First National Bank v. Germania Safety Vault & Trust Co.

Opinion of the court by JUDGE PAYNTER — Affirming. Previous to August 4, 1891, the appellant, the First National Bank, loaned to the Masonic Savings Bank $29,586.59, partly secured by collateral. On that day the latter bank, through its president, Jacob Krieger, Sr., applied to Adolph Schmidt, president of the former bank, for a further loan of $3,000. This application was refused unless collateral was pledged. Shortly after the application for the loan, was refused, Krieger again applied for a loan of $3,000. He brought his check, as president, on the Masonic Savings Bank, for that amount, a'nd tendered as collateral five bonds of the Louisville & Jeffersonville Bridge Company, for $1,000 each. Schmidt, for the bank, agreed to mafe the loan, and [739] ¡'the bonds were accepted as collateral. Thereupon Krieger’s check was cashed, with the understanding it was to be held for some days, but before it was presented for payment the Masonic Savings Bank assigned for the benefit of its creditors. These words, “5 L. & J. Bridge bonds,” were indorsed on the face of the check by Krieger. At the time the Masonic Savings Bank assigned, it had not paid any part of its indebtedness to the First National Bank, so it owed- it $32,586.59. When the bonds were pledged, they had no commercial value. In the distribution, of’ the assets of the Masonic Savings Bank, the First National Bank received its proper share. In the fall of 1891, Jacob Krieger as&igfned his estate to the appellee for the benefit of his creditors. He became greatly involved on account of becoming security for the East End Improvement Company, which had built the Louisville & Jeffersonville Bridge; and it is claimed by the appellee that, to protect him in the liability thus assumed, the improvement company delivered to him 73 of the Louisville & Jeffersonville Bridge bonds, and that the five bonds delivered by Krieger to appellant, were part of that number. In May, 1895, by reason of an arrangement made with certain railroad companies, the bonds had become valuable. They were to be paid. The appellee desired to obtain the bridge bonds which had been delivered to Krieger by the improvement company, with a view of having them paid, so as to reimburse, as far as possible, the Krieger estate the sums which he had been compelled to pay for that company. The appellee, through its president, ascertained that there was due on the $3,000 check $2,987.52. So in April, 1895, it tendered the appellant that amount in payment of the balance due on the check, and demanded a surrender of the collateral (the five Louisville & Jeffersonville Bridge bonds), which it refused [740] to surrender, claiming that they also stood in pledge for the payment of the balance of its deb.t against the Masonic Savings Bank. Immediately after the tender the appellant sold the bonds to Mr. Armstrong, from whom the appellee obtained'them paying $6,462.50. This action was brought to recover the difference between $2,987.52 and the value of the bonds. It is claimed they were worth the amount paid Armstrong for their redemption. Issues of law and fact were involved infjhis case. To recover, it was essential for the appellee to sh'ow that the five bridge bonds belonged to Krieger, not to the Masonic Savings Bank; for, if they belonged to it, then Krieger’s trustee had no cause of action. To show they did, appellee introduced T. W. Spindle, president of the appellee, as a witness. It is urged that the court erred in permitting him to give certain testimony. As wé have concluded that the appellant can not now complain of the alleged error, we do not pass upon the question as to whether the court did err in the admission of the evidence. The reason for the conclusion will be hereinafter given. Counsel for appellant insists that tlie bonds were pledged to pay the $3,000, but, as they were not pledged to pay that debt only, the law appropriates their proceeds to the payment of the balance which is due the appellant by the •Masonic Savings Bank; and, further, it is claimed that there was an agreement at the time the bonds were pledged that they were to be a lien for the entire indebtedness of the bank. It is the contention of the appellee that they were pledged only for the $3,000 debt, and that when that was paid it was entitled to have them, surrendered to it. We do not understand that there is much disagreement between counsel as to the law with reference to the rights of bankers’ general liens on collaterals pledged to them. The ap [741] pellee does not base its claim upon the doctrine as to the general liens of bankers, but upon the right of a debtor to make a special pledge of collateral on a particular debt. The court below tried the case upon the theory that the appellee could recover if the' bonds had been pledged only for the $3,000 debt. The court tried the case upon the correct theory, for this court said in Bank v. Bangs’ Adm’r, 84 Ky., 139 (8 R., 16) (4 Am. St. Rep., 197), “It is equally well settled that when the deposit is made for a special purpose, with the knowledge and undertaking of the bank, that purpose must be carried out, or, when the pledge is specific, to secure a particular debt, the lien only applies to the debt intended to be secured by it.” In its instructions, the oourti recognized the doctrine of the Bangs case, for the burden was placed upon the appellee to.show that the collateral was to secure a particular debt. Instruction No. 1 reads as follows: “The court instructs the jury that if they believe from the evidence that in the transaction on the 4th day of August, 1891, when Jacob Krieger, president of the Masonic Savings Bank, borrowed from the defendant, the First National Bank, the sum of $3,000, for which he gave a check and indorsed on the same, '5 L. & J. Bridge bonds,’ the said memorandum and transaction was intended by the parties thereto to put in pledge filie sáid five bonds as collateral security for the payment of the said $3,000, only, then, the same being a specific pledge'for payment of the said sum, and the said bonds were not in lien beyond the amount of the said- $3,000 check and its interest, then they should find for the plaintiff the difference of the amount of the noté at the date of the tender, and the value of the bonds.” It is urged, and properly so, that the court should have left to the jury the disputed fact as to the ownership' of' the bonds. The rule that this should be done is so well set742 tied that it can not be a subject of debate-. If a court can properly do this, then the necessity for a jury is obviated. The court did not leave to the jury the question as to whether or not the bonds belonged to Krieger. The instructions assumed that they did belong to him. It is probable, from the circumstances which were properly proven, that the jury could not have found otherwise, had the question been submitted to it. The court committed the error because both appellant and appellee offered instructions in none of which the question of the ownership of the bonds was submitted to the jury. On the contrary, they assumed that Krieger was the owner of the bonds. The error committed ■was the result of the combined action of appellant and appellee. When the instructions offered by) the appellant wrere subject to the same fault as the ones given by the court, there should not be a reversal for such error. Insurance Co. v. Hughes’ Adm’r (110 Ky., 26) (22 R., 1549) (60 S. W., 850). To establish the ownership of the bonds in Krieger, appellee introduced Mr. Spindle, president of appellee (the appellee being the trustee of the Masonic Savings Bank as well as of Krieger) as a witness, wdio gave testimony, over (lie objection of the appellant, which tended to support that claim. It is insisted that certain parts of his evidence was incompetent to show that Krieger owned the bonds. If the instructions offered by both appellant and appellee assumed that Krieger did own them, and for that reason appellant is not 'entitled to a reversal, because the court committed, the same error in its instructions to the jury, it necessarily follows that there should not be a reversal for the admission of incompetent testimony which only tended to prove the fact assumed in the instructions. Whether or not there had been evidence introduced to establish the ownership of the bonds is immaterial. Evidence, [743] competent or incompetent, could not have done more than to establish the fact assumed in the instructions. We can not say that, at first blush, the veirdict appears to be flagrantly against the weight of the evidence. Besides two juries have found that the collateral was a special pledge for a particular debt. Under such circumstances, we do not feel authorized to reverse the case on the ground that the verdict is flagrantly against the weight of the evidence. The judgment is affirmed. Petition for rehearing by appellant overruled.