Tower Grove Bank & Trust Co. v. Duing

• Citation: 144 S.W.2d 69,346 Mo. 896
• Decision Date: 31 October 1940
• Docket Number: 36602
• Parties: Tower Grove Bank & Trust Company, a Banking Corporation, Appellant, v. Herman Duing, Edna Duing, Raymond J. Tombridge, E. Alice Toohey, Mary Toohey and Gerald Ryan
• Court: United States State Supreme Court of Missouri

144 S.W.2d 69

346 Mo. 896

Tower Grove Bank & Trust Company, a Banking Corporation, Appellant, v. Herman Duing, Edna Duing, Raymond J. Tombridge, E. Alice Toohey, Mary Toohey and Gerald Ryan

No. 36602

Supreme Court of Missouri

October 31, 1940

Rehearing Denied October 31, 1940.

Appeal from Circuit Court of City of St. Louis; Hon. Charles B Williams, Judge. Opinion filed at May Term, 1940, June 28, 1940; motion for rehearing filed; motion overruled at September Term, 1940, October 31, 1940.

Affirmed.

Dubail Judge & Winter for appellant.

(1) Supreme Court has jurisdiction of action to cancel a deed made pursuant to powers granted by a deed of trust, such action involving title to real estate. Cordia v. Matthes, 122 S.W.2d 32; Meredith v. Pound, 92 S.W.2d 698; Castorina v. Herrmann, 340 Mo. 1026, 104 S.W.2d 297; Medich v. Stippec, 335 Mo. 796, 73 S.W.2d 998; Phillips v. Phoenix Trust Co., 332 Mo. 327, 58 S.W.2d 318; Koewing v. Greene County B. & L. Assn., 327 Mo. 680, 38 S.W.2d 40; Thomas v. Scott, 214 Mo. 430, 113 S.W. 1093; Balz v. Nelson, 171 Mo. 682, 72 S.W. 527; Brennecke v. Reimann, 102 S.W.2d 874, 109 A. L. R. 1214. (2) Where a principal clothes his agent with apparent title to a negotiable promissory note, such as by indorsing the note in blank, and the agent, contrary to the commands of his principal, negotiates the note to one who acquires the same in good faith, before maturity and for a valuable consideration, the act of the agent, although unauthorized, will bind the principal as effectually as if no defect of authority existed. 8 Amer. Juris., sec. 619, p. 331; Baade v. Cramer, 278 Mo. 516, 213 S.W. 121; Neuhoff v. O'Reilly, 93 Mo. 164, 6 S.W. 78; Horton v. Bayne, 52 Mo. 531; Corby v. Butler, 55 Mo. 398; Greer v. Yosti, 56 Mo. 307; Bennett v. Torlina, 56 Mo. 309; Merrick v. Phillips, 58 Mo. 436; Ginter v. Commerce Trust Co., 222 Mo.App. 1156, 14 S.W.2d 41; Sec. 2680, R. S. 1929; Hoeley v. South Side Bank of St. Louis, 280 Mo. 336, 217 S.W. 504; International Bank v. German Bank, 71 Mo. 183, 36 Am. Rep. 468; Priest v. Garnett, 191 S.W. 1048; Clifford Banking Co. v. Donovan Comm. Co., 195 Mo. 262, 94 S.W. 527; M. & M. Securities Co. v. G. M. A. C., 230 Mo.App. 900, 79 S.W.2d 521. (3) Appellant, as pledgee of the notes and deed of trust, was a holder for value, without notice and before maturity. (a) One who takes a note as collateral for a debt is a holder in due course. Batson v. Peters, 89 S.W.2d 46; Farmers' State Bank v. Miller, 222 Mo.App. 633, 300 S.W. 834; Commerce Trust Co. v. McGirk State Bank, 222 Mo.App. 8, 300 S.W. 526; Republic State Bank v. McDaniel, 290 S.W. 449; Central Bank v. Lyda, 191 S.W. 245; State Bank of Freeport v. Cape Girardeau & C. Ry. Co., 172 Mo.App. 662, 155 S.W. 1111; Natl. Bank of Commerce v. Morris, 156 Mo.App. 43, 135 S.W. 1008. (b) Appellant bank had no such actual notice of fraud as would take it out of classification of a bona fide purchaser for value without notice and before maturity. Knowledge of facts which would excite suspicion or put a reasonable man on inquiry or even negligence is not sufficient to charge a purchaser of a note with notice of fraud. Downs v. Horton, 209 S.W. 595, affirmed 287 Mo. 414, 230 S.W. 103; Leavitt v. Taylor, 163 Mo. 158, 63 S.W. 385; Link v. Jackson, 158 Mo.App. 63, 139 S.W. 588; Lindsay v. Thomas, 213 S.W. 513; Russell v. Wyant, 214 Mo.App. 377, 253 S.W. 790. (4) A holder in due course may sell to a person with notice and the latter will succeed to the rights of him from whom he bought. McMurray v. McMurray, 258 Mo. 405, 167 S.W. 513; Miller v. Chinn, 195 S.W. 552; Pattonsburg Savs. Bank v. Koch, 255 S.W. 580; Tillotson v. Independent Breweries Co., 216 Mo.App. 412, 268 S.W. 425.

Foristel, Mudd, Blair & Habenicht and Abeken & Bergmann for Herman Duing and Edna Duing.

