Swope v. LeFfingwell

• Decision Date: 04 December 1877
• Citation: 4 Mo.App. 525
• Parties: LOGAN O. SWOPE, Respondent, v. HIRAM W. LEFFINGWELL ET AL., Appellants.
• Court: Missouri Court of Appeals

4 Mo.App. 525

LOGAN O. SWOPE, Respondent,

v.HIRAM W. LEFFINGWELL ET AL., Appellants.

St. Louis Court of Appeals, Missouri.

Dec. 4, 1877.

H. purchased certain real estate of S., subject to a deed of trust given to secure certain notes made by S., which notes H. covenanted to pay; and for the purpose of paying them, and thus avoiding a sale under the deed of trust, H. endorsed and procured the discount in bank of a note made by another for the amount of these secured notes. At H.'s request the holder of these secured notes sent them, with a draft on H., to the bank, with instructions to return the notes and deed of trust if the draft was not paid. The bank paid the draft with the proceeds of the discount, and retained these secured notes as collateral security for the discount, under an agreement between it and H. In making the discount the bank relied upon the real estate security, and intended taking the secured notes as collaterals, but at the same time it had notice of the agreement between H. and S., by which the former was to pay these notes. The discounted note not being paid at maturity, the bank sold the secured collateral notes, purchased the same, and advertised the real estate for sale under the deed of trust. S. brought an action to enjoin the sale. Held, that the secured notes were paid in the hands of the bank, and the sale should be enjoined; that these notes were really paid on behalf of H., who stood to the bank in the position of maker of the notes; that the evidence shows that H. really intended to pay the notes; that the acts of the parties accomplished a payment independently of their intention, and thus destroyed the value of the notes as collaterals; that the notes were paid with money obtained by H. from the bank, but the notes were then dead in H.'s hands, and could not be pledged by him; and that the bank, having notice of the agreement between S. and H., will not be permitted to sell the land and make S. pay the debt which H. had agreed with him to discharge.

APPEAL from St. Louis Circuit Court.

Affirmed.NOBLE & ORRICK, for appellants: The secured notes were not paid. The acts of the parties did not constitute a payment.--Byles on Bills, 175; Pacific Bank v. Mitchell, 9 Metc. 297; Chitty on Bills, 321; Dodge v. Freedman's, etc., Co., 3 Otto, 79; Harbeck v. Vanderbilt, 20 N. Y. 395; Thompson v. Kellogg, 23 Mo. 284; Howard v. Jones, 33 Mo. 583; Appleton v. Kennen, 19 Mo. 637. The bank had authority to assert the notes and deed of trust as a lien against the real estate, and the injunction should not have been granted.--Abb. Dig. 245; 6 Hill, 37; Sackett's Harbor Bank v. Lewis County Bank, 11 Barb. 213; Steam, etc., Co. v. Weed, 17 Barb. 378; 2 Cent. L. J. 692; First National Bank v. Haire, 36 Iowa, 443; Shinkle v. First National Bank, 22 Ohio St. 524.

E. B. SHERZER and ALEX. MARTIN, for respondent: The payment of the draft by the bank was a payment of the secured notes, so far as plaintiff was concerned, and neither Honoré nor his assignee could sue on them.-- Schnaake v. Kellogg, 56 Mo. 136; Bond v. Fitzpatrick, 4 Gray, 89. The transferee of negotiable paper, after maturity, takes only the actual right and title of the transferor.--1 Dan. Neg. Inst. 539; Story on Prom. Notes, 205, 206; Campbell v. Burch, 1 Lans. 178; McCabe v. Swapp, 14 Allen, 188; Strong v. Converse, 8 Allen, 554; Brown v. Lapham, 3 Cush. 554. The discount was a loan.-- Farmers', etc., Bank v. Baldwin, 4 Cent. L. J. 119; Niagara, etc., Bank v. Baker, 15 Ohio St. 69; Flekener. v. Bank, 8 Wheat. 338. The bank's security for the discount, so far as the secured notes were concerned, was void, and the bank could not sell the real estate by which they were secured.-- Matthews v. Skinker, 62 Mo. 329.

HAYDEN, J., delivered the opinion of the court.

