Cass County v. Green

Sherwood, O. J.

— Two questions of prominence present themselves: Eirst, whether the evidence adduced suffices to support the allegations of the petition and warrant the decree rendered. Second, whether on the case made by the pleadings, the plaintiff has any standing in a court of equity. Defendant, seeking a reversal, holds in each instance the negative. As .the pleadings are lengthy and the evidence voluminous, and as the substance of each is hereto prefixed, we will not discuss the evidence in de *504 tail, nor give more tban an outline of the petition which seeks' the surrender and cancellation of 55 funding bonds of. Cass county, for $1,000 each, (dated February 22nd, but issued March 1st, 1872,) and an order restraining defendant from their negotiation. This relief is asked on the gi’ound that the bonds were fraudulently issued, and that Mastin & Co., as well as defendant, are purchasers with notice.

I. Relative to the-first point: A careful perusal of the evidence has fully satisfied us that a-conspiracy wras formed by the parties named in the petition to secure the issuance of the bonds of Cass county and their transfer to and distribution among the conspirators ; that this conspiracy was successful and the conspirators smitten with sudden fear at their own iniquitous success seized their ill-gotten gains and, justly apprehensive of popular indignation commensurate with the fraud perpetrated, sought safety in flight and opportunities in the distance for the secret and secure division of their plunder. This division occurred March 2nd, 1872, in St. Louis, and was marked as was the entire affair from inception to termination with the secrecy, hurry and trepidation usually incident to larcenous operations. A lai’ge portion of the bonds taken across the river to East St. Louis, and there placed in the custody- of an express company for safe keeping, were afterwards recovered by the county in an action of replevin. Cline, the county attorney of Cass county, received, as his share of the spoil, $55,000 in bonds, and left on the same day. So conspicuously conclusive is the evidence regarding the fraudulent issuance of the bonds, that defendant does not seriously controvert it, but relies on the defense of being an innocent purchaser. (It is worthy of parenthetic remark in this connection, as one of the anomalies incident to the transfer of railroad bonds, that a purchaser of a different description- is seldom, or never seen.) Let us examine the facts and weigh the evidence, in thg endeavor to ascertain whether the claim which defendant *505 makes does indeed rest upon a substantial foundation. And, as defendant claims also that John J. Mastin & Co. occupy the like high-toned attitude in this regard as himself, and as their fates and fortunes seem to be indissolubly blended, we will consider their respective claims in con-' nection with each other. After leaving St. Louis, Cline is next seen in Kansas City, on the morning of the 4th of March, 1872, engaged in the effort to sell his share of the bonds. He approaches Thos. H. Mastin, of the firm of John J. Mastin & Co., bankers, and endeavors to effect a •sale to him. Mastin states that no bonds were exhibited to him; that he declined to purchase, when Cline pressed the matter on him, stating that they were a good investment, being funding bonds; that there was nothing about them to which objection could he made except that they were signed by the deputy instead of by the clerk; but that had been provided for in the order of the court; that •Cline, being asked why the bonds were not signed by the clerk himself, replied that the latter was absent on a committee which had been sent to Clinton to look after the interest of the county in the Memphis railroad ; that witness asked Cline as to an injunction and mandamus that had been sued out, and was told by Cline that the mandamus suit had been dismissed and the injunction fell with it; that witness again declined to purchase, and on passing out of the door to go to Independence, saw his brother and partner, John J. Mastin, talking to their attorney, Black, •and to Cline in reference to the matter; that witness gathered from the conversation that Cline had made the same statements to witness’ brother as previously made, regarding the validity of the bonds, but that Black being interrogated by the brother of witness did- not concur in Cline’s opinion; that thereupon witness proceeded to Independence, returning about 8 o’clock the same day. During his absence the bonds were purchased for the firm by Jno. J. Mastin, at 60 cents. "While in Independence Thos. H. Mastin related in Chrisman’s office, with evident zest, the *506 trick whereby the clerk (of the Cass county court), opposed to funding the Pacific bonds, had been sent away on a committee to Clinton, and the bonds were signed by the deputy in his absence.

