miller v. Mellier, 59 Mo. 388; Schneer v. Lemp, 19 Mo. 40. (4) The taking of the note of Joseph A. Maxwell was not an extension of time to the maker so as to discharge indorsers. Sec. 906, R. S. 1919; Brannon on Neg. Instrument Act, 327, subsec. 6; 32 Cyc. 194; Draper v. Weld, 13 Gray (Mass.) 580; Pingrey on Suretyship, sec. 180; Daniel on Negotiable Instruments, sec. 1324; Wright v. Independence Natl. Bank, 96 Va. 728; First National Bank of York v. Diehl, 218 Pa. St. 588. (5) The giving by Joseph A. Maxwell of his note to the bank did not discharge indorsers subsequent to him, to-wit, Geo. W. Maxwell and defendant Collett. Sec. 907, R. S. 1919; Night & Day Bank v. Rosenbaum, 191 Mo.App. 559.

Ragland, P. J. All concur, except Graves, J., absent.

OPINION

RAGLAND

Plaintiff's suit is on a promissory note. The defendants are the maker and certain indorsers. In their answers they pleaded a number of defenses, and then by cross-bills in which the same matters are set forth they asked the cancellation of the note sued on and that of two others held by plaintiff, alleged to have been executed at the same time and under the same circumstances and with respect to which they sustained the same relations as parties. The avoidance of a multiplicity of suits is the only ground for equitable relief appearing in the cross-bills. Whether the facts pleaded were sufficient to invoke that ground of equitable jurisdiction we need not determine. On the trial of the cause the parties assumed that the cross-bills had converted the action into one in equity and we will so treat it here.

The nature of the questions to be determined requires a somewhat detailed statement of the facts. In 1911 a corporation, known as the Universal Exposition Company (hereinafter called the Company), was organized for the purpose of giving fairs and expositions. It leased land for its purposes from Mr. Joseph Maxwell, constructed a race track, stables, grand-stand and club house thereon, and called it "Maxwellton." In order to complete the improvements just named, which cost approximately $ 125,000, the Company found it necessary to borrow $ 12,000. This amount it obtained from the plaintiff bank on three sixty-day promissory notes, two of the notes being for $ 5,000 each and the third for $ 2,000. These notes were given sometime in the year 1912; all were executed by the Company as maker and indorsed by C. F Blanke, George W. Maxwell, George R. Collett and Joseph A. Murphy. The $ 2,000 note was also indorsed by S. P. Keyes. All of these indorsers were members of the Company's board of directors. The first and only fair held by the Company was in 1912, and from a financial standpoint it was a complete failure. Thereupon one Wishart was made secretary of the corporation and empowered to liquidate its affairs. His efforts were directed to the getting together of enough funds to pay the debts of the Company without sacrificing its property, with a view to effecting a re-organization and getting in additional capital. He succeeded in paying all the debts except that due the plaintiff bank, but efforts at re-organization which for a time appeared to promise success finally failed.

About the middle of the year, 1914, Joseph Maxwell served on the Company notice of forfeiture of its lease. It immediately surrendered possession of the premises and thereafter ceased to function as a corporation. At the time Maxwell took over the possession, there were in the club house rugs, furniture and furnishings, the value of which according to various estimates was from $ 100 to $ 300. But the Company owed him for rent about $ 30,000, and for taxes which he was compelled to pay $ 5,000.

The three notes given the plaintiff in 1912 were renewed from time to time by successive renewal notes until December 1914, the renewal notes in every instance being executed by the Company as maker and indorsed by the same persons who indorsed the originals. Mr. Julius Kessler was president of plaintiff bank; he was also a stockholder, director and treasurer of the Company. In 1914 when the Company for all practical purposes had ceased to exist, he stated to the persons who were indorsers on the Company's notes that if the notes were again renewed they would have to be signed by some other principal and that there would have to be an additional indorser, suggesting in that connection Mr. Joseph Maxwell. Thereafter on December 14, 1914, the last renewal notes given by the Company were surrendered by the plaintiff upon the delivery to it...