Union National Bank v. Lyons

IN BANC. PER CURIAM. This cause was transferred to Court in Banc upon the dissent of Graves, J., and upon reargument and after due consideration the opinion of Woodson, J., in division is adopted as the opinion of the court. All concur except Graves, J., who dissents in ■ a separate opinion. IN DIVISION ONE. WOODSON, J. This suit was instituted by plaintiff in the circuit court of Lafayette county, against the defendant, to recover the sum of $10,000' loaned — 546 — by it to defendant. The trial resulted in a verdict and judgment for plaintiff for the sum of $10,560, principal and interest. The circuit court having refused a new trial, the defendant duly appealed the cause to this court. Formal matters omitted, the petition on which the cause was tried was as follows: “For its amended petition herein, the above-named plaintiff alleges that it is now, and at all the dates hereinafter mentioned was, a national banking corporation, organized and existing under and by virtue of the laws of the United' States, and engaged in the general banking business in Kansas City, Missouri. That said Middleton Bank is now and at all the times hereinafter mentioned was a banking corporation organized and existing under and by virtue of the laws of the State of Missouri, and until the appointment of the receiver as hereinafter set forth, engaged in a general banking business, at Waverly, Missouri. That on the 6th day of May, 1905, defendant, Charles Lyons, Was by the circuit court of Lafayette county duly appointed receiver of and for said Middleton Bank to take possession of its property and assets and for the purpose of winding up the business thereof, and is now in possession of said property and assets as such receiver for that purpose. That by order of said circuit court of Lafayette county made on the 22d day of June, 1905, this plaintiff was given permission to institute and prosecute this suit. “Plaintiff further states that on the 7th day of May, 1904, said Middleton Bank borrowed of plaintiff ten thousand dollars, which sum was loaned by plaintiff to said Middleton Bank, and thereupon said Middleton Bank executed and delivered to plaintiff its promissory note, dated May 7, 1904, whereby it promised, for value received, to pay to plaintiff or order said sum of ten thousand dollars, one hundred and twenty days after date, with interest thereon from — 547 — maturity at the rate of eight per cent per annum. That upon the maturity of said note, said Middleton Bank, in renewal thereof, executed and delivered to plaintiff another promissory note, dated September 6, 1904, whereby it promised, for value received, to pay to plaintiff or order, said sum of ten thousand dollars, one hundred and twenty days after date, with interest thereon from maturity at the rate of eight per cent' per annum-, and thereupon plaintiff cancelled and delivered up to said Middleton Bank the note first above-mentioned. That upon the maturity of said note, dated September 6, 1904, said Middleton Bank, in renewal thereof, executed and delivered to plaintiff another promissory note, dated January. 9, 1905, whereby it promised, for value received, to pay to plaintiff or order said sum of ten thousand dollars, one hundred and twenty days after date, with interest thereon from maturity at the rate of eight per cent per annum, a duly verified copy of which last-mentioned note is hereto attached and herewith filed, marked ‘Exhibit A.’ Plaintiff further says that no part of said sum of ten thousand dollars so borrowed as aforesaid, and no part of said note, has ever been paid, and by reason of the premises, said Middleton Bank now owes and stands indebted to plaintiff in the sum of ten thousand dollars, together with interest thereon from May 12, 1905, at the rate of eight per cent per annum,; for which sum and for costs plaintiff prays judgment. ’ ’ The answer was as follows: “The defendant for answer to the amended petition of plaintiff admits that plaintiff was and is a national banking corporation under the laws of the United States and engaged in banking at Kansas City, Missouri. Admits that the Middleton Bank was, at the times mentioned, a banking organization organized under and by virtue of the laws of the State of Missouri, and until the appointment of the receiver was engaged in the general banking business at Waverly, — 548 — Missouri; admits that on May 6, 1905, defendant, Charles Lyons, was duly appointed receiver for said Middleton Bank by the circuit court of Lafayette county, Missouri, and is now in the possession of the property and assets of said bank as such receiver; admits that by order of' said circuit court of Lafayette county, Missouri, made on the 22d of June, 1905, plaintiff was given permission to institute and prosecute this suit, and denies each and every other allegation of said amended petition. “(Defendant further alleges that said Middleton Bank by its board of directors, or otherwise, did not at a regular meeting of said board of directors, by a written record first made, authorize any of its officers to borrow the said1 sum of ten thousand dollars or any other amount on behalf of said bank, or authorize the execution of any note or obligation therefor, nor did said bank by its said board of directors, at a regular meeting, by a written record or otherwise, authorize any renewal of said alleged note) and now having fully answered asks to be hence discharged with his costs.” Plaintiff filed a motion to strike out the last paragraph of the answer, which alleged that the board of directors of the Middleton Bank did not authorize its officers to borrow the money sued for, or to execute the note mentioned in the pleadings. This motion was by the court sustained, and defendant duly excepted. The facts are few and practically undisputed, and are as follows: E. H. Lewis was cashier of the Middleton Bank (which will hereafter be called the defendant or appellant) from 1899 to the time of its failure. Lewis, as such, borrowed the $10,000' in question, signed the note given therefor and all of the renewals thereof, including the last. The defendant had been the correspondent of plaintiff from the year 1893 to the date of its failure, — 549 — and kept a running account with the latter during said time, making deposits and drawing drafts against them, according to the usual course of business. At the time of the loan, Lewis wrote plaintiff a letter inclosing the note and collaterals, and requested that the proceeds of the note, less the discount, be placed to the credit of defendant, which was done, and the latter was duly notified thereof. Defendant drew this money from plaintiff by drafts in the usual course-of