Swope v. Leffingwell

72 Mo. 348

• Court: Supreme Court of Missouri
• Decided: October 15, 1880
• Status: Published

Opinions

Henry, J.

On the 25th day of May, 1872, Logan 0. Swope was the owner of block 24 of Peter Lin dell’s second addition to the city of St. Louis, incumbered by a deed of trust, by which said block was conveyed to Leffingwell to secure three promissory notes executed by said Swope to Robert C. Gordon, in the aggregate for the sum of $35,-839.95. Each of said notes was dated December 26th, 1871; one for $12,586.65, payable December 26th, 1872, one for $11,946.65, payable■ December 26th, 1873, and the other for $11,336.65, payable December 26th, 1874. On said 25th day of May, 1872, Swope sold and conveyed the said block to Henry H. Honoré for $80,000, subject to said trust deed to Leffingwell, and, by another agreement in writing of that date, Honoré obligated himself to Swope to pay off said notes secured by the deed of trust from Swope to Leffingwell. Honoré on the 27th day of May, 1872, executed a deed of trust to Ed. B. Sherzer, conveying said block to him in trust to secure two notes executed by said Honoré to Andrew McKinley, one for $10,040, the other for $4,000, dated 27th day of May, 1872, and payable three years after their date, and one for $3,000 to Logan O. Swope of same date, and payable three years after its date. This deed of trust from Honoré was, by its terms, subject to two prior deeds of trust made by Honoré, one to Edwin Sherzer, dated May 25th, 1872, to secure a note of that date for $18,500, payable to Swope, three years after its date ; the other deed of same date to same trustee, to secure a note of that date for $11,500, payable to Andrew McKinley, one year after its date, who subsequently assigned it to C. T. Bowen.

The notes of Swope to Gordon, by assignment, became the property of the St. Louis Life Insurance Companj-. When the first two became due the holder caused the property'to be advertised for sale under the deed of trust, but Honoré interposed, and, by paying expenses and interest, induced the holder to suspend proceedings, that he might get some one to purchase the notes who would not force a sale of the property. Honoré then opened negotiations with John W. Doane, of Chicago, who was acting as agent of the Atlas National Bank, of Boston, in-purchasing commercial and other paper. Doane at first declined to purchase the Swope notes, because he had instructions from the Atlas Bank to buy no paper running more than four months. It was finally arranged between them that Honoré was to get C. T. Bowen to execute his note for the aggregate amount of the Swope notes, payable three months after its date, for discount by the Atlas National Bank, and the Swope notes to be held by Doane as collateral security for its payment. This note of Bowen was dated in July, and fell due October 19th, 1874, before the maturity of the last of the three Swope notes. A. M. Britton; vice-president of the St. Louis Life Insurance Company, agreed with Honoré that the Swope notes and the deed of trust should be sent to Hew York with a view to the consummation of the arrangement with Doane, and through the Hational Bank of the State of Missouri the notes and deed of trust, with a draft on Honoré for the aggregate of the three notes, were sent to the Bank of Commerce, New York. The notes were indorsed •“ without recourse in law or equity,W. J. Lewis, President,” as agreed by Britton and Honoré, and ordered by the executive committee of the board of directors of the life insurance company. Doane proceeded to New York with Bowen’s' note, having previously telegraphed the Atlas Bank to honor his draft for the aggregate amount of the notes, but on arriving in New York found that the Bank of Commerce had returned the notes, deed of trust and draft to the bank at St. Louis, and informed Honoré of the fact, and subsequently, by request of Doane and Honoré, they were sént to the Atlas Bank, which remitted the amount to the bank at St. Louis. On the 25th day of June, 1875, Logan 0. Swope caused the block in controversy to be sold under Honoré’s deed of trust to Sherzer, to secure his note for part of the purchase money, and Swope purchased the property at the price of $22,000, and received a deed from Sherzer conveying the property to him. There were several renewals of the Bowen note to the Atlas'Bank. Of the renewal notes, Bowen was maker and Honoré payee and indorser. After the last renewal note became due, the Atlas Bank took steps to have the property sold under the deed of trust, for the payment of the Bowen note, of which it had become the purchaser at a sale made by Doane, who held them as collaterals to secure the Bowen note with power to sell, etc.

