Thornton v. Nat'l Exch. Bank

• Citation: 71 Mo. 221
• Parties: THORNTON et al., Plaintiffs in Error, v. THE NATIONAL EXCHANGE BANK.
• Decision Date: 31 October 1879
• Court: United States State Supreme Court of Missouri

71 Mo. 221

THORNTON et al., Plaintiffs in Error,

v.THE NATIONAL EXCHANGE BANK.

Supreme Court of Missouri.

October Term, 1879.

Error to Callaway Circuit Court.--HON. G. H. BURCKHARTT, Judge.

REVERSED.

Mary O. Thornton and Amos B. Thornton sued Bragg by attachment, and among others garnished the National Exchange Bank as the holder of a note for $4,744.50 made by one Lamkin. Lamkin had bought a property known as “Bragg's Hall,” at trustee's sale, and in payment of his bid had made this note to the trustee, Miller, who had assigned it to the National Exchange Bank, who claimed to hold, as to $1,000 of the amount, for the benefit of the First National Bank, and as to the remainder, for itself, and filed an interplea setting up this claim. “Bragg's Hall” had been the joint property of Bragg and Mary O. Thornton, and plaintiff's attachment was laid on the theory that the deed of trust to Miller was given to secure a National bank for a present advance of money and was, therefore, void under the National banking act, and hence, one-half of the proceeds of the sale by Miller belonged to Bragg, and was hable to attachment for his debt. As to the other half for the same reason they claimed it as the property of Mary O. Thornton. Plaintiffs obtained judgment against Bragg, but upon a trial of the interplea filed by the National Exchange Bank there was a judgment for the interpleader, to reverse which plaintiffs took this writ of error. Other facts appear in the opinion of the court.

Nathan C. Kouns for plaintiffs in error.

1. The National Exchange Bank took nothing by the indorsement of the notes to it but Bragg's note with Ewing's indorsement, and the lien of the deed of trust was lost. U. S. Rev. Stat., p. 998, §§ 5137, 5136; Matthews v. Skinker, 62 Mo. 329; Woods v. People's National Bank,83 Penn. St. 57. If it were true, as claimed by the bank, that the Miller deed of trust was given to indemnify Ewing against his indorsement, the bank would still have no equity to enforce it nor any right to claim the benefit of it. The doctrine that a creditor may resort to securities made for the protection of the debtor's surety ( Burnside v. Fetzner, 63 Mo. 107) cannot be invoked. Aequitas sequitur legem, and does not seek to abrogate or evade statutes, nor relieve against a general rule of law. (Willard 318, 41.) Nor can a court of equity lend its and to enforce a security, which is, as to the creditor, an illegal contract, nor aid the creditor to make his debt out of an illegal security in contravention of public policy, or of a statute. Downing v. Ringer, 7 Mo. 585; Bank of Mo. v. Bank of Baltimore, 10 Mo. 125; Bank v. Clark, 4 Mo. 59; Griffith v. Bank, 4 Mo. 255; Riley v. Jordan, 122 Mass. 231; s. c., 5 Cent. Law Jour. 120.

2. The equity of plaintiffs grows out of three considerations: First, That there is no creditor before the court claiming the fund that has legal capacity and right to receive it: (1 Story, Eq. Jur. 27, 28, 53.) Second, That Mrs. Thornton, having paid the purchase money “prematurely,” i. e. before getting a title, has a lien on the property and on the proceeds of the sale of it. ( Stewart v. Wood, 63 Mo. 252,) and: Third, That by the deed of Bragg and wife to her, of May 5th, 1874, she became the legal representative of the grantors therein, and as such entitled to receive all of the proceeds of the sale under a prior deed of trust, which do not legally go to some other party before the court. Reid v. Mullins, 43 Mo. 307; s. c., 48 Mo. 344; Warner v. Veitch, 2 Mo. App. 459.

3. The deed of trust executed by Mrs. Thornton and her husband did not create any lien either at law or in equity upon her estate. Shroyer v. Nickell, 55 Mo. 264; Whiteley v. Stewart, 63 Mo. 360. At the date of the deed her husband had a fifteen year lease on the third story of the building in which she had a right of dower, and her relinquishment of dower must be understood as applying to that, notwithstanding the description in the deed was of the entire property.

4. The tender made by plaintiffs discharged the lien of the deed of trust as against Mrs. Thornton's interest in the property. 1 Hilliard on Mortgages, 269; Whelan v. Reilly, 61 Mo. 570; 3 Southern Law Review, 712, 767.

The consideration for the assumption by Thornton and Bragg of the obligation of Berry, Crow and A. W. Ewing having failed by the extinguishment of the lease by the sale under the Miller deed of trust, these parties are remitted to their original positions, and the liability of Berry, Crow and A. W. Ewing as sureties is revived.

Ewing & Pope for respondents.