Now, it would seem very far from probable, and probability is the chief guide in placing a proper estimate upon evidence, that Thos. H. Mastin would see his brother and partner asked to purchase a large amount of bonds, which-he, himself, had just refused to purchase, and yet pass him by without so much as a single word or gesture of warming or disapproval. And then take the conduct of Thos. H. Mastin in Chrisman’s office. Did he rejoice at the subterfuge by which an honest clerk was spirited away and a dishonest deputy substituted in his stead, and the people of Cass county saddled with a large fraudulent debt, because he loved fraud for fraud’s sake? or was it because he expected the fraud to be personally beneficial, to swell his revenues and enrich his coffers ? The latter supposition is more creditable to him and more credible to us. But how, when and where, did Thos. IT. Mastin derive the information that the clerk was opposed to issuing the bonds ? And how, when and where that the county court of Cass county “got the advantage of the clerk?” Nothing that Mastin reveals as having transpired in the conversation with Cline afforded that information. Either, then, Cline in the conversation with Thos. H. Mastin, must have revealed more than the latter testified to, or else prior to the 4th of March Thos. IT. Mastin must have been apprised of the conspiracy to get the clerk out of the way; a matter virtually predicted by Cline nearly a month before, when procuring and purchasing the services of the deputy Yelton; and Cline, about a week before his last visit to Kansas City, had been there and conversed with Thos. H. Mastin.

When we take all these matters into considei’ation, the conclusion is very strong that Mastin, who it does not appear had any business at Independence, went there in *507 order to be conveniently absent, being well aivare that he at least knew too much to be an innocent purchaser. If he had notice, then that was notice to the firm of which he was a member. But there are other grounds for the belief that John J. Mastín was also aware of those things which should have precluded a purchase by him. He, when approached by Cline and asked to purchase the bonds, declined to “trade” until his attorney said they were all right.

He then took the bond and order to Black’s office. "What occurred there is not known, but it is certain, according to the testimony of Thos. II. Mastín, that Black, on coming down to the bank, did give an opinion in opposition to that given by Cline as to the validity of the bonds; and John J. Mastín says himself that Cline did not succeed in impressing Black favorably with the order.

Yet, notwithstanding this adverse opinion, leaving behind him the objectionable order which authorized the issuance of the bonds, he took the bond alone and consulted defendant about the validity of the issue. Green was not counsel for Mastín, and it is noteworthy, in this connection, that Mastín did not go to Green’s law office, but to the Times office, where he “ expected to see him.” Green, the testimony shows, was the frequent purchaser of and dealer in railroad bonds, but he never inquired for the funding order, nor did Mastín offer it to Green, although the evidence shows that' it is customary, when offering bonds for sale, to accompany them by the order which authorizes their issue.