business; and no part of the $10,000 has ever beent paid. The note, a copy of which was filed with the petition, was admitted in evidence over the objection of defendant. At the close of plaintiff’s case, defendant asked a demurrer to the evidence, which was by the court refused, and defendant duly excepted. Defendant introduced no testimony. The only instruction given by the court was as to the measure of recovery, if the verdict should be for the plaintiff. The jury were told that if they should find the issues for the plaintiff, they should allow it such sum as they might believe from the evidence was loaned by the plaintiff, if any, to the Middleton Bank, together with interest from the date of the institution of the suit to the time of the trial, at the rate of six per cent per annum. The jury returned a verdict for the plaintiff for $10,560', and a judgment was rendered by the court for that amount against the defendant as receiver, and to be paid out of the assets of the Middleton Bank in his hands as such receiver, and for the costs. Defendant, in due time, filed a motion for a new trial and in arrest of judgment, which, being overruled, he has brought the ease to this court by appeal, as before,stated. — 550 — OPINION. I. The character of this suit is the first proposition presented for determination. Respondent contends that it is a suit in assumpsit to recover money loaned by it to the appellant; while, upon the other hand, appellant insists that it is a suit on the note attached to the petition. There is' much room for' argument in favor of each of those contentions; but when the entire petition is read and its meaning gathered from its four corners, It is apparent the pleader attempted to do more than simply declare upon the note. If the pleader had intended to declare upon the note, then the following allegations of the petition would have been superfluous and entirely unnecessary, to-wit: the history of the various renewals of the note originally executed; the allegation that the defendant borrowed of plaintiff ten thousand dollars on May 7, 1904; that no part of said sum of ten thousand dollars so borrowed had ever been paid; and that by reason of the premises the defendant now owes and stands indebted to the plaintiff in the sum of ten thousand dollars; but the pleader would have stated in conventional form that on January 9, 1905, the defendant, by its promissory note, for value received, promised to pay plaintiff the sum of ten thousand dollars with interest, etc., one hundred and twenty days after date; that said note' was past due and unpaid, and prayed judgment, etc. But, as before stated, when we read the entire petition we are convinced that the pleader had in mind and was trying to plead the facts of the transaction in detail just as they occurred, and trusted to the courts to name the form of action to which it belongs. By a critical analysis of the allegations of the petition it will be seen that it is dual in character, that is, it states two perfect causes of action in one count — one upon the note and the other in assumpsit — 551 — for the money loaned. If appellant had seen proper, it eonld have filed its motion asking the conrt to compel respondent to elect npon which of the two canses of action stated it would go to trial. [White v. Railroad, 202 Mo. l. c. 561; O’Brien v. Railroad, 212 Mo. l. c. 69.] But having neglected to file such a motion, appellant is in no position now to complain of the fact that respondent of its own motion elected to stand upon the count in assumpsit. The case was tried upon the latter theory, and appellant cannot raise that objection for the first time in this court. If such practice should be tolerated,' and had'respondent elected to stand upon the note, then appellant could for the same reason have raised the same objection to that election that it now urges against the present election. Clearly, no court would be justified in permitting such practice to prevail. We must, therefore, sustain respondent’s contention, and hold this is a suit in assumpsit for money loaned. II. This brings us to the action of the court in striking out that part of the answer which alleged that the board of directors of appellant bank did not authorize Lewis, its cashier, to borrow the money sued for, or to execute the note given therefor. If either of those allegations constituted a defense to the suit, then appellant is not injured by the action of the court in striking out that part of the answer, for the reason that the same facts could have been proven under the general denial filed in the cause. It is self-evident that if the cashier had no power to borrow the money or to execute the note for appellant, then clearly the bank never borrowed the money or executed the note through the cashier. And the charge in the petition that appellant did borrow the money and execute the note was squarely put in issue by the general denial; — 552 — and that being true, the court properly sustained the motion to strike out the part of the answer before mentioned. III. Having in the previous paragraph hereof disposed only of the question of pleading, we now come to the consideration of the merits of that part of the answer which was stricken out by the court, but which we held could be proven under the general denial. That part of the answer is as follows: “Defendant further alleges that said Middleton Bank by its board of directors, or otherwise, did not at a regular meeting of said board of directors, by a written record first made, authorize any of its officers to borrow the said sum of ten thousand dollars, or any other amount, on behalf of said bank, or authorize the execution of any note or obligation therefor; nor did said bank, by its board of directors at a regular meeting, by a written record or otherwise, authorize any renewal of said alleged note, and now having fully answered, ’ ’ etc. Counsel for appellant insists that under sections 1281 and 1294, Revised Statutes 1899, the cashier of defendant had no authority to borrow the money sued for, or to execute the note mentioned in the pleadings, for the reason that he was not first authorized by written authority to so do by the board of directors. "We will consider those two sections of the statute separately, and in the inverse order in which they are stated. Section 1294, in so far as is material to the question in hand, reads as follows: ‘1 The cashier or any other employee shall have no power to indorse, sell, pledge or hypothecate any notes, bonds or other obligations received by said corporation for money loaned, until such power and authority shall have been given such cashier or employee by its board of directors, in a regular