(1) The evidence did not show that the notes were negotiable at the time plaintiff bank acquired them: (a) Because the principal note showed on its face that it was overdue and an extension agreement unsigned on its back. R. S. 1929, secs. 2630-2838; 49 C. J., p. 900, sec. 16. (b) Because the bank did not fulfill the burden of proof to show it a holder in due course as required by the N. I. L. R. S. 1929, sec. 2687. (c) Because negotiability of the $ 3000 principal note was destroyed by the endorsement thereon and incorporation therein of the first (signed) extension agreement promising to do acts other than the payment of money. R. S. 1929, sec. 2634; Robertson v. Kochtitsky, 217 S.W. 546; H. & M. Finance Co. v. Brandt, 86 S.W.2d 196; Hull v. Angus, 60 Ore. 95, 118 P. 284; G. M. A. C. v. Gerrard, 41 Idaho 151, 238 P. 524. (d) Because after its original maturity, negotiability of the $ 2000 principal note was destroyed by placing thereon an unsigned (parol) extension agreement. Tourse v. Mound City Trust Co., 52 S.W.2d 611; R. S. 1929, sec. 2630. (e) Because even if the extension agreement had been signed (and it was not), negotiablity was destroyed because the provisions as to paying taxes, and so forth, prevented the $ 3000 principal note from being negotiable, because it was not "payable on demand or at a fixed or determinable future time." R. S. 1929, sec. 2630. (f) Because the extension agreement was not signed by the original two makers of the $ 3000 principal note (one of the makers being dead). R. S. 1929, sec. 2630. (2) Appellant admitted that respondent Herman Duing was a holder in due course of the $ 3000 principal note and the other papers herein at issue, and the evidence failed to show that the appellant bank became a subsequent holder in due course. R. S. 1929, secs. 2680, 2687. (a) Raymond J. Tombridge's title to the notes, subsequent to Duing's title, was admittedly defective, so that appellant bank had no greater right than Tombridge had, unless it acquired the papers under circumstances making it a holder in due course. R. S. 1929, secs. 2683, 2686, 2680. (b) The bank failed to meet the four requirements of a holder in due course, as set out in the N. I. L. R. S. 1929, sec. 2680. (c) Because the $ 3000 principal note, eight years overdue, was not "complete and regular on its face," because: It was eight years overdue; the last two extension agreements were not signed; the last (unsigned) extension notation showed that one of the makers was dead; the alleged extention interest notes were not signed by the two makers, as one of those makers was dead. (d) Because the evidence does not show that the bank acquired the paper "before it was overdue" and without notice of previous dishonor. The evidence shows the note was in fact overdue, and indeed the bank had notice of this fact; but notice is not necessary because overdue paper is not negotiable at all. (e) Because the evidence does not show that appellant bank had no notice of infirmity in the note or of defect in the title thereto of Tombridge. R. S. 1929, sec. 2680. The note referred to the deed of trust and charged the bank with notice that Tombridge was trustee under that deed, and had limited authority. 8 C. J., p. 515; Renshaw v. Wills, 38 Mo. 208; Sanford v. Van Pelt, 314 Mo. 175, 282 S.W. 1022. Having taken the paper after default, the bank took it subject to equities of respondents Duing. Dowling v. Bank, 267 S.W. 3.

OPINION

Clark, J.

Appeal by plaintiff from a decree in the circuit court of the City of St. Louis in favor of defendants, Herman Duing and Edna Duing. The suit is in equity to set aside a deed executed and delivered to said defendants by Raymond J. Tombridge, as trustee, under foreclosure of a deed of trust on real estate. Being an action in equity we hear the case de novo. However, this court will usually defer to the findings of the chancellor unless satisfied that they are against the weight of the evidence. [Fessler v. Fessler, 332 Mo. 655, 60 S.W.2d 17, and cases cited.]

Briefly, the evidence shows: that on September 25, 1922, E. Alice Toohey and Florence M. Toohey executed and delivered to Clarence R. Dowlin a promissory note for $ 3000, due in three years after its date, and six semi-annual interest notes for $ 90 each, and at the same time executed and delivered a deed of trust on certain real estate to secure said notes, Raymond J. Tombridge being named as trustee in the deed of trust. The principal note was extended from time to time and new interest notes executed, the last extension being for three years from September 25, 1931. It is conceded that the defendants, Duing, were the holders of the notes in due course on March 25, 1933, the principal note having been endorsed in blank by the payee. The deed of trust provided that failure to pay any interest note when due would cause the whole sum to become due. Debtors made default of the interest note falling due on March 25, 1933. Shortly before that the Duings had been informed that debtors would be unable to make further payments of either principal or interest and a few days before March 25 they placed the notes, deed of trust, insurance policies and certificate of title in the hands of the trustee, Tombridge, and instructed him to foreclose. He published the notice of sale in the St. Louis Daily Record, a daily newspaper published in said city, for the time specified in the deed of trust, the first publication being on April 1, 1933. Public sale was held on April 25, 1933, and Tombridge bid in the property for the Duings for the amount of the principal note. Tombridge executed and delivered to the Duings a trustee's deed, which they promptly recorded.

During 1933 and for many years prior thereto, Raymond J. Tombridge conducted the Tombridge Real Estate Agency, a corporation, of which he was the president and sole manager. This Agency was constantly indebted to the plaintiff bank in varying amounts on March 17, 1933, the...