This suit was instituted to enjoin and restrain said bank from proceeding with the sale of the block of land in controversy, alleging that the notes had all been paid. Swope obtained a decree in his favor in the circuit court, which, on appeal to the co.urt of appeals, was affirmed, and defendants have prosecuted their appeal to this court.

The only question for consideration is, was the transaction between Honoré and Doane and the bank, a payment of the Swope notes? That it was the intention of Doane and Honoré that the former should purchase, and not pay off the notes, the evidence leaves no doubt. If Doane intended to pay off the notes, why his precaution to ascertain whether they were or not a first lien on the property ? and why so solicitous for the opinion of Mr. Albert Todd in regard to the title to the block? All the circumstances show that it was his purpose, as agent, to make an investment for the Atlas Bank, and his positive testimony is, that he purchased the notes. That this was also what was contemplated by Honoré, is shown by his letters to the St. Louis Life Insurance Company, and his conversations with its vice-president, and the final agreement that they should be indorsed by the company, without recourse, and sent to New York with a view to the consummation of the arrangement made by Honoré with Doane. The same evidence conclusively shows that this was the understanding of the insurance company, the owner of the notes. If sent to New York for collection, why did they take the precaution to indorse them without recourse? Why indorse them at all? or, if indorsed, why not for collection, if payment of notes was expected ? It had sent the notes and the draft on Honoré with directions to deliver them up to the payor of the draft, whether Honoré, or another ; and there was no necessity, if nothing but the payment of ^the notes was in view, for any indorsement of the notes whatever, even for collection. Bat Mr. Britton’s testimony, uncontradicted, is positive, that the notes were sent thus indorsed, first to New York and then to the Atlas Bank at Boston, under the agreement made between Honoré and the insurance company, through Britton and its executive board. This being so, what is there.to make the transaction a payment, instead of a transfer and sale, of the notes ?

It is contended that the draft for the aggregate amount of the notes was drawn on Honoré, who was bound for their payment, and, therefore, the payment of the draft was a payment of the notes. The cashier of the Atlas Bank testifies that the draft was not paid, but that an amount corresponding to the amount of the draft was paid, which was the sum total of the notes. He is not contradicted, although the transaction upon its face bears a different construction. This, however, is well explained by the witness, briefly, in answer to the following interrogatory : “ Don’t you think that the cashier of the St. Louis Bank, or any other third party, on reading your letter, would interpret the words ‘ accept for larger amount,’to mean that you had paid the Honoré draft ? ” Answer. “Hnowing nothing about other transactions, I think he would.”

But suppose it is treated as a payment of the Honoré draft, does that, in view of all the facts, constitute payment of the notes? It is contended that Doane and the Atlas Ba nk had knowledge that, as betwixt him and Swope, the Swope notes were Honoré’s debt, and he was primarily liable to pay it, and that, therefore, the payment of the Honoré draft was a payment of the notes. Conceding, for the argument, that from these facts, that would be a legal conclusion, the facts are not established by the evidence. Doane testifies, that all he knew of that matter was, that Honoré’s conveyance was taken subject to the encumbrance of the Swope notes. No witness testifies to the contrary. The conveyance, it is true, was subject to the encumbrance, and this was expressed in the deed, but that did not create a personal obligation on Honoré to pay those notes. This is well settled in this State, and we know of no text book or adjudged ease, that holds otherwise. Heim, v. Vogel, 69 Mo. 529; Hoy v. Bramhall, 19 N. J. Eq. 75.