meeting of the board, a written record of which proceeding shall first have been made.” — 553 — There is no pretense that snch written authority was given to the cashier to borrow the ten thousand dollars in suit, or to execute the note in question. While the prohibition enjoined against the cashier to do the things mentioned in the statute is not absolute, yet his power to do those things is conditioned upon the board’s written authority first spread of record empowering him to do so; and as his power to do those things depends upon a condition precedent, which is prescribed by a public statute, all the world must take notice of that limitation of his power and authority and determine at their own peril whether or not the condition has been complied with and the authority granted. If not, then his acts are unauthorized, null and void and not binding upon the bank. That being true, it brings us to the question, did that section of the statute prohibit the cashier of defendant bank from borrowing the money and executing the note therefor in question? We think not, for the reason that the statute only prohibits the cashier from indorsing, selling, pledging 'or hypothecating any notes, bonds or other obligations received by said bank for money loaned until he is first authorized by the board to do so, etc. The borrowing of the ten thousand dollars in question and the execution of the note therefor by Mr. Lewis, the cashier of the Middleton Bank, was neither the indorsement, sale, pledge or hypothecation of note, bond or other obligation received by said bank for money loaned, etc. The clear object of the statute was to prevent any of the bank’s officers from selling or otherwise disposing of the bank’s notes and securities without authority first being granted by the board of directors, and not for the purpose of preventing its officers from borrowing money in the usual course of business. But counsel for appellant contend that both the Kansas City and St. Louis Courts of Appeals have placed a different construction upon that section of — 554 — the statute in the eases of Hume v. Eagon, 83 Mo. App. 576, and Vansandt v. Hobbs, 84 Mo. App. 628. In our judgment that is a misconception of those cases; in each the cashier had sold or disposed of a note owned and held by the bank, and did not borrow money within the meaning of that word, as was done in the case at bar. But there is another feature of this case to which those cases would have applied if the suit had been brought on that phase of the case, and that is this— in addition to borrowing the ten thousand dollars and executing the note in question therefor, the cashier went further and without written authority, first had and obtained from the board of directors, hypothecated a note for the sum of $12,500, owned by the Middleton Bank to the respondent, as collateral security for the $10,000 borrowed from it on May 7, 1904. That hypothecation having been made by the cashier without such authority from the board of directors was clearly in excess of his authority, and was, consequently, null and void. That was the question which was presented to the Kansas City and St. Louis Courts of Appeals in the cases of Hume v. Eagon and Vansandt v. Hobbs, supra. • But conceding the cashier in the case at bar had no authority to hypothecate the $12,500 note to respondent, as collateral security for - the $10',000 borrowed of respondent, yet that would not, in the absence of an express statute to the contrary, cut deeper and nullify the contract of loan. It would only render the collateral unavailing. [Vette v. Geist, 155 Mo. 27; Kelerher v. Henderson, 203 Mo. l. c. 516.] We must, therefore, decide the first contention of appellant against it. But the second presents a much more difficult legal proposition for solution. That is, counsel for appellant contends that under said section 1281 the cashier of the defendant bank had no power to borrow the money in question except with the consent of the board of directors. — 555 — So much, of that section as is material to this inquiry reads as follows: “The hoard of directors of each and every bank organized under this article shall meet at least once per month and pass, upon the business of the bank back to the previous meeting of. the board, and shall keep a written record of its approval or disapproval of each and every loan, and at each monthly meeting the records shall show "the aggregate of the then existing indebtedness and liability of each of the directors and officers to the bank, and no bills payable shall be made and no bills shall be rediscounted by the bank except with the consent of the board of directors.” The language of that section is plain and unambiguous. It says, no bills payable shall be made, and no bills shall be rediscounted by the bank without the consent of the board of directors. While there is some evidence contained in this record which points to the consent of the board to the execution of the bill or note in question, yet it was in our judgment insufficient to warrant the jury or court in finding that such consent was in fact given; and we must, therefore, hold that no such assent was given. This holding brings us to the consideration of the most important legal proposition involved in this litigation. It is the contention of counsel for respondent that it is entitled to a recovery in this case even though it be conceded that Lewis, the cashier of appellant, had no authority to execute the note in question. ‘This contention is based upon the fact that there is nothing contained in that section of the statute which prevented the Middleton Bank from borrowing the $10,000 in question, but it simply prohibited the bank from executing the note in question therefor. The power of a bank to borrow money without executing therefor some written form of obligation is unquestionable. [Vanatta v. State Bank of Ohio, 9 Ohio St. l. c. 34.] The mere fact the cashier of — 556 — appellant had no authority to execute the note for the $10,000 borrowed does not render the entire contract illegal and void, and thereby exempt it from repaying the money to the respondent. This suit is not bottomed upon the note, and respondent’s success in this case does not depend upon the validity of that instrument. It is sufficient that appellant had the power to borrow the money and that it did in fact borrow it. There was sufficient vitality and force in this transaction to enable appellant to receive the $10,000 from respondent, and now after enjoying the benefits thereof it attempts to repudiate the entire transaction. In so far as this theory of the case is concerned, it is wholly immaterial that appellant’s promise was contained in a