Third Nat. Bank v. Reichert

• Decision Date: 31 March 1903
• Citation: 101 Mo. App. 242,73 S.W. 893
• Parties: THIRD NAT. BANK OF ST. LOUIS v. REICHERT.
• Court: Missouri Court of Appeals

73 S.W. 893

101 Mo. App. 242

THIRD NAT. BANK OF ST. LOUIS v. REICHERT.

Court of Appeals at St. Louis, Missouri.

March 31, 1903.

BILLS AND NOTES—CONSIDERATION—COLLATERAL ORAL AGREEMENT—DEFENSES.

1. Where a national bank, which had acquired a flouring mill, entered into a business arrangement with defendant for the organization of a corporation to own and operate the mill, which contemplated the giving of certain notes by defendant in payment for stock, and also that defendant should run the mill, and have the privilege of acquiring the entire business, and that the bank should lend the milling company the capital required to operate the mill, the notes so given were based on a sufficient consideration in the agreement of the parties to undertake the enterprise as agreed.

2. Where a note sued on was payable absolutely without condition, the maker was not entitled to urge as a defense a parol agreement that the note was only to be paid contingently in the event enough money was earned by a certain milling corporation to pay the same from its profits.

Appeal from St. Louis Circuit Court; H. D. Wood, Judge.

Action by the Third National Bank of St. Louis against W. J. Reichert. From a judgment in favor of plaintiff, defendant appeals. Affirmed.

Dawson & Garvey, for appellant. F. E. Richey and Turner & Holden, for respondent.

Statement of Facts.

GOODE, J.

Action on a negotiable promissory note for $2,750, executed by the appellant to the Chemical National Bank of St. Louis on the 13th day of August, 1896, due six months after date, and given in renewal of a previous note for the same amount on February 10, 1896. The petition avers that the instrument in suit was indorsed and delivered by the Chemical National Bank to the respondent, the Third National Bank of St. Louis, for value, and before maturity; while the answer avers that the appellant received no consideration for the note, and that in fact there was no consideration for it; further, that the respondent was not a purchaser in good faith, before maturity, but came into possession of the note long after it was due, and otherwise than by purchase.

Complaint is made of the refusal of certain declarations of law by the circuit court, but the declarations need not be recited, because we think no defense to the respondent's case was shown, and that the judgment was for the right party. The Third National Bank of St. Louis purchased the assets of the Chemical National Bank of said city, the purchase being the outcome of negotiations and transactions which began anterior to January 13, 1897, and were finished by the removal of said assets to the respondent's banking house on the 28th day of February. The latter date fell about two weeks after the maturity of the note in controversy, and that fact is relied on as showing that the respondent did not acquire it in the ordinary course of business before maturity, but subsequently, and hence that any equity appellant may have against the note is available as a defense to the respondent's action. The officers of the Third National Bank on January 13th made a verbal agreement to purchase the assets of the Chemical Bank for the Third National Bank, if, on examination, they were found to be satisfactory. The examination was made January 18th, and the purchase then definitely arranged, so far as the principal officers of the two banks could arrange it; but the terms of the deal were not put into writing until January 30th, when an instrument was drawn up and signed by the officers of the banks providing for the purchase of the assets, furnishings, good will, fixtures, and property of all kinds of the Chemical Bank by the Third National for $475,000, the agreement being based on a statement of the condition of the Chemical Bank's affairs rendered on January 18th. Said instrument provided that the officers of the two institutions should procure approval of its terms by their boards of directors, and that it should be carried out in accordance with the provisions of the federal national bank act, the transfer of the assets to be made on or before March 1st. At the time the sale was negotiated, appellant's note was among the assets of the Chemical Bank, and was passed at its face value by the officers of the Third National without any information or notice coming to them that it was other than what it purported to be, namely, an ordinary promissory note not yet due, held by the Chemical Bank as one of its bills receivable. It unquestionably constituted part of the consideration moving the Third National Bank to make the purchase, as the testimony shows it was regarded as giltedged paper. The testimony of the officers of the Third National tends to show that the assets and property of the Chemical were transferred to the former institution, and actually delivered on or about the 30th day of January, but that they were not physically removed from one banking house to the other until February 28th.