The court of appeals, in its opinion, fell into an error in stating that the knowledge of his (Honoré’s) position, with reference to these notes, was brought home to the bank, when with the deed of trust, containing the assumption of payment by Honoré of the Swope notes and the Honoré draft before him, the cashier sat down to fill up the blank in the Bowen-Honoré note with the description of the collaterals. The only deed then before the cashier was the deed of trust from Swope to Leffingwell, to secure the notes in question, and it contained no reference whatever to Ilonoré’s obligation to pay them, because, at its date, there had been no transaction between Swope and Honoré. The deed from Swope to Honoré was not before him, nor had he or Doane, or any officer of the bank, ever seen it, and if they had, it contained, as we have seen, no stipulation binding Honoré, personally, to pay the SwopeGordon notes, so that the only information Doane, or the bank had, was that communicated to Doane by Honoré, that his deed was subject to the encumbrance.

Conceding then that the Honoré draft was paid, as is contended, does that, under the circumstances, amount to payment of the notes ? It was the plan adopted by the insurance company and Honoré to effect a sale of the notes; Honoré did not raise the money to pay it. His name was not on the first Bowen note. This is the positive testimony of the cashier of the bank, and the facts, that the proceeds of the discount of that note were placed to the credit of Doane on the books of the bank, and the name of Honoré nowhere occurred on the books are strongly corroborative of his statement. It was a clumsy mode of accomplishing a very simple result; but the form is not to overshadow the substance. It was not a payment of the notes by Honoré, or any one for him, nor did either the holder of the notes, or Honoré, or Doane, or the bank, or any one connected with the transaction intend any such thing, or suppose that it had been done. Honoré’s name in the draft is of no more significance, in the light thrown upon the transaction by all the antecedent circumstances, than if it had been drawn on John Doe or Richard Roe.

Considerable stress is laid upon letters written by Honoré to Britton, in one of which, July 21st 1874, he states that he “had made arrangements with a party to pay the Swope notes;” in another, July 29th, 1874, that he was surprised and annoyed by receipt of a telegram “ saying these Swope notes had not been paid;” but in the letter of the 2l8t day of July he also says: “I had made arrangements with a party who left here for New York Sunday to pay the Swope notes, but have just received a telegram from him that the papers had all been returned to St. Louis. I have just telegraphed you as follows: ‘Papers not in New York. Party who is to pay them gone to Boston, and wants them sent to Atlas National Bank, Boston. Please do so. Answer.’” Can there be any doubt that the reference in this letter is to Doane and the arrangement between them, and that Mr. Britton well understood to what it referred? In pursuance of the understanding betwixt him and Honoré, and in compliance with the above telegram, he sent the papers to the Atlas Bank with the notes indorsed as we have seen. In Honoré’s letter of the 29th day of July, he wrote : “ Nearly two weeks ago I made arrangements with Mr. J. W. Doane, of this city, to take up the notes, but, when he arrived in New York, found that they had been returned to St. Louis, and sent me the following telegram: ‘H. H. Honoré, etc. Papers have all been returned to St. Louis. Have them forwarded to Atlas National Bank, Boston, and I will carry out the contract.’/’ Again : “ Mr. J. W. Doane is one of our largest grocers and a man of means and reliability, and he is also one of the largest buyers of securities we have, and his failure to take up the notes completely mystifies me. I still feel confident that Doane will take the paper.” Evidently when he speaks of the “ payment of the notes,” or “taking them up,” he does not mean payment of the notes, but payment of the amount to the insurance company under the arrangement with Doane for the sale of the notes.

It is alleged in the petition that Bowen was jointly concerned with Honoré in the purchase of the block, and as between them, was equally bound to pay the Swope notes, and for this reason, it is contended, he executed his note for discount at the Atlas Bank. There is not a particle of testimony to that effect; but on the contrary, Bowen testifies positively, that he had no interest whatever in that purchase, and that he executed that note in order to prevent a sale of the premises under the Swope deed of trust, to the sacrifice of his lien for the note assigned to him by McKinley. We think the conclusion, from all the facts of this case, irresistible, that it was not in the contemplation of Honoré, or Doane, or Bowen, or the bank, or the insurance company, the holder, that the notes were paid, or to be paid, by the transaction betwixt them.

