Vandagrift v. Bates County Investment Co.

BROADDUS, P. J. This is an action the purpose of which is to follow a certain fund by tracing it into the assets held by the respondent assignee, and to secure a preference for the full payment of the plaintiff’s claim. The plaintiff is the receiver of the Bates National Bank, of Butler, Missouri, organized in September, 1902, and which continued in business until September 20, 1906, at which date it was declared insolvent and a receiver was appointed, who held the office until May 15, 1908, when the plaintiff was appointed as his successor. — 81 — The Bates County Investment Company was organized as a Missouri corporation in June, 1897, and continued in business until February, 1907, at which time it made an assignment for the benefit of creditors and defendant Chastain was appointed assignee. During the years of 1905 and of 1906 this company was' insolvent. In January, 1900, one Mary E. Holt acquired title by deed to two hundred and forty acres of land in Bates county. It appears, hoAvever, that she took the title in her own name for the benefit of the real purchaser, her son, E. A. Holt. On March 1st, 1900, Mary E. Holt and her husband executed to a trustee for the investment company tvvo deeds of trust, one for $1500, securing three notes for $500 each; and the other or second deed of trust for $1000, securing two notes for $500 each; both of which Avere duly recorded March 17, 1900. All these notes were signed by E. A. Holt, and recited on their faces that they were secured by the said deeds of trust. The consideration for the two deeds of trust and the notes mentioned was furnished by the Bates County Bank, of which the Bates National Bank was the successor. The transaction was according to the usual custom existing between the bank and the Investment Company when a real estate loan’ was made by the bank. In a short time thereafter, the three notes described in the first deed of trust were sold in the regular course of business to the Masonic Home of Missouri, which held them until paid in April, 1906.' The controversy arises as to the two notes secured by the second deed of trust, which are designated by numbers 193 and 194. The Investment Company kept deposits and a checking account in the bank and the two institutions were until January, 1906, closely related. The officers and most of the directors were the same and the place of business was the same. — 82 — The books of the bank show, that on November 6, 1900, the bank sold the two notes to the Investment Company, and the books of the latter evidence snch sale. These notes matured March 1, 1905, five years from date. On February 18, 1905, the land, which was security for the notes, was sold by the trustee, and the Investment Company at such sale became the purchaser and received a deed from the trustee therefor, but did not place it on record until April 14, 1906, more than a year later. ■ It is claimed that this sale was made in pursuance of an agreement between E. A. Holt, the beneficial owner of the land, and F. J. Tygard, the president of the Investment Company. The evidence in support of this claim is that of A. E. Holt and is as follows: “In 1904, I paid part of the interest, b.ut the crops were destroyed, and I had bad luck and I could hot do anything more, and in 1904, Captain Tygard came to me on the east side of the square and told me that he guessed they had better take the land back. I said all right, I had done all that I could do, and for them to take the land back, and told them that I would give them the deed for the land, that it would not be necessary to sell it. I told Captain that he had better take it back and cancel all that I owed there, as the property was well worth the whole amount, and Captain told me he would take it back for the mortgage, whatever the. mortgage called for, twenty-five hundred dollars, that he would take it back for that amount. He advertised the land, so I learned a short time after-wards. Having an appointment with the Government, I went on duty and I was not here when the land was sold. I supposed that the notes were all cancelled, as was the agreement.” The consideration mentioned in the deed of trust Avas $100. In November, 1905, the two notes were sold by the Investment Company to the Bank. Subsequently, on April 13, 1906, the company sold to one E. Anderson — 83 — tlie two hundred and forty acres of land for $3600, in cash. As stated the three notes were paid April 30, 1906, the accrued interest at that time $208.72, making a total then due and paid $1708.72. This left in the hands of the Investment Company a balance realized on sale of the land of $1891.28. About the time the arrangement was made between Tygard and Holt, that the Investment Company take the land and cancel the latter’s notes as testified to by the latter, he was given credit for the amount of the notes in the sum of $1000, the amount received by the former from the bank. Plaintiff introduced evidence for the purpose of showing that there had come into the hands of the defendant as assignee of the Investment Company collateral paper, obtained by use of the remainder of the fund derived from the sale of land after payment of the three first mortgage notes-held by the Masonic Home. The relationship between the two concerns was of the most intimate nature. Besides, the officers of the two being the same and their place of business being the same, they used the same safety vaults, the same letter books, and the bank kept detailed account of the Investment Company’s business. A resale by the Investment Company to the bank of the two notes after a foreclosure of the deed of trust, was a fraud upon the latter unless it had notice or knowledge of that fact. So far as the maker of the notes is concerned as a matter of law the bank was not an innocent purchaser as it did not become the owner until after maturity. But the sale and transfer by the Investment Company to the bank after maturity of the notes was equivalent to the execution of a bill at sight. [Kelley v. Staed, 136 Mo. 430; Light v. Kingsbury, 50 Mo. 331; Davis v. Francisco, 11 Mo. 1. c. 575.] And such transfer as a rule operates as an assignment of the security. [Barber v. Stroub, 111 Mo. App. 57 — 84 — Hagerman v. Sutton, 91 Mo. 519.] But while such is the rule the law is also, where the note has been paid by the maker at or after maturity, ■ it becomes extinguished. [Kelley v. Staed, supra; Daniels on Negotiable Instruments, vol. II, sec. 1238.] It followed, as a matter of course when the bank took the notes after maturity and when paid, they were defunct. Notwithstanding it may be conceded that the sale of the notes under the circumstances to the bank by the Investment Company was a fraud upon the former, the defendant assignee contends that the bank had notice of the fraud. That the officers of both corporations being the same the knowledge of each as individuals was the same. It is, however, a rule of law that the knowledge an officer of a corporation receives in his individual capacity is not to be attributed to the corporation. Such knowledge being in the breast of the officer and not imparted to the corporation or to the mangement of the corporation, were it not for the rule excluding evidence of such knowledge, might lead to great injustice and open the door to almost every species of fraud. But as here, where all the officers of a corporation have the same knowledge as to the existence of a certain fact, the reason for the rule no longer exists, because the information as to the fact is as complete as it can be imparted. However, we believe that under the circumstances, owing to the confidential relations existing between the two corporations the bank must have been acquainted with all the facts pertaining to the transaction. Practically the company was the agent of the bank in the transaction and the act of the one ought to be treated as the act of the other. For this reason we do not feel that we would be justified in holding that the plaintiff as receiver is entitled to any preference over the other creditors to any of the assets in the hands of tile assignee. We do not know upon what theory the trial — 85 — court disposed of the case, but we are satisfied that its conclusion was right. Judgment affirmed. All concur.