The facts out of which the supposed equitable defense of the appellant arises are connected with the organization of a milling company in the state of Illinois to operate a mill at La Grange, Mo. The appellant, W. J. Reichert, and his brother, George Reichert, were the controlling owners of the capital stock of the Reichert Milling Company, which was engaged in manufacturing flour in Freeburg, Ill. Said concern kept a bank account with the Chemical National Bank of St. Louis, enjoyed a line of credit with said bank, and the officers of the two corporations seem to have been on friendly terms. Some time in 1895 the Chemical Bank acquired the property of the La Grange Milling Company at La Grange, Mo., on account of having loaned this company money secured on its milling plant, and being forced subsequently to take the plant. The title to said plant was put in the name of William E. Garvin to hold for the Chemical Bank. J. C. Richardson and Francis Kuhn were president and vice president of the Chemical Bank, and, after this property had been taken over by the bank, said officers, in order to make it productive, opened a negotiation with the Reicherts, and proposed that the Chemical Bank or its officers and the Reicherts should operate the La Grange plant together, as the latter were practical millers. The result of that negotiation was that the Climax Milling Company was organized under the laws of the state of Illinois, with a capital stock of $15,000, which was paid by Garvin conveying to it the mill and machinery of the defunct La Grange Milling Company. Of the 150 shares of capital stock of the Climax Milling Company, Richardson and Kuhn took 35 shares each, W. J. Reichert and George Reichert 30 shares each, C. A. Whittaker 15 shares, and Walter J. Serth 5 shares. Whittaker and Serth had been employés of the Reicherts in the Freeburg mill, but after the organization of the Climax Milling Company the former took charge of that enterprise, as it was understood they should when the plan to operate the La Grange property was arranged. The Climax Milling Company continued business for seven or eight months, and then stopped, as it lost money all the time. When said Company was organized, W. J. and George Reichert each executed a promissory note for $2,750 to the Chemical National Bank to pay for the shares of stock taken by them, which included the 20 shares put in the names of Whittaker and Serth, who gave their notes to the Reicherts for their shares; that is to say, the Reicherts subscribed for 80 shares of the total 150 shares, and sold 20 shares to Whittaker and Serth. They also took the following contract binding Richardson and Kuhn to sell them the other shares:

                        "Freeburg, Illinois, Jan. 31, 1896
                

"This agreement is that Wm. J. Reichert and George Reichert are to have eighty shares of Climax Milling Company for $5,500.00, and agree to resell to the Reicherts within fifteen months, our seventy shares for the sum of $7,000, and if bought we agree to waive all profits except six per cent. interest.

                                         J. C. Richardson
                                         "Francis Kuhn."
                

When the original notes given by the Reicherts to the Chemical Bank matured, renewal notes were executed, and the instrument sued on is one of the renewals.

The position of the defendant is that his original note was given pursuant to an understanding and agreement between him and the officers of the Chemical Bank that he was not to be bound for its payment, but that it was to be paid out of the earnings of the Climax Milling Company; that in fact it was an accommodation note, and the entire arrangement was entered into by him and his brother, George, at the solicitation of the officers of the Chemical Bank for the convenience of the latter institution, and so that it might utilize its La Grange property, keep its assets in presentable condition, and have the two notes given by the Reicherts to exhibit to the national bank examiner as solvent assets. That is substantially the testimony of the Reicherts and of Becker, a bookkeeper of the Freeburg mill, who says he heard the arrangement made; but it is disputed by the respondent, and there is testimony the other way. Becker's version of the affair, which is in all respects like that given by the appellant himself, is as follows: "He [Richardson] came out there one morning on the...