The Commercial Bank of Boonville v. Varnum
| Decision Date | 19 January 1914 |
| Citation | 162 S.W. 1080,176 Mo.App. 78 |
| Parties | THE COMMERCIAL BANK OF BOONVILLE, MISSOURI, Appellant, v. MARY E. VARNUM, Respondent |
| Court | Kansas Court of Appeals |
Appeal from Cooper Circuit Court.--Hon. J. G. Slate, Judge.
REVERSED AND REMANDED (with directions).
Reversed and remanded.
John Cosgrove for appellant.
Roy D Williams and W. V. Draffen for respondent.
Plaintiff sued defendant to recover the unpaid balance due upon a promissory note executed by the latter jointly with her husband, J. B. Varnum. The defense is the note has been paid.
Some years prior to the institution of the suit, the defendant Mrs. Varnum, bought with her own money a stock of merchandise, and her husband, J. B. Varnum, ran the store for her at Rocheport, Missouri, carrying on the business in her name. Thereafter the stock was removed to Boonville where for two or three years the husband conducted the business in his name with his wife's knowledge and consent. It was so conducted down to the time the business was sold as hereinafter related.
Soon after J. B. Varnum commenced business in Boonville, he and his wife, the defendant, began borrowing money from plaintiff on their joint notes, and the money as borrowed was used in the business. It was generally thought that Mrs. Varnum was possessed of means of her own, and the bank lent the money largely on the strength of her credit. In this way the note now in suit came to be made. It was executed on June 9, 1909, and, as stated before, was signed by defendant and her husband J. B. Varnum. On April 16, 1910, Varnum, who was still running the store in his own name, with his wife's knowledge and consent, sold the stock of goods to D. L. Davis who gave a check on the plaintiff bank for the purchase price. J. B. Varnum deposited the check to his own credit in the plaintiff bank and then drew his check payable to plaintiff for the amount due on the note and for some store rent also due. Plaintiff's cashier received the check, stamped the note "paid" and delivered it to J. B. Varnum.
Within four months thereafter, to-wit, on May 24, 1910, J. B. Varnum became a voluntary bankrupt and W. R. Million was elected trustee of the bankrupt's estate. The payment of the money by Varnum to the bank on April 16, 1910, being within four months of the bankruptcy, was a preference which could be declared void under the National Bankrupt Act. [Paragraphs a and b, Sec. 60, Bankruptcy Act of 1898.] Million, the trustee in bankruptcy, thereupon brought suit to have said preference and payment declared void and to recover the money so paid. The trustee obtained judgment against the bank which was affirmed by this court. [Million, Trustee, v. Commercial Bank of Boonville, 159 Mo.App. 601, 141 S.W. 453.] The bank thereupon paid said judgment and then filed its claim against the bankrupt's estate, and was paid thereon the sum of $ 664.85. Thereupon, after the discharge in bankruptcy of the husband, the present suit was instituted against the other maker of the note, Mrs. Varnum, to receive the remainder due on same.
As stated, the wife's defense is that the note has been paid. The contention involved in that defense is that the stock of goods sold by J. B. Varnum, in reality, belonged to Mrs. Varnum, and consequently, the money received for said stock, and used by him in paying said note, belonged to her, and when her husband, J. B. Varnum, paid it to the bank, it was a payment and satisfaction in full of the note. Defendant's further contention is that she was not a party to the suit by the trustee in bankruptcy and, therefore, was not bound by the judgment therein rendered declaring void the payment by her husband to the bank, and hence, as to her, the situation is the same as if the transaction between her husband and the bank, whereby he used her money to pay the note in question, had never been declared void and the same as if the bank had never been compelled to refund the money. This is the effect of her contention, though, in words, her contention is that, as she was not a party to the bankruptcy suit, she was not bound by the adjudication therein that the title and ownership of the money with which J. B. Varnum attempted to pay the note was in him and not in her. The further contention, apparently, is that, as the bank knew the payment by J. B. Varnum was a voidable preference, knew that the stock belonged to her, it was engaged in a fraudulent transaction when it received the money in payment of the note, and must therefore be left where it was brought itself.
There was practically no dispute as to the facts. The court refused to give plaintiff's peremptory instruction to find for it, but submitted to the jury the question whether the stock sold to D. L. Davis was defendant's property, and told the jury that, if it was, then the payment attempted to be made by J. B. Varnum to plaintiff was with defendant's money and the note was, in that event, satisfied. The jury found for defendant, and plaintiff has appealed.
As the facts were not in dispute, the question to be passed upon was one of law to be decided by the court. [Williams v. Williams, 132 Mo.App. 266, 111 S.W. 837; Coleman v. Reynolds, 207 Mo. 463, 105 S.W. 1070.]
The question is, was the payment, attempted to be made by J. B Varnum, to the bank a payment and satisfaction of the debt? The payment attempted to be made by J. B. Varnum was with money that belonged neither to him nor to Mrs. Varnum in the sense that they could do with it as they pleased. It was a trust fund belonging to all the creditors of J. B. Varnum. The payment, or transaction attempted to be made a payment, was liable to be declared void, and was so declared by the judgment in the bankruptcy case. It was as if it had never been made. Mrs. Varnum treats the judgment in the bankruptcy case as if it operated to deprive her of the title to the money and, as she was not a party to the suit, it cannot bind her. But the judgment in the bankruptcy case operated rather upon the transaction between Varnum and the bank whereby he attempted to pass the money over to the bank in payment of the note. That transaction was declared void, that is, the effect of the judgment was that no payment was made which gave the bank title...
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