This is a bill to enjoin a sale of real estate in St. Louis, advertised to be sold by certain of the appellants, under a deed of trust. On December 26, 1871, the respondent, Swope, bought of one Gordon the real estate in question, and, to secure part of the purchase-money, made his three negotiable promissory notes, known in this controversy as the Swope notes, in favor of Gordon. These notes were dated December 26, 1871; are payable, respectively, in one, two, and three years after date, and are, in the aggregate, for the sum of $35,839.95. They were secured by deed of trust on the real estate, which deed was recorded January 22, 1872. On May 25, 1872, the respondent sold the real estate to Henry H. Honoré, of Chicago, for $80,000, by deed of that date, recorded June 24, 1872; and by this deed the grantee, Honoré, as part of the consideration, assumed the payment of the Swope notes, and, by a separate contract with respondent, agreed to pay them as they became due. On May 25, 1872, to secure three notes of that date, representing $18,500 of the purchase-money, Honoré executed a deed of trust on the property; and afterwards, and before July, 1872, two more deeds of trust were given by Honoré upon the same property, the three given by him amounting to over $40,000. By transfer from Gordon, the Swope notes, secured by the deed of trust which was the first lien upon the real estate, became the property of a company finally known as the St. Louis Life Insurance Company. The first two of the Swope notes not being paid at maturity, the insurance company, early in 1874, advertised the real estate for sale, and Honoré, who had informed the insurance company that he had assumed payment of the notes, procured from it the withdrawal of the advertisement by paying certain interest and costs, and giving a draft, which, however, was not honored.

In the summer of 1874 Honoré had an interview with Mr. Doane, of Chicago, who, besides his regular business, acted as agent for the Atlas National Bank of Boston, one of the appellants in this case, and who, for that bank, was accustomed to buy negotiable paper. As to precisely what happened at this interview there is some controversy, but it sufficiently appears that Honoré, who was well known to Doane, not as a man of pecuniary means, but as a perfectly reliable gentleman, stated to Doane that he (Honoré) had bought this real estate in St. Louis, subject to an encumbrance of about $30,000, and had agreed to have these Swope notes provided for; that the time was up, and the insurance company, the holder, would wait no longer; that two of the notes were then overdue and unpaid, and that he (Honoré) wanted to get the money paid over to the Bank of Commerce, in New York, as he had agreed it should be, about that time. Doane was assured that these notes were well secured, being a first lien on real estate worth over $100,000, and a letter and abstract of title from an eminent lawyer of St. Louis, with a certificate as to the value of the property, were shown to him. Honoré knew that Doane was agent for the Atlas Bank, and wished to borrow the money on the Swope notes and put up his own note, as Doane states it. Doane declined to accede to this, but told Honoré that if he would get a Mr. Bowen, who, as Doane knew, had previously accommodated Honoré, to make his (Bowen's) note for an amount corresponding to the sum of the Swope notes, and payable in four months, that he (Doane), would take such note in behalf of his bank, with the Swope notes as collateral. This was accepted, and Honoré procured Bowen's signature to a note for $32,805.97, dated about July 20, 1874, and maturing about October 3, 1874. This contained a power to sell collaterals, and the blank for the description of the collaterals was left, as the Swope notes were then in New York, or supposed to be there. It is a disputed point whether this note, thus signed by Bowen, and known as the first Bowen note, or Bowen-Honoré note, was endorsed by Honoré or by Bowen. This Bowen note Doane took with him to New York, telegraphing in the meantime to the Atlas Bank to honor his check in New York to the amount of “$32,805, for papers bought on your account.” On July 20th, the day after the date of this telegram, the Atlas Bank telegraphed its correspondent in New York to pay the check of Doane. The Swope notes, however, were not in New York. Doane held no communication with the holder of the Swope notes. Honoré, however, on July 1st, had written from Chicago to the insurance company, requesting it to have the Swope notes sent to New York, and to let him know at what place in New York they were payable. Upon receipt of this letter, and about July 2d, the insurance company drew its draft on Honoré for the sum total of the Swope notes, attaching to the draft the notes and deed of trust, and handed them to its banker, the Bank of the State of Missouri, for transmission. The latter, on July 3d, sent the papers to the Bank of Commerce, at New York, saying it enclosed the draft on Honoré “for collection and credit,” fixed with the Swope notes and deed of trust, the latter to be delivered on payment of draft. These enclosures were received by the Bank of Commerce, and the Honoré draft, not being paid, was protested and then returned to the Bank of Missouri.

When Doane reached New York, finding that the Swope notes had been sent back to St. Louis, he telegraphed Honoré to that effect, upon which Honoré wrote to the insurance company a letter, of date Chicago, July 21st, in which he states he had made arrangements with a person who had gone to New York “to pay the Swope notes;” that this person was about to leave New York for Boston, and “says he will pay the notes if they are sent to the Atlas Bank, at that place.” Upon receipt of this letter the insurance company wrote to the Bank of Missouri, enclosing the Honoré draft which had been sent back from New York, and also a new draft for $80.31, representing interest and protest fees, and directed its banker to send these drafts to the Atlas Bank, at Boston, for collection. This letter, of date July 22d, contains the direction: “Upon payment of these two drafts you...