Summary
Appeal from St. Louis City Circuit Court. — Hon. Daniel D. Fisher, Judge.
(1) Defendant Gould was a bona fide bolder for value, (a) An extension of time, even for a single day, is a valuable consideration. Loewen v. Forsee, 137 Mo. 29; Allen v. Harris, 79 Mo. App. 490; Deere v. Marsden, 88 Mo. 512; Smith v. Norman, 19 Ohio St. 148; Powers v. Woolfolk, 111 S. W. 1187. (b) Security for a debt given after the debt was contracted but in pursuance of a prior or contemporaneous agreement constitutes tbe receiver a bolder for value. Miller v. Boykin, 70 Ala. 469; Boykin v. Bank, 72 Ala. 263; Marks v. Bank, 79 Ala. 558; Thompson v. Maddux, 117 Ala. 468; Jordan v. Thompson, Ibid. On a sale on credit to be secured by notes as collateral, the receipt of the collateral after the delivery of the goods makes the seller a bona fide holder of the notes, although the notes in question were not specified or described at the time of the sale, and were not, in fact, then in possession of the buyer. Penby & Johnson v. Pritchard, 2 Sandf. (N. T.) 151. (c) One who takes a negotiable note as security for a pre-existing debt is a holder for value under the Negotiable Instruments Law, and so is a lienor to the extent of his lien. R. S.'1909, secs. 9996, 9998; Payne v. Zell, 98 Ya. 294; Wilkins v. Usher, 97 S. W. 37; Brooks v. Sullivan, 129 N. 0. 190; Musick v. Alderman, 77 Conn. 634; Petrie v. Miller, 67 N. Y. Supp. 1042,173 N. Y. 596; Brown v. James, 114 N. W. 591; Brewster v. Shrader, 26 Mise. (N. Y.) 480, 57 N. Y. Supp. 606; Lowell v. Bickford, 88 N. E. (Mass.) 1; Graham v. Smith, 118 N. W. 726 (d) Value is any consideration sufficient to support a simple contract. R. S. 1909, sec. 9996; Bank v. Tot-tenham (1894), 2 Q. B. 717; Bank v. Gordon, App. Cas. 240; Bank v. Silke 2 Q. B. 435; Banking Co. v. Bank, 21 Q. B. 535. (e) The rule that the transferee of negotiable paper is not an innocent holder, if there are circumstances connected with the transfer sufficient to put an ordinarily prudent man on inquiry is uncertain and devoid of uniformity, and will not be followed •in this State. Hamilton v. Marks, 63 Mo. 167; Edwards v. Thomas, 66 Mo. 468; Bank v. Stanley, 46 Mo. App. 440; Bank v. Schoen, 56 Mo. App. 160; Leavitt v. Taylor, 163 Mo. 158. (f) The title of a purchaser of negotiable paper before maturity cannot be defeated by proof of a want of due care on his part. Nothing less than fraud is necessary to defeat his title. Bank v. Stoneware Co., 4 Mb. App. 276; Bank v. Pipkin, 66 Mo. App. 592; Cloud v. Book & News Co., 23 Mo. App. 319; Investment Co. v. Yette, 142 Mo. 560; Kuch v. Cornett, 79 Mo. App. 574; Investment Co. v. Filling-ham, 85 Mo. 534; Wilson v. Ridler, 92 Mo. App. 335; Bank v. Hammond, 104 Mo. App. 403; Bank y. Salmon, 117 Mo. App. 506; Bank v. Bank, 109 Mo. App. 665; Bank v. Leeper, 121 Mo. App. 618; Jennings v. Todd, 118 Mo. 296; Mayes v. Robinson, 93 Mo. 114. (g) The doctrine of innocent holder applies to one taking a note as collateral security for a loan. Bank y. Eu-banks, 124 Mo. App. 499; Stewart v. Givens, 128 Mo. App. 389. (2) The signatures to the note being genuine, and the note knowingly signed, defendant Gould was not bound to make any inquiries before taking the note. There was no evidence of either fraud or bad faith on his part. Briggs v. Ewart, 51 Mo. 245. (3) Appellant Haas made all the inquiries that a reasonably prudent man was bound to make before purchasing at the sale. He pursued the title to his vendor Gould. (4) Respondents, by remaining passive for nine months after acquiring full and complete knowledge that defendant Dausman had pledged their papers to defendant Gould, ratified defendant Daus-man’s unauthorized act and are estopped by their laches.
