Rankin v. Bates County Investment Co. ( 1911 )

ROY, C.

This action was brought to declare a general warranty deed to be a mortgage.

In 1893, the defendant J. A. Patterson owned a large tract of land in Bates county, subject to incumbrances of $8000 to insurance companies, and some interest. On September 27 of that year, he, with his wife, defendant Cora A. Patterson, executed a deed of trust on the land to secure the payment of two notes and their renewals, one for $3000 and the other for $3800, both payable to the Bates County Bank, which was on September 4, 1902, reorganized as a national bank under the name “Bates National Bank.”

In June, 1897, the Bates County Investment Company was incorporated. The stockholders in the investment company and in the bank were practically the same. The capital of the investment company was furnished by the reduction of the capital stock of the bank to the extent of $50,000, and that much of the assets of the bank, including the two notes above mentioned, was turned over to the investment company as its capital stock. The investment company was organized as practically a subsidiary corporation to the bank, to handle items of business which the bank was not authorized under its charter to conduct.

It is agréed by the parties that the Bates National Bank, on its organization, succeeded to all the rights, assets and business of the Bates County Bank. F. J. Tygard was president of the Bates County Bank until it was succeeded by the Bates National Bank, of which he was president until it was placed in a receiver’s hands September 20, 1906. He was also president and general manager of the investment company from its organization until in January, 1906. The investment company and the bank did business in the same building, using the same vault, but keeping their papers in a general way separate in the vault.

After the execution of the deed of trust to the bank, judgments were rendered against J. A. Patterson, amounting to several thousand dollars, which became junior liens on the land. In order that a sale might be made of a portion of the land clear of the judgment liens, in 1897, while the investment company was still holding the notes for $6800, Patterson and Tygard entered into an arrangement by which Tygard bought the land at a foreclosure sale under the deed of trust for an expressed consideration of $100, but which was in fact not paid. Tygard then conveyed to Cora O. Patterson a part of the land, which she at once conveyed to other parties for $9976, which was applied in payment of the senior incumbrances to the insurance company.

On September 3, 1898, while the legal title to the remaining land was in Tygard, in order that the Pattersons should procure a loan of $3300 on it from the county to pay the investment company on account of Patterson’s indebtedness to it, Tygard conveyed the land to Cora O. Patterson, who borrowed the money, executing a mortgage to the county, and immediately, with her husband, executed a general warranty deed, dated October 3,1898, conveying the land to the investment company, for the expressed consideration of one dollar.

At the time of the organization of the investment company, Patterson was indebted to the bank, in addition to the $6800, to the amount of about $5000, and the amount of his indebtedness to the bank varied at times from that time on to the time of the appointment of the receiver of the bank, when, as plaintiff claims, it amounted to $5614.83. For about $3000 of this amount the bank held chattel mortgage security.

At the time of the trial Tygard was under guardianship as a person of unsound mind. Patterson testitled that the deed from his wife and himself to the investment company was made under an agreement between Tygard and himself that the deed was to be held as a mortgage to secure the bank on the notes then in the bank, and their renewals, and that the deed was made to the investment company because the bank could not carry real estate as security. The defendant objected to this testimony on the ground that Tygard was insane and Patterson was the other party to the agreement and could not testify. The court sustained the objection, but the plaintiff saved no exceptions to the ruling.

The following instrument was read in evidence and was admitted to be in the handwriting of F. J. Tygard:

“F. J. Tygard, Prest. J. B. Newberry, Yice-Prest.

“J. C. Clark,'Sec’y & Treas.

“Bates County Investment.Co.

“Capital $50,000.

“Abstracts of title to all lands in Bates county.

“Loans made on real estate and choice securities! for sale.

“Butler, Mo., Oct. 1, 1901.

“Whereas, Jno. A. Patterson is now indebted to the Bates County Bank in the sum of $6674.70, and whereas this Co. holds a Wt. deed from said Patterson for 550 acres of land at an estimated- value of $-, and whereas the interest of this Co. and of the Bates Co. Bk. are closely connected, it is therefore understood and agreed that this Co. holds the land above referred to in trust as follows: First, for the benefit of said Bates County Bank to secure indebtedness of said J. A- Patterson for amt. of $6674.70.

“Bates County Inv. Co.

“By F. J. Tygard, Pt.

“Copy of this delivered to Bates Co. Bank & held in Coll, pkgs.” ' •

And a copy of it was kept among the collateral securities of the bank from its date.

The plaintiff read in evidence a memorandum in a book kept among the archives of the bank, in the handwriting of Tygard, dated December 9, 1897, containing a list of the Patterson land with the following written under the list:

“Containing in all:

“All of above lands sold this day & bo.t by F. J. Tygard for bank for $100.

“Prior liens on above lands.

■ “Mch. 12/98 — I bot. at sheriff’s sale for the Bank for $25.00 all of the land described on p. 23 & also AY % Lot 23 S. 5, 39, 32..

“Oct. 7/98 — Patterson gave us trust deed on AY. i/2 of lot 9, N. AY. 5, 39, 32. E. % Lot 23, 6. 39, 32, for $169.”

On November 1, 1906, there was realized, on a sale of a portion of the land, a net amount of $3282.54, which, by agreement, was delivered to the Farmers’ Bank of Bates county, defendant, to await the result of this suit. Of that amount the sum of $2500 was loaned the investment company on a deed of trust, under an agreement of the parties to the suit that it should depend on the result of this suit; and the sum of $784.54 remains still with the Farmers’ Bank.

The decree found in favor of the investment company, allowing it a prior lien for $3854.15, the balance of the $6800 debt, against the funds in the Farmers’ Bank and against the unsold lands. Subject to the foregoing liens, the receiver of the Bates National Bank was decreed a lien on all the unsold land for the amount of $5614.83. There are other features of the decree which it is unnecessary to set out here.

OPINION.

It stands conceded that the investment company, on its organization, became the owner by assignment from the bank of the two notes for $3000 and $3800 respectively, secured by the Patterson deed of trust. It is not pretended that any consideration was ever paid by the bank to the investment company as an inducement for the surrender of its lien on the land in favor of the bank. When Tygard acquired the legal title under the foreclosure, he paid nothing, and, under the law, held it as surety for the $6800 notes due the investment company of which he was president. He had no right, as between the parties here concerned, to agree that the lien of the investment company should be subject to the bank’s claims. The conveyance by Tygard to Cora O. Patterson and from her to the investment company only strengthened that company’s position, as it then held the legal title in addition to its lien. Tygard had no power to agree, either orally or in writing, that the lien of the investment company should be made subordinate to the-bank’s claims. He could not give away the company’s property, or the securities for its choses in action.

In Brinkerhoff Zinc Co. v. Boyd, 192 Mo. l. c. 612, Judge Valliant, speaking on this subject, said: “It is sufficient to say that they wére trustees for the management and care of the property of the corporation, and whilst they had the right to deal with it in a business way, it did not belong to them in their own right and they could not give it away.” It was said by Judge Litrton in Germania Safety-Vault & Trust Co. v. Boynton, 71 Fed. 797: “The general presumption in favor of such officers of a corporation might support a disposition of the securities for any apparent corporate purpose, but that presumption does not extend so far as to justify one who accepts such securities in payment of, or as security for, the private obligation of the officer. ’ ’

This proposition is so elementary that we deem it unnecessary to cite further authorities. There is no pretense that Tygard had any authority by resolution of the board of directors to thus surrender the company’s rights. This conclusion determines all the other questions involved. The judgment is affirmed.

Bond, G. (sitting in Division Two when this case was argued), concurs.