note which was not executed according to law. If it repudiates the note for the reason that the board of directors had not authorized its execution, then this court would sanction rank injustice to hold that payment of that money need not be made at all. Such is not the law. The bank was not exempt from the comm oh obligation to do justice which binds individuals. Such obligations rest upon all persons whether natural or artificial. If the bank obtained the money and by mistake or without authority of law executed therefor an invalid note, then it was its duty under this general obligation to do justice, to refund it. Under those conditions an implied obligation arose on the part of the appellant to repay the money so obtained. [Sparks v. Jasper County, 213 Mo. l. c. 240.] •A similar question came before the Supreme Court of the United States in the case of Hitchcock v. Galveston, 96 U. S. 341. In that case the city council of Galveston had the authority under the charter to cause sidewalks in the city to be constructed, and in pursuance thereof passed an ordinance ordering the work done, and provided further that the same should be paid for in bonds of the city, which were — 557 — ■also ordered to be issued for that purpose. The contract for doing the work was let to Hitchcock and others, who proceeded to fulfill their engagement. After partially executing the contract the city council declared the contract null and void, and they were forced by the city to abandon the work. The contractors then brought suit to recover the damages sustained by reason of the breach of the contract by the city. The bonds were held to be invalid because their issue was held to be transgressive of the power of the city. The defendant demurred to the petition, which was sustained by the circuit court., and plaintiff sued out a writ of error. In the discussion of this question, on pages 350 and 351, Mr. Justice Strong, in speaking for the court, used the following language: “In the view which we shall take of the present case, it is, perhaps, not necessary to inquire whether those cases justify the court’s conclusion; for, if it were conceded that the city had no lawful authority to issue the bonds, described in the ordinance and mentioned in the contract, it does not follow that the contract was wholly illegal and void, or that the plaintiffs have no rights under it. They are not suing upon the bonds, and it is not necessary to their success that they should assert the validity'of those instruments. It is enough for them that the city council have power to enter into a contract for the improvement of the sidewalks; that such a contract was made with, them; that under it they have proceeded to furnish materials and do work, as well as to assume liabilities; that the city has received and now enjoys the benefit of what they have done and furnished; and for these things the city promised to pay; and that after having received the benefit of the contract the city has broken it. It matters not that the promise was to pay in a manner not authorized by law. If payments cannot be made in bonds because their issue is ultra vires, it would be — 558 — sanctioning rank injustice to hold that payment need not he made at all. Such is not the law. The contract between the parties is in force, so far as it is lawful. “There may be a difference between the case of an engagement made by a corporation to do an act expressly prohibited by its. charter, or some other law, and a case where legislative power to do the act has not been granted. Such a distinction is asserted in some decisions. But the present is not a case in which the issue of the bonds was prohibited by any statute. At most, the issue was unauthorized. At most, there was a defect of power. The promise to give bonds to the plaintiffs in payment of what they undertook todo was, therefore, at farthest, only ultra vires; and, in such a case, though specific performance of an engagement to do a thing transgressive of its corporate power may not be enforced, the corporation can be held liable on its contract. Having received benefits at the expense of the other contracting party, it cannot object that it was not empowered to perform what it promised in return, in the mode in which it promised to perform. This was directly ruled in State Board of Agriculture v. Railroad, 47 Ind. 407. There it was held that, ‘although there may be a defect of power in a corporation to make a contract, yet if a contract made by it is not in violation of its charter, or of any statute prohibiting it, and the corporation has by its promise induced a party relying on the promise and in execution of the contract to expend money and perform his part thereof, the' corporation is liable on the contract.’ See, also, substantially to the same effect, Allegheny City v. McClurkan, 14 Pa. St. 81; and, more or less in point, Maher v. Chicago, 38 Ill. 266; Oneida Bank v. Ontario Bank, 21 N. Y. 490; Argenti v. City of San Francisco, 16 Cal. 256; Silver Lake Bank v. North, 4 Johns. (N. Y.) Ch. 370.” — 559 — ' The same question came before the Supreme Court of the United States in thp case of Louisiana v. Wood, 102 U. S. 294. That case was brought in the circuit court of the United States for the eastern district of Missouri and arose under the laws of this State. The facts of that case are as follows: The city of Louisiana, having lawful power to borrow money and provide for the payment of her debts, issued her bonds for the purpose of raising the means with which to pay her interest-bearing debts and the expenses of her’ government. The bonds recited that they were issued under the authority of the city charter and an ordinance enacted in pursuance thereto on January 8,1867. The bonds were not actually executed until July 16, 1872, though antedated as of January 1,1872, for the purpose of evading the law of this State, passed March 28, 1872, which provides that no bond thereafter issued, by any county, city, etc., for any purpose whatever should be valid or negotiated until it is registered by the State Auditor, etc. The bonds were sold to Dorsheimer and Gibbons, who believed they were valid and purchased them in good faith, and they sold them to Woods, the defendant in error. The money paid for the bonds went into the city treasury and was used by the city. The bonds were held to be void, and the suit was brought to recover the money which was paid for them. In the discussion of that question Mr. Chief Justice Waite, in speaking for the full court, on pages 298 and 299, used this language: “That the bonds in question are invalid is conceded. Such is the effect of Anthony v. County of Jasper (101 U. S. 693), decided at the last