In short, Mastín, who would not purchase till his attorney said so, concluded to buy, whether he said so or not; was more willing, in other words, to trust Green’s judgment, without a funding order, than Black’s with one. And Green was so highly pleased with the looks of the bond that after a brief examination of the law of 1868, without more ado, gave an enthusiastic opinion in favor of their validity. But Green did have a copy of the funding *508 order. Mr. Allen’s uncontradicted testimony shows this. There were but three certified copies of the funding order made out by Yelton, which were .delivered to Cline. Where did Green procure his copy ? Not from Mastin -if the latter is to be credited. Who else then but from Cline ? Mr. Allen states also that Green, when offering the bonds to him for sale, represented himself as merely interested in selling on commission for an acquaintance; that Green’s attention was drawn to the fact that the specimen bond exhibited “ bore a different number from any authorized in the other 'paperthat the bond “ was signed by a deputy, and was ■either dated or interest made payable on a legal holiday.” Mr. Allen expressed doubts on all these points. Tie also states that Green left the bond with him, with the understanding of returning at a later hour; that on his return, Green stated that since the first interview, he had 'met some one from Cass county; Mr. Allen thinks Green said a “ county officer ” of that county, who had personal knowledge of some of the matters raised in the first conversation, and knew them to be all light. The only county officer in town that day, so far as the record discloses, was Cline; but Green is particular to state in his deposition taken before trial, that it was not till after his purchase of the bonds from Mastin & Go. that he saw Cline, and then only to speak, shake hands and pass on. Green in his deposition is altogether silent about a funding order, and professes not even to know that the bonds “were issued for a railroad subscription.” Yet, if Allen’s testimony is true, and it is nowhere contradicted, such ignorance was wholly impossible. The precise time that the sale was consumated between Green and Mastin, and between the latter and Cline, is not disclosed. It is known, however, that Green’s check for $10,000 was given before Cline was paid. Green, who is evidently possessed of more than ordinary shrewdness and intelligence, had two interviews with Allen and at least three with Mastin before completing the purchase. It seems difficult of belief that Green would have *509 ventured to offer the bonds to Allen for 75 cents, and even to make a reduction on that figure of from one to one and one-half cents; “ to deduct part of his commission,” and to give assurances that “ the other party would make some reduction,” unless he both knew that he had authority so to do, and that the figure at which he offered to sell would afford a profitable margin to his “ acquaintance ” or principal. But Jno. J. Mastin is careful to say that he never told Green what he paid for the bonds. These statements of Green to Ahen, and of Mastin, when a witness, cannot be readily reconciled. If Mr. Allen gives a correct version of the affair,-it very strongly indicates that Green had seen Clint», the only “ county officer ” then in town, before making his purchase. If he did see him, it is scarcely credible, if really desirous of becoming what he now so zealously professes to be, an “innocent purchaser,” that he failed to make full inquiry touching the matters he and Allen had just before talked of. Allen’s testimony, too, points very decidedly towards a secret understanding or complicity between Green and Mastin respecting the purchase of the bonds, and it is not at all easy, on perusing the evidence, to divest the mind of such unfavorable impression. Nor does it tend to. diminish that impression, when we see the wondrous anxiety, after the fraud became public, that Green displayed to stop payment of the drafts and acceptances given to Cline by Mastin & Co., and to search, with similar purpose, the dead body of the suicide Higgins (the only one of the bond brokers who gave token of a conscience). 'If Green was indeed an innocent purchaser, what interest could he feel, what need he care, whether' those certificates and acceptances were paid or protested? Green says his purpose was to protect himself and the county. No doubt ‘such solicitude in behalf of the county was, though tardy, highly commendable. But what protection did an “ innocent purchaser ” need ? The only rational hypothesis with which this anxiety of Green’s *510 can be reconciled, is his collusion with Mastin & Co. in the purchase of the bonds.

Besides all that, even if we concede that the $10,000 was really paid by Green, and paid in good faith, what excuse has he to offer for paying his note for $29,600, long after discovery of the fraud? Ilis defense in any action by Mastin & Co. on the note would, it seems, have been ample. He certainly, therefore, can lay no claim to having paid that sum, at least, in good faith. And Thos. II. Mastin’s testimony shows that Green was fully aware that if the bonds were “ fraudulent or forged, he would-have recourse” against them. John J. Mastin says the note of Green was paid “in money or its equivalent.” What equivalent ? Their cash-book shows no such payment. John J. Mastin states that Cline’s administrator threatened, unless they paid the acceptances given to Cline, to throw the firm into bankrupty, and thereupon they paid them. And on the same day Green is called upon and pays his note, as it is said, thus keeping up the coincidence of payments which began when Green drew his check, the only difference being that payment of the cheek took place just before Cline was paid, and the payment of the note just after his administrator was paid. But what caused Mastin & Co. to so readily yield to the demand of Cline’s administrator? Their defense, too, would appear to have been good. These are mysteries which deserved and should have received the fullest explanation. The above, however, are not the only mysteries, incongruities and contradictions presented by this record.

When the endeavor was made by the Cass county officials in the latter part of March, 1872, to discover the locus in quo of the bonds in order to replevy them, Thomas H. Mastin stated that they were not interested, that they had only purchased as the “ agents or brokers ” of Green; and yet, when on the .same day, and a brief space thereafter, Green, in the presence of Thomas H. Mastin, states em *511 phatically that he. bought the bonds of John J. Mastín & Co.; had nothing to do with Cline in the transaction, Mas-tin stands mute, interposing no denial. When the latter is asked where the bonds were, he said Green had taken them from his safe the evening before. Green, replying to the same question, says that he had “ sent” or “ shipped” the bonds East some six days before, and they were beyond his reach. But the deposition of Green shows that up to the 10th of October, 1878, when the writ of replevin and notice of injunction were served on him, the bonds were in his possession, or under his control, and had never left Kansas City. When we reflect on the foregoing diverse statements, and numerous others of like kidney scattered through this record, these questions come unbidden before us. Need honesty shelter itself behind prevarication ? Must good faith, summon to its aid the. motley troop of falsehood ? No one so bold as to answer yea. We have hitherto examined the facts of this case, as if the onus probandi were on the county.