The authorities are all to the effect that “if money be paid, not by one who is a party to a judgment and liable upon it, but by some third person, the judgment will be extinguished or not according to the intention of the party paying it.” This was the language of Selden, J., in Harbeck v. Vanderbilt, 20 N. Y. 398. In that case there was a judgment against Jacob Vanderbilt, and Harbeck and five others. An execution having been issued to the sheriff of Richmond county, in which Jacob Vanderbilt had abundant property to satisfy it, he, through his attorney, paid to plaintiffs in the execution his aliquot share, one-seventh, and for the remainder, delivered to the plaintiff in the judgment his promissory note, payable four months after date, to the order of and indorsed by Cornelius Vanderbilt, and simultaneously the attorney took to himself an assignment of the judgment to be held by him as an indemnity to Cornelius Vanderbilt against his liability as indorser of the note, and the execution was then withdrawn. Before the note became due Cornelius Vanderbilt had another execution issued to the sheriff of New York, who was proceeding to enforce its collection from the property of other of the defendants, who instituted suit to enjoin and restrain the sheriff, etc., alleging that the judgment had been satisfied. The trial court so held, but the court of appeals reversed the judgment. Opinions were delivered by Gray and Selden, JJ. The former observed that: “ Every judgment purchased and paid for, is so far as the plaintiffs in it are concerned, paid; but if at the time of payment an assignment is made by the plaintiffs to a third party for the benefit of one with whose money or credit the payment is made, the judgment, although in one sense paid, is not satisfied, but remains subsisting and valid, until it has answered the purpose for which it was assigned.” Jacob Vanderbilt was personally bound for the full amount of the judgment. This was known to the plaintiffs who obtained it. He paid one-seventh of the amount in cash, and gave his note payable to the order of Cornelius Vanderbilt for the balance, which was accepted by the plaintiffs, and the execution was withdrawn, and the judgment assigned to the attorney for the benefit of C. Vanderbilt. So far as the plaintiff's in that judgment were concerned, it was paid by Jacob Vanderbilt, who was primarily liable as maker of the note, and a defendant in the execution. Suppose, instead, the arrangement had been that the plaintiffs in that judgment should draw on Jacob for the amount, to be paid by Cornelius Vanderbilt, who was thus, for his security, to have an assignment of the judgment, would not this transaction have been the same in substance? Instead of paying a draft on Jacob, he indorsed a note executed by him, and in that way became liable to pay the amount of that judgment. In equity, form yields to substance. The shadow follows the body, not body the shadow, and if equity would, on the facts of this case, permit Logan 0. Swope to purchase this property, worth nearly $100,000 for less than one-forth of its value, having previously received at least $10,000 on the sale to Honoré, and hold it discharged of the lien in question, it would work an injustice seldom, if ever, resulting from an application of the indexible rules of the common law.

The case of White v. Knapp, 8 Paige Ch. 175, we regard as directly in point. Hinkley had executed a mortgage to a bank on property, which he afterward conveyed to Knapp, to whom he obliged himself to pay the incumbrance. Knapp subsequently executed a mortgage to White of the same property for $1,413.27. In June, 1836, the bank demanded of Hinkley the balance due on his mortgage, and not having the money, he induced the son of the defendant, Thomas, to let him have $380 of his father’s money to pay off said mortgage, promising that Thomas’ father should have the same security for the money that the bank then had, which arrangement the father, when informed of it, sanctioned. Hinkley, the debtor, then went to the bank with the money thus obtained, together with a further sum of his own, and took from the bank an assignment of the bond and mortgage to Thomas, to whom they were afterward delivered. The Chancellor,Walworth, said: “ Upon the facts presented in this case, I should have no doubt that the defendant, Thomas, was entitled to hold the bond and mortgage as security for the money thus advanced by his son, with the’ interest thereon, even if the subsequent mortgage by Knapp to the complainant had been given for money advanced at the time and not merely to secure an antecedent debt.”

Two respectable courts having decided this cause against the defendants, we have given it the consideration, which that fact, and the amount and principle involved, demanded, and been forced by the evidence, to the conclusion that the Atlas Bank has, both in law and equity, a right to the lien it claims upon the property in question, and that the judgment should be reversed and the bill dismissed, and, all concurring, it is so adjudged and ordered.