term. It is equally true that the legal effect of the transactions by which the plaintiff and his assignors got possession of the bonds was a borrowing by the city of the money paid for what was supposed to be a'purchase of the bonds. As the broker through whom the business was done was the agent of the city and acting as such, — 560 — the case, so far as the city is concerned, is the same as though the money had been paid directly into the city treasury and the bonds given back in exchange. The fact that the purchasers did not know for whom the broker was acting is, for all the purposes of the present inquiry, immaterial. They believed they were buying valid bonds which had been negotiated and were on the market, when in reality they were loaning money to the city, and got no bonds. The city was in the market as a borrower, and received the money in that character, notwithstanding the transaction assumed the form of a sale of its securities. “The city, by putting the bonds out with a false date, represented that they were valid without registry. The bonds were bought and the price was paid under the belief, brought about by the conduct of the city, that they had been put out and had become valid commercial securities before the registry law went into effect. It would certainly be wrong to permit the city to repudiate the bonds and keep the money borrowed on their credit. The city could lawfully borrow. The objection goes only to the way it was done. As the purchasers were kept in ignorance of the facts which made the bonds invalid, they did not knowingly make themselves parties to any illegal transaction. They bought the bonds in open market, where they had been put by the city in the possession of one clothed with apparent authority to sell. The only party that has done any wrong is the city. “In Moses v. Macferlan (2 Burr. 1005) it is stated as a rule of the common law, that an action ‘lies for money paid by mistake, or upon a consideration which happens to fail, or for money got through imposition.’ The present action can be sustained on either of these grounds. The money was paid for bonds apparently Well executed, when in fact they were not, because of the false date they bore. This was clearly money — 561 — paid by mistake. Tbe consideration on which the payment was made has failed, because the bonds were not, in fact, valid obligations of the city. And the money was got through imposition, because the city, with intent to deceive, pretended that the false date the bonds bore was the true one. While, therefore, the bonds cannot be enforced, because defectively executed, the money paid for them may be recovered back. As we took occasion to say in Marsh v. Fulton County (10 Wall. 676) ‘the obligation to do justice rests upon all persons, natural or artificial, and if a county obtains the money or property of others without authority, the law, independent of any statute, will compel restitution or compensation. ’ “It is argued, however, that, as the city was only authorized by law to borrow money at a rate of interest not exceeding ten per cent per annum, the money ■cannot be recovered back, because a sale of the bonds involved an obligation to pay interest beyond the limited rate, and the borrowing was, therefore, ultra vires. There was no actual sale of the bonds, because there were no valid bonds to sell. There was no express contract of borrowing and lending, and consequently no express contract to pay any rate of interest at all. The only contract actually entered into is the one the law implies from what was done, to-wit, that the city would, on demand, return the money paid to it by mistake, and,’ as the money was got under a form of obligation which was apparently good, that interest should be paid at the legal rate from the time the obligation was denied. That contract the plaintiffs seek to enforce in this action, and no other. ’ ’ A much stronger case, as I conceive it to be, for the defendant, involving this same question, was presented to the Supreme Court of the United States in the case of Chapman v. County of Douglas, 107 U. S. 348. The facts were substantially as follows: On — 562 — March. 5, 1859, Chapman, hy general warranty deed, conveyed to Douglas county, Nebraska, a certain tract of land for a poor farm, for and in consideration of $8,000, of which $2,000 was paid in cash, and for the remainder gave its four promissory notes, secured by mortgage, and payable, respectively, in one, two,- three and four years. Sometime thereafter, the Supreme Court of that State decided that by the purchase of lands for such a purpose, a county could not he bound to pay at any specified time the purchase money, or to secure it by mortgage upon the land, but was limited to a payment in cash and to the levy of an annual tax to create a fund wherewith to pay the residue. The notes remaining unpaid, Chapman filed a bill praying for a reconveyance and an accounting, or should the county elect to retain the lands, then for a decree for the value of them. In the discussion of that question the court, on pages 355 to 358, in speaking through Mr. Justice Matthews, used this language: “In the present case, however, it was not the understanding of the parties that the vendor should await the collection of taxes, as prescribed by the statute, for the payment of the purchase money, but, on the contrary, there was an agreement for payment in a definite time, without regard to the condition of the county treasury, and for security by way of notes and mortgages. The agreement, as we have assumed, so far as it relates to the time and mode of payment, is void; but the contract for the sale itself has been executed on the part of the vendor by the delivery of the deed, and his title at law. has actually passed to the county. As the agreement between the parties has failed by reason of the legal disability of the county to perform its part, according to its conditions, the right of the .vendor to rescind the contract and to a restitution of his title would seem to be as clear, as it would be just, unless some valid reason to the contrary can he shown. As was said by this court in — 563 — Marsh v. Fulton County, 10 Wall. 676, 684, and repeated in Louisiana v. Wood, 102 U. S. 294, ‘the obligation to do justice rests upon all persons, natural and artificial, and if a county obtains the money or property of others without authority, the law, independent of any statute, will compel restitution or compensation.’ See also Miltenberger v. Cooke, 18 Wall. 421. The illegality in the contract related, not to its substance, but only to a specific' mode of performance,, and does not bring it within that class mentioned by Mr. Justice Bradley in Thomas v. City of Richmond, 12 Id. 349. The purchase itself, as we have seen, was expressly authorized. The agreement for definite times of payment and .for security alone was not authorized. It was not illegal in the sense of being prohibited as an offense; the power in that form was simply withheld. The policy of the law extends no further than merely to defeat what it does not permit, and imposes upon the parties no penalty. It thus falls within the rule, as stated by Mr. Pollock, in his Principles of Contract, 264: ‘When no penalty is imposed and the intention of the Legislature appears to be simply that the agreement-is not to be enforced, then neither the agreement itself nor the performance of it is to be treated as unlawful for any purpose.’ [Johnson v. Meeker, 1 Wis. 436.] ‘ ‘ The principle was applied in the case of Morville v. American Tract Society, 123 Mass. 129, 137, where it was said: ‘ The money of the plaintiff was taken and is still held by the defendant under an agreement which it is contended it had no power to make, and which, if it had power to make, it has wholly failed on its part to perform. It was money of the plaintiff, now in the possession of the defendant, which in equity and good conscience it ought now to pay over, and' which may be recovered in an action for money had’ and received. The illegality is not that which arises where the contract is in violation of public policy cur — 564 — of sound morals, and under which the law will give no aid to either party. The plaintiff himself is chargeable with no illegal act, and the corporation is the only one at fault in exceeding its corporate powers by making the express contract. The plaintiff is not seeking to enforce that contract, but only to recover his own money and prevent the defendant from unjustly retaining the benefit of its own illegal act. He is doing nothing which must be regarded as a necessary affirmance of an illegal act.’ “The decision of this court in Hitchcock v Galveston, 96 U. S. 341, 350, covers the very point. There a recovery was allowed for the value of the benefit conferred upon the municipal corporation, notwithstanding and, indeed, for the reason, that the contract to pay in bonds was held to be illegal and void. ‘It matters not’, said the court, ‘ that the promise was to pay in a manner not authorized by law. If payments cannot be made in bonds, because their issue is ultra vires, it would be sanctioning rank injustice to hold that pay«ment need not be made at all. Such is not the law.’ “This doctrine was fully recognized by th'e Supreme Court of Nebraska as the law of that State in the case of Clark v. Saline county, 9 Neb. 516, in which it adopts, from the decision of the Supreme Court of California in Pimental v. City of San Francisco, 21 Cal. 362, the following language: ‘ The city is not exempted from the common obligation to do justice which binds individuals. Such obligation rests upon all persons, whether natural or artificial. If the city obtain the money of another by mistake, or without authority of law, it is her duty to refund it, from this general obligation. If she obtain other property which does not belong to her it is her duty to restore it, or if used to render an equivalent therefor, from the like obligation. [Argenti v. San Francisco, 16 Cal. 282.] The legal liability springs from the moral duty to make restitution.’ — 565 — “The conveyance by Chapman to the connty of Douglas passed the legal title, but upon a condition in the contract which it was impossible in law for the county to perform. There resulted, therefore, to the grantor the right to rescind the agreement upon which the deed was made, and thus to convert the county into a trustee, by construction of law, of the title for his benefit, according to the often repeated rule, as stated by Hill on Trustees, 144, that/whenever the circum-’ stances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest, without necessarily violating some established principle of equity, the court will immediately raise a constructive trust and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the parties who, in equity, are entitled to the beneficial enjoyment’. Upon this principle the vendor of real estate is treated as trustee of the title for the purchaser; and the mortgagee, having the legal title, after payment of the mortgage debt, is a trustee for the mortgagor. The analogy is complete between these and every case, of which the present is one, where the holder of the legal title is under a duty to convey to another.” So in the case of Vanatta v. State Bank of Ohio, supra. In that case under the act under which the bank was incorporated it had no power to discount negotiable notes unless their negotiability was restricted to special indorsement. A branch bank thereof assumed to discount a negotiable promissory note without indorsing the restriction thereon. The court in that case held that while the bank could not recover upon the note, yet it was entitled to recover the money in an action on common count, and in so holding used this language: “The power of the bank to make such a contract of loan, without taking any written evidence of indebtedness, was unquestionable. The answer shows the transaction to have been, not the discounting — 566 — of a valid business note by a third party, but in fact a loan of money, evidenced by a note drawn in a form which the law prohibited, and which was void for want of power in the bank to receive it in that form.' The substantial contract of the parties was untainted with usury, or any other, illegality; the sole vice was in' the negotiable form of the note. As commercial paper, this note was utterly void; the bank could maintain no action upon it; and the statute prohibited its assignment,- even if valid, except for the use of the bank. We think the whole object of the requirement of the statute, as to the form of discounted paper, is accomplished,, and indeed can only be attained, by holding that securities, taken in a prohibited form, are simply void, and do not affect the independent rights or liabilities of the parties. The mischief intended to be remedied is thus guarded against, whilst the bona-fide assets of the bank are preserved for the benefit of bill-holders and creditors. A party should not be permitted to plead his own violation of the law, as a discharge from legal obligation to pay an honest debt. The authorities are numerous, both in-this country and in England, in support of the principle that money loaned on a written security which the statute makes void, may be recovered in an action on the common counts. Indeed, I am aware of no authority to the contrary, where the vice of the paper is