Straus v. Tribout

• Decision Date: 03 May 1938
• Docket Number: 34937
• Citation: 116 S.W.2d 106,342 Mo. 511
• Parties: Samuel J. T. Straus, Trustee, and William R. Orthwein, Cotrustee, v. Julius E. Tribout et al., Defendants, Chase Hotel Company, Appellant
• Court: Missouri Supreme Court

116 S.W.2d 106

342 Mo. 511

Samuel J. T. Straus, Trustee, and William R. Orthwein, Cotrustee, v. Julius E. Tribout et al., Defendants, Chase Hotel Company, Appellant

No. 34937

Supreme Court of Missouri

May 3, 1938

Appeal from Circuit Court of City of St. Louis; Hon. O'Neill Ryan, Judge;

Affirmed.

Bishop & Claiborne and Paul Dillon for appellant.

(1) The noteholders, or bondholders, for whom the trustees seek to foreclose the chattel mortgage are not innocent holders for value, for the reason that the bonds sought to be foreclosed were not negotiable instruments. Globe Indemnity Co. v Miss. Valley Merchants State Trust Co., 41 S.W.2d 962; Roberts v. Consolidated Pav. & Matl. Co., 70 S.W.2d 543; St. Louis-Carterville Coal Co. v. Southern Coal & Mining Co., 186 S.W. 1152; Reetz v. Pontiac Realty Co., 293 S.W. 382. (2) The loan for which the chattel mortgage was given as security was an usurious one. Kreibohm v. Yancey, 154 Mo. 67; Ferguson v Sutphen, 8 Ill. 567; White v. Anderson, 164 Mo.App. 132; Mo. Co. v. Sims, 179 Mo. 479; Quinn v. Van Raalte, 205 S.W. 59; Machine Co. v Tomlin, 174 Mo. 253; Mo. Discount Corp. v. Mitchell, 261 S.W. 746; Tobin v. Newman, 271 S.W. 843; General Motors v. Weinrath, 262 S.W. 428; Sec. 2844, R. S. 1929. (3) The loan in question being usurious at its inception, this statute makes said chattel mortgage given to secure same void, illegal and of no effect whatsoever. Keim v. Vette, 167 Mo. 403; Johnson v. Grayson, 230 Mo. 396; Securities Inv. Co. v. Rothweiler, 7 S.W.2d 486; Tolman v. Union Cas. Co., 90 Mo.App. 289; Gen. Motors Acc. Corp. v. Weinrath, 262 S.W. 428; Marx v. Hart, 166 Mo. 524; Coleman v. Cole, 158 Mo. 253; Western Sge. & Whse. Co. v. Glosner, 169 Mo. 38; Manufacturers' & Mechts. Bank v. Twelfth St. Bank, 16 S.W.2d 106; Foskin v. Laesing, 32 S.W.2d 768. (4) The chattel mortgage is governed by the law of the State, in which the personal property on which the mortgage is given, is situated. Steckel v. Swift & Co., 56 S.W.2d 808; Arkansas City Bank v. Cassidy, 71 Mo.App. 186; 11 C. J., ch. 32, p. 423; 5 R. C. L., p. 398, ch. 20.

Theodore Rassieur, David Levinson and Sullivan, Reeder & Finley for respondents.

(1) The bonds are negotiable and the bondholders are innocent holders for value. State ex rel. v. Cox, 325 Mo. 906; Enoch v. Brandon, 164 N.E. 46; Paepcke v. Paine, 235 N.W. 871; Pfluger v. Bank 184 N.E. 321. (2) The chattel mortgages are valid, since the bondholders have not exacted usurious interest. Vette v. Geist, 155 Mo. 33; Johnson v. Simmons, 61 Mo.App. 398; Smith v. Mohr, 64 Mo.App. 39; Cowgill v. Jones, 99 Mo.App. 395; Keim v. Vette, 167 Mo. 404. (3) The appellant, being a corporation, cannot insist on usury on this hearing de novo. Laws 1935, p. 267; Medich v. Steppic, 335 Mo. 798; Dinkelman v. Hovekamp, 236 Mo. 572; In re Champion Co., 17 F.Supp. 985; Ewell v. Daggs, 108 U.S. 143. (4) The burden of proving usury rested with the appellant. Davis v. Bowling, 19 Mo. 651; Discount Corp. v. Mitchell, 216 Mo.App. 100; Acceptance Corporation v. Weinrich, 218 Mo.App. 68. (5) Until certified the bonds were not completed instruments. Jones on Corp. Bonds & Mortgages, sec. 210; Stewart v. Ry. Co., 255 F. 618; Maas v. Ry. Co., 83 N.Y. 223; Thede v. Bank, 22 P. 1105. (6) The bonds being finally executed and payable out of the State, the rate of interest is not controlled by our statute, and the appellant did not prove the foreign rate and hence the plea fails, and the mortgages are valid. Davis v. Bowling, 19 Mo. 653; Trower Bros. v. Hamilton, 179 Mo. 205; Central Bank v. Cooper, 85 Mo.App. 383; Hansen v. Duvall, 333 Mo. 74; Whitworth v. Davey, 279 Mo. 678. (7) The contract with Straus & Company was not a loan but an underwriting contract, and there can be no usury unless there is a loan of money. State ex rel. v. Savings Institution, 48 Mo. 193; Quinn v. Van Raalte, 276 Mo. 104; Tobin v. Neuman, 271 S.W. 844; Allen v. Newton, 219 Mo.App. 74; Chakales v. Djiovanides, 170 S.E. 862; Miller v. Claridge Manor Co., 14 F.2d 859; Stewart v. Miller & Co., 45 A. L. R. 565; Wicker v. Trust Co., 147 So. 588; Firebaugh v. Seegren, 265 Ill.App. 387; Chicago Trust Co. v. Jensen, 271 Ill.App. 419; Lubbock Hotel Co. v. Guaranty Bank & Trust Co., 77 F.2d 155. (8) Charges against the proceeds of the bond issue, such as the appellant complains of, are approved by the courts. Hansen v. Duvall, 333 Mo. 73; Cuendet v. Love, Bryan & Co., 57 S.W.2d 701; Federal Bond Co. v. Burstein, 192 N.W. 550; Bankers Trust Co. v. Cowhey, 220 N.W. 732; 76 A. L. R. 1467; Bishop v. Blair, 90 Ill.App. 64; Daley v. Investment Co., 43 Minn. 517; Bird v. Napodano, 177 N.Y.S. 541; In re Danville Hotel Co., 38 F.2d 18; Miller v. Claridge Manor, 14 F.2d 860; Hardware Co. v. Denbigh Hall, 152 A. 133; Heaberlin v. Ins. Co., 171 S.E. 419; Dubose v. Parker, 13 Ala. 779; 21 A. L. R. 883; Schiele v. Anderson, 252 Ill.App. 393. (9) On the transfer of the property, subject to the mortgage, the purchaser is estopped. Landau v. Cottrill, 159 Mo. 318; Reed v. Steward, 276 S.W. 12; Davis v. Tandy, 107 Mo.App. 442; 27 R. C. L., p. 289; 66 C. J., p. 321; Hiner v. Whitlow, 66 Ark. 121; Shufelt v. Shufelt, 9 Paige, 137; Trusdell v. Dowden, 20 A. 972; Hatch v. Banker, 249 N.Y.S. 215; Mortgage Co. v. Keahey, 155 P. 537; 8 L. R. A. (N. S.) 814; 48 L. R. A. (N, S,) 840, (10) All in privity are bound by such estoppel. Brown v. Patterson, 224 Mo, 639; Ettensen v. Ry. Co., 248 Mo. 395; Williams v. Fitt, 36 N.Y. 325.