1. The proceeds of the sale should be applied as asked by the interpleader. Helweg v. Heitcamp, 20 Mo. 569.

2. This is not an effort, or a proceeding by a National bank, to enforce a debt due and secured by a deed of trust to the bank, but is a controversy over money, arising from a sale under deed of trust, given to indemnify sureties. This case is not similar to Matthews v. Skinker, 62 Mo. 329. The claim of plaintiffs is an audacious effort by debtors to defeat their sureties on the pretext that ultimately the money is to go to a National bank. If the bank does not get its money out of this fund it will recover it from the sureties. They will be unable to get it back from Bragg's estate or the Thorntons, for they are both insolvent; and thus if plaintiffs succeed here they will have wrested from their sureties through a court of justice the proceeds of the very property which they conveyed as indemnity for their sureties.

3. Bragg and Mary O. Thornton owned Bragg Hall as tenants in common. Bragg and A. B. Thornton owed certain debts, evidenced by notes. To secure these notes Bragg and wife, and Thornton and wife, executed in due form of law, and delivered their deeds of trust. A sale is had under a prior deed of trust, and the Thorntons insist that the surplus must be paid to them as general creditors of Bragg and not to extinguish Thornton's own debt. There is no equity in this.

4. The deed of trust of Thornton and wife conveyed the interest of Mrs. Thornton. Schneider v. Staihr, 20 Mo. 269; Shroyer v. Nickell, 55 Mo. 264; Whiteley v. Stewart, 63 Mo. 360; Kinner v. Walsh, 44 Mo. 65; Brown v. Brown, 47 Mo. 130; Siemers v. Kleeburg, 56 Mo. 196; McQuie v. Peay, 58 Mo. 56.

PER CURIAM.

This was a suit by attachment instituted in the Cole circuit court against Charles G. Guenther, administrator of the estate of Henry Bragg, deceased, in which the National Exchange Bank and the other parties to the cause were summoned as garnishees. A change of venue was taken to the Callaway circuit court.

On the 21st day of March, 1874, said Bragg executed and delivered to H. Clay Ewing two promissory notes, one for $2,300, and the other for $700 payable three months thereafter to H. Clay Ewing at the First National Bank, Jefferson City. On the same day, said Bragg and wife conveyed to P. T. Miller in trust to secure said notes, property in Jefferson City, known as “Bragg's Hall,” and on the same day Ewing indorsed said notes to the National Exchange Bank, a corporation organized under the act of Congress in relation to National Banks. On the 5th day of May, 1874, said Bragg and wife conveyed to Mary O. Thornton, by deed of that date, one undivided half of said property for the consideration of $7,000, expressly subject to said deed of trust. On the 25th day of February, 1875, said Mary O. Thornton and her husband, A. B. Thornton, and Henry Bragg and wife conveyed said property to H. Clay Ewing in trust, to indemnify the sureties of said Henry Bragg and Amos B. Thornton, in their notes, one to the National Exchange Bank for $592; one to Sarah A. Chiles for $556.75, and one to the First National Bank of Jefferson for $1,000. The note to Mrs. Chiles was afterward paid. J. R. Crow and A. W. Ewing were sureties on the notes to Mrs. Chiles and the National Exchange Bank, and together with Green C. Berry, were sureties on the note to the First National Bank. These notes bore date 3d day of February, 1875. The suit of Thornton and wife by attachment against Bragg's administrator was substantially for a breach of covenant in the deed from Bragg to Mrs. Thornton, and by garnishment, they seek to subject the proceeds of the sale of the “Bragg Hall” property by P T. Miller, trustee, in the first desscribed deed of trust, to the payment of the judgment recovered by them against Bragg's administrator. That judgment has not been appealed from, and we have only to consider the proceedings in the garnishment cases from the judgment in which Thornton and wife have appealed to this court. At the sale of said property by P. T. Miller, as trustee, May 22nd, 1875, one Lamkin became the purchaser at the price of $4,744.50, for which he executed his note to said trustee, who on the same day assigned it to the National Exchange Bank for the benefit of that bank and the holders of the notes described in the deed of trust of February 25th, 1875. The garnishments were served after the sale of the property, and after the assignment of the Lamkin note to the bank.

1. NATIONAL BANKS: power to avail themselves of real estate security.

By the assignment of the notes of Bragg to the National Exchange Bank by H. Clay Ewing, the deed of trust passed to the bank, and as the execution of the notes and the deed of trust and the advancement of the money thereon by the bank were contemporaneous acts, the transaction was a violation of Section 28 of the act of Congress, which provides as follows: “It shall be lawful for any such association to purchase, hold and convey real estate as follows: First, Such as shall be necessary for its immediate accommodation in the transaction of its business; Second, Such as shall be mortgaged to it in good faith by way of security for debts previously contracted; Third, Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; Fourth, Such as it shall purchase on sales under...