merely in its form.” The same question came before the Supreme Court of California; and it was held that where the plaintiff loaned money to a corporation which applied the same to its own use, he could recover it back in an action for money loaned, though the notes on which the loan was made were void because their execution was unauthorized; and that the notes, while not evidence of liability on the express contract appearing on the face thereof, were admissible for the purpose of showing that the money which they represented was fumisbed by plaintiff to defendant. [Pauly v. Pauly, 40 Pac. 29.] — 567 — In Bank of Missouri v. Scott, 1 Mo. 745, it was said: “On the second point the law is well settled, that where the plaintiff fails on the special count, upon the note or bill, from a defect in the count, misdescription of the instrument, failure in the proof, etc., he may in many, and indeed in most cases, supply the omission by the proof of the consideration, for which the note or bill was given, under the general count; but then the consideration must be adapted to the count, and money loaned cannot be given in evidence to support the count for money had and received.” In Marston v. Boynton, 47 Mass. l. c. 129, it was said: “The court instructed the jury, first, to inquire whether the loan was made by the plaintiff to the defendants, on their credit; and there was evidence to warrant the jury in finding that it was so made. If it was, then, by operation of law, the defendants became bound to repay the money, and .the note of Centre, received of them by the plaintiff, was merely collateral security. ’ ’ In Aldrich v. Chemical National Bank, 176 U. S. 618, it was held: “A national bank which uses in its business money obtained by its vice-president as a loan to it from another national bank cannot escape liability to account therefor upon the ground that the loan was not negotiated by it or by its direction, or that it could not itself have legally borrowed the money.” In the case of Gwin v. Smur, 49 Mo. App. 361, defendant and his wife entered into a contract with plaintiff whereby they agreed to sell to him the wife’s general property, and as a part of the consideration thereof the plaintiff paid defendant the sum of $500. The wife refused to convey the land to plaintiff, or to return the $500. In holding defendant liable for said money, the court, speaking through Gill, J., used this language: — 568 — “Said real estate contract was not only void and worthless as to Mrs. Smur, but as well invalid as to this defendant, her husband. It was a blank piece of paper, worthless for any purpose. [Gwin v. Smurr, 101 Mo. 550; Craig v. VanBebber, 100 Mo. 584; Brown v. Miller, 46 Mo. App. 1.] “The mere statement of this case readily suggests its decision. Through the instrumentality of a worthless and void contract for the sale and conveyance of his wife’s real estate, defendant Smur has obtained $500 from plaintiffs, which, in equity and good conscience, he ought to return. Smur holds that sum of money which he got possession of by means of a void, non-enforceable contract — therefore, without consideration; and as said by the Supreme Court ‘plaintiffs have an undoubted right to recover this money in an action for money had and received.’ [101 Mo. 553.] “Since, then, the Smurs were not bound on said so-called contract, neither were the plaintiffs. The matter then set up in the answer constitutes no defense. The plaintiffs’ right to this money, thus held by defendant Smur, cannot be defeated by reason of any supposed stipulation in said nugatory instrument. ’ ’ For the purpose of showing more clearly the application of the principle of law announced in that case to the case' at bar, we have rearranged the clauses quoted therefrom, but by so doing neither the sense nor meaning thereof has been changed. The same principle involved in this case Was involved in the case of Binion v. Browning, 26 Mo. 270. In that case Browning borrowed of Binion $120 for one year to enable him to enter a tract of land, and agreed to give the former a mortgage upon the.land as soon as entered to secure the money; the land was entered, but defendant refused to give the mortgage as agreed. As the agreement to give the mortgage — 569 — was within the Statute of Frauds, and therefore void, plaintiff instituted a suit in assumpsit to recover the money so loaned to defendant. In the discussion of that case Napton, J., speaking for the court, on pages 271 and 272, used this language: “We think the plaintiff was entitled to his judgment. The contract for the mortgage was within the Statute of Frauds, and the promise of the plaintiff to wait twelve months was therefore without consideration. In McGowen v. West, 7 Mo. 569, it was held that, where a note was given in consideration of a parol contract to convey land, in a suit upon such note the defendant could not plead in bar that the consideration was the parol contract, because it was at the option of the plaintiff to insist on the statute or not, and his suit upon the note might be construed as a disclaimer of the protection of the statute, so far as he was concerned. If, therefore, the plaintiff, was not in fault, the defendant could not in this way rescind the contract. That case was not like this. Here the mutual promises form the consideration of the agreement.. The plaintiff sues for his money, and the defendant insists on the promise of the plaintiff to wait twelve months, a promise manifestly given on consideration of the verbal promise of the defendant to secure the money by a mortgage. Apart from the inability of the plaintiff to enforce this promise, the time for its effectual performance had passed when ten or eleven months had elapsed after the entry of the land, and when the entire object of the conveyance'as a security may have been defeated. The case of Barnes and others v. Wise, 3 Mon. 170, cited in the opinion of McGowen v. West, is an authority to show that under circumstances like the present the Statute of Frauds is available to the plaintiff and that his money was due immediately. The plaintiff did not repudiate the contract, but the defendant has. The fact that no specific day was — 570 — fixed for making the mortgage is immaterial. As security was the object of the plaintiff and the consideration for his agreement to give time, it was the obvious meaning of both parties that the mortgage should be given when the land was purchased. The judgment of the circuit court will be reversed and a judgment will be entered here for the debt and interest. ’ ’ We have cited and quoted somewhat extensively from a few of the many cases found in this country and in England bearing upon the question of