Westhues, C. Cooley and Bohling, CC., concur.

OPINION

WESTHUES

Respondents, plaintiffs below, brought this suit to foreclose a certain deed of trust on real estate and a chattel mortgage on personal property. The property covered by the instruments was the Chase Hotel in the city of St Louis, Missouri. The trial court entered a decree for plaintiffs and the appellant, hotel company, appealed. The defense set up was usury. The appellant abandoned its defense as against the deed of trust. The only controversy remaining in the case is over the chattel mortgage. Julius E. Tribout and wife executed the note and chattel mortgage in the first instance and therefore were made defendants. However, they had no interest in the case, since they were merely straw parties, and therefore did not appeal. The appellant, Chase Hotel Company, a corporation, had title to the property at the time foreclosure proceedings were instituted.

The main facts, necessary for an understanding of the question, upon which we have determined the case are as follows: Chase Ulman owned real estate in St. Louis, situated in the northeast corner of Kingshighway and Lindell Boulevard. About the year 1920, he conceived the idea of constructing a large hotel upon this property. For reasons of his own, in which we are not now concerned, he transferred the title to this property to one of his employees, J. E. Tribout, and wife Agnes C. Tribout. Application was then made to S.W. Straus & Company, a partnership, with offices in St. Louis, to procure funds for the purpose of constructing a hotel. The Tribouts executed a temporary note and bond for $ 2,700,000, dated October 1, 1921, bearing interest at seven per cent annually. This note and bond were later returned to the Tribouts and a series of bonds totaling $ 2,700,000, due at various dates, bearing interest at seven per cent per annum, were executed by the Tribouts, and a deed of trust and chattel mortgage were given to secure the bonds. The construction of the hotel was completed in the year 1923. As the construction of the hotel progressed Straus & Company advanced the cash to pay for the labor and materials. After its completion it was operated by various parties who paid the interest and the principal on the bonds which fell due during that time, amounting to $ 745,000. A default occurred in the year 1931, in both the payment of interest and bonds then due. Appellant, Chase Hotel Company, turned the property over to the trustees for the bondholders, who are the respondents in this case. Later this suit was brought to foreclose, and then, for the first time, the question of usury was mentioned when the company filed its answer to the foreclosure proceedings. The defendant claimed that the chattel mortgage was given to secure a debt tainted with usury, and therefore was void by reason of our statute, Section 2844, Revised Statutes 1929 (7 Mo. Stat. Ann., p. 4633).

The bonds, upon their face, did not disclose usury, but the defendant claimed usury was exacted. This claim is based upon the contract entered into between Straus & Company and the Tribouts, which reads as follows:

"'X. The Purchaser agrees to purchase and the Seller agrees to sell and deliver to the Purchaser said bond issue for a sum equal to ninety per cent (90%) of the par value thereof, the proceeds of said sale (to-wit, ninety per cent (90%) of the par value thereof) to be held, applied and disposed of in the manner and under the conditions provided for in Article XII hereinafter set forth.'"

Appellant in its brief interprets the contract as follows:

"S. W. Straus & Company, a partnership, agreed to buy the bonds of Tribout and his wife for ninety cents on the dollar. In other words, they were to be given $ 2,700,000 worth of bonds and they were to give the Tribouts, for said bonds, $ 2,430,000. In other words, they were to loan the Tribouts $ 2,430,000, and the Tribouts were to return them $ 2,700,000 with interest at the rate of 7 per cent, and the interest on this $ 2,700,000 began to be earned from the date of the bond, to-wit, October 1, 1921. . . ."

It was also contended, by appellant, that the Tribouts were charged interest on the full amount of $ 2,700,000, from October 1 1921, when in fact the money was paid to the Tribouts, as the work...