But the evidence having established the fraudulent issuance of the bonds, that burden is cast in all its weight on the shoulders of the defendant. This ruling is in full accord with our most recent adjudication. Hamilton v. Marks, ( 63 Mo. 167 .) In that case our approval was bestowed upon the views of the latest elementary writer on this subject: “That if the maker * * * * proves that there was fraud or illegality in the inception of the instrument; or if the circumstances raise a strong suspicion of fraud or illegality, the owner must respond by showing that he acquired it bona fide, for value in the usual course of business while current, and under circumstances which create no suspicion, that he knew the facts which impeach its validity.” (Daniel Neg. Instr. Sec. 8.1-r.) Drimarially, as a matter of course, the presumption favors the holder of negotiable paper acquired before maturity. (Horton v. Bayne, 52 Mo. 531 .) But this presumption must be for naught held and esteemed, when a record, such as *512 this, stares- us iu the face; and we are fully persuaded that in order to hold either Green or Mastín & Co., innocent purchasers, we must shut our eyes to'most obvious inferences deducible from proven facts, and close our ears to arguments based thereon of most persuasive cogency.

Our object in considering the claim of Mastín & Co., to be considered innocent purchasers, in connection with a like claim made by Green, is because of the assertion made by the latter, that if the former purchased without notice, defendant, even if a purchaser with notice, would take a title purged from all fraud. There is no doubt of the general correctness of this assertion, (2 Gif. Ev. § 171,) but inasmuch as we regard both Mastín & Co. and defendant as purchasers with notice, this doctrine has here no application.

But we must not conclude our remarks touching the sufficiency of the evidence before adverting to some other matters. The defendant was present at and conducted the trial. The opportunity for giving explanation of, or contradiction to, the damaging statements made by Allen and others, which tended to show defendant’s want of good faith, was thus opén to him, -and yet he failed to embrace it. The presumption, under such circumstances, is always adverse to the party thus making default. (Adams v. Adams, 21 Wal. 185; Henderson v. Henderson, 55 Mo. 559 .) And this failure is rendered more strikingly apparent when it is remembered that the good faith of defendant, is, by the very form of this procedure, directly called in question ; questioned in a court of equity, which cannot look upon unfair dealing with the least degree of-allowance; questioned in a court accustomed from its very nature and organization to track fraud through all its crooked pathways, and to drag it forth discomfited from its most hidden recesses.

Again, it is insisted that the judgment must be reversed because the evidence shows that the bonds were transferred before suit brought. That transfer, it is said, oe *513 eurred on the 11th day of October; but the injunction notice was served on the 10th, and the injunction granted on the 18th of that month. The party to whom the bonds are alleged to have been transferred, is not here complaining, and the defendant cannot be heard to vicariously complain. Besides, the court below may perhaps have concluded (and we are not prepared to dispute the correctness of the conclusion) that defendant’s assertion respecting the transfer of the bonds rested on no more secure foundation than his claim to being an innocent purchaser.

II. In regard to our second point: The case of Grand Chute v. Winegar, (15 Wallace 355, 373,) is cited as showing that plaintiff is entitled to no relief in equity. But that case is totally unlike this. There an injunction was prayed of a suit at law on some bonds, on the ground that the bonds were void. It does not appear whether the bonds were not mature at the time of their reception, nor that the holder threatened to negotiate them, and the bill was very properly dismissed because the remedy at law was amply adequate. Here, on the contrary, though the reply shows that the bonds are void, yet the petition charges, in addition to the matters already noticed, that repeated demands and actions at law had proved unavailing to recover possession of the bonds from defendant; that defendant refused to obey the order of the court and deliver possession of the bonds, but kept them concealed so that they could not be reached by process at law; that the bonds were negotiable in form and transferable by delivery ; that defendant pretended he had already transferred them, and unless restrained defendant would transfer them, so that any decree rendered would be ineffectual. It is quite clear that any remedy at law would, in this case, bo wholly inadequate and, therefore, equity has jurisdiction. This proceeding is somewhat analogous to that where a party is seeking to remove a cloud upon his title; the title held by his adversary, though void, is on its face valid, and be made the basis for repeated actions at law. *514 (Harrington v. Utterback, 57 Mo. 519 .) So in case of these bonds, which though void, are yet apparently good, the equity of the plaintiff is equally clear to the relief sought, and we affirm the judgment.

All concur except Hough, J., not sitting.

Aeeirmed.