the right of a party to sue for and recover money paid or loaned to another upon a void contract; and the rule announced by all of them seems to be that where a void contract has been entered into, and that by means thereof money or other valuable thing has been parted with by one party thereto, and received and accepted by the other party thereto, and where the latter repudiates the contract and refuses to return the money or such other valuable thing, then the law will imply an agreement on the part of the recipient to return the same to the other party; and if he fails to do so, then the injured party may maintain an appropriate action against the offending party for the recovery of the money, or for the value of the thing so retained. That implied promise or agreement springs from the' general moral obligation resting upon all persons and corporations to do equity and justice in all such transactions. To hold otherwise would be sanctioning the rankest injustice, and thereby take the money or property from one party and give it to another without compensation, and against the intention of both parties, as manifested by the void contract. Of course this rule should not and does not apply where its enforcement would violate some statute or other principle of law which prohibits the doing of the very thing the enforcement — 571 — of the rule would accomplish. The courts have improvised this rule by which right and justice may be worked out to the parties thereto, and not for the purpose of enabling them to avoid the law, and do indirectly that which the law will not permit them to do directly. We have just been called upon to consider and pass upon the latter question in the case of Seaman v. Cap-Au-Gris Levee District; the opinion in which Will be handed down with this. [219 Mo. 1.] In that case, the plaintiff, one of the commissioners of the district, entered into a contract with the other commissioners in violation of an express statute to act as engineer of the district, in the construction of the drainage system ordered constructed in the district; and after serving in that capacity, other commissioners were appointed, and they refused to pay plaintiff for his services. Thereupon, he sued the district therefor, and relied upon the rule contended for in this case as authority for his right to recover in that case. ' We denied his right of recovery for the reason before suggested. To have permitted a recovery in that case under the rule here contended for would have operated in setting aside and nullifying the statute in that case, which expressly prohibited him from being so employed. But that is not this case. Here the Middleton Bank was not prohibited by statute or other law from borrowing the money sued for. The statute interposed in this case simply went to the prevention of the execution of the note by the cashier, and for that reason a suit could not be maintained upon the note. ■ Counsel for appellant do not controvert the soundness of the rule of law contended for by respondent in this case, but expressly recognize its existence by this language, contained in their brief filed herein, to-wit: “There are cases which respondent will doubtless cite, which hold that a party cannot ques — 572 — tion the validity of an act done without authority, without restoring the money or property received under such act. The law is, however, not applicable to this case for the reasons; “(a). There is no evidence that the Middleton' Bank received any money upon the note sued upon, nor upon the two notes previously given.” If that contention was true in point of fact, then, unquestionably, respondent would not be entitled to a recovery in this case, for the reason that the very foundation of respondent’s claim rests upon the contention that appellant obtained $10,000 of its money under a void contract; that it repudiates the same and refuses to return the money so received,' and that the only remaining remedy available to it is the enforcement of this rule. In onr judgment this record does not sustain the contention of appellant to the effect that it did not receive the proceeds of the note executed by Lewis to respondent on May 7, 1904. Mr. Neal, the vice-president of respondent bank, testified without objection that the proceeds of the note, less the discount, were placed on its books to the credit of the Middleton Bank, and that the latter drew it out on drafts, in the ordinary course of business. But counsel for the first time here raises the objection to this evidence that it is secondary and not the best evidence, and for that reason it should be disregarded. Whatever merit there might have been in that objection, had it been timely raised in the trial court, was completely waived by appellant’s failure to make it there when the testimony was offered. That ancient rule of evidence is .too well settled to require the citation of authorities to support it. [Rothwell v. Jamison, 147 Mo. 601.] But independent of that, we are of the opinion that the testimony of Neal was properly admitted, — 573 — even though timely objection had been made to its admission. If the books of the bank and the drafts which were drawn against the account had been produced and admitted in evidence, they could have been corroborated, explained or contradicted by parol testimony. They do not stand upon the same footing with written contracts signed by the parties thereto. The latter cannot be contradicted, altered, added to, enlarged or changed by parol evidence. While the books of the bank and the drafts would have been admissible in evidence had their correctness first been proven, their admission would not have excluded any other competent testimony tending to prove or disprove the facts to which they related. IY. The form of the judgment is erroneous in this case in that it directed execution to be “levied out of the assets in the hands of the receiver.” The respondent has no priority over the other creditors of the Middleton Bank, but stands upon an equal footing with them; and this judgment must be paid pro rata with the claims of its other creditors. [Harding v. Nettleton, 86 Mo. 658; Smith v. Railroad, 151 Mo. 391.] There are several other minor questions presented and argued by counsel for appellant, but as they are subordinate to those herein disposed of, no wise purpose would be served by prolonging this opinion by their discussion. We, therefore, reverse the judgment, and remand the cause to the circuit court, with directions to enter judgment for respondent for the sum sued for, with six per cent interest, to be paid pro rata by the receiver with the other claims allowed against said bank. All concur, except Graves, J., who dissents.