(1) Upon the testimony of the payee in the collateral note, he had full knowledge of everything at the time he accepted the $515 note. Gould having had full knowledge of the facts, the appellant Max Haas could claim no greater right than his assignor could assert. Yette v. Sacher, 114 Mo. App. 363; Bank v. Ornsdorff, 126 Mo. App. 654. (2) Entirely apart, however, from any knowledge which Dausman may have imparted to him, Gould cannot be held to be an innocent purchaser for value. He purchased from George Dausman, the trustee in the deed of trust, under the circumstances aforesaid, and became chargeable with knowledge of the facts. Bank v. Furniture Co., 57 W. Va. 625, 70 L. R. A. 312.
SxatembNT. — On or about the 25th of April, 1905, plaintiffs below, one of them the respondent here, being the owners of a one-story honse situated at 2614 Glasgow avenue in the city of St. Louis, executed a deed of trust to one George Dausman, as trustee, purporting to secure a principal note for $1500 as well as semi-annual interest notes for $45 each, the principal note due in three years after its date, the notes payable to one Henry J. Grimm. At the time of the transaction and for some time prior thereto, Dausman had been engaged in the real estate business at St. Louis, and plaintiffs, desirous of adding one or more stories to their building, and not having the money with which to do it, went to Dausman to raise the necessary money on the property. Dausman appears to have examined the property and told them that the proposed improvements would cost between two thousand and twenty-one hundred dollars, and that he could raise that amount for them on the property. For some reason not disclosed, however, it was concluded to borrow $1500 on the property as a first loan, Dausman. testifying that he intended to raise the other, when necessary, by a second deed of trust. Thereupon he agreed with them to raise $1500 for the proposed improvements by means of a deed of trust on the property, and had this deed of trust and the notes drawn up, went out to the residence of plaintiffs with a notary public, and had them sign and acknowledge the deed of trust and sign the notes and they were all delivered to him. He thereupon placed the deed of trust on record and had Grimm, who at times did clerical work in his office, indorse the notes “without recourse.” Grimm never paid anything for them, had no interest whatever in the matter and is designated in the testimony of the several witnesses as a “.straw man.” This all occurred in April, 1905.
One of the plaintiffs testified that Dausman told them at the time of the execution of the deed of trust and of the notes that the money to be raised on the deed of trnst conld not be nsed for any other purpose than for the rebuilding of the house, converting it from a one-story into a two-story structure. Dausman neither furnished nor raised any money on these notes for that purpose nor did he mate any arrangements for carrying on the proposed improvements, although repeatedly requested to go on by plaintiffs, until the summer of 1909, when he appears to have contracted with two men named Smith and Griesecke to remodel the house. As the evidence tends to show, their contract price was from two thousand to twenty-one hundred dollars. Smith and Griesecke began the work and when it was practically completed employed an attorney, former Judge Jesse A. McDonald, to file a lien on the property and commence proceedings for its enforcement, as none of the work done or material furnished by them had been paid for. They informed Judge McDonald that there was a deed of trust on the property, and on the suggestion that one Barney Schwartz, an attorney at law of St. Louis, held the deed of trust for collection or held it for some client of his, Judge McDonald called on Mr. Schwartz about the 1st of December, 1909, and told him that he represented Mrs. Yeney, the owner, as also the contractors, and wanted to examine the deed of trust and the notes. Mr. Schwartz told Judge McDonald that they belonged to a man by the name of Gould hut that he (Schwartz) did not at that time have possession of them hut would have them later. Judge McDonald asked him when he could see them and Mr. Schwartz told him he could do so in a short time. About two weeks afterwards, Judge McDonald went hack to Mr. Schwartz’s office and the latter showed him the papers, the notes and deed of trust, including among the papers, a note of date September 14, 1907, signed by George Dausman, wherein he promised, one day after date, to pay to the order of J. S. Gould $535, with interest from date at six per cent per annum. The note, after the above reads:
“Payable at the office of Geo. Dausman Real Estate Co.
This note is secured by deed of trust.. Geo. Daus-man.
On property éílS Nth. Taylor Avl 2614 Glasgow Ave.”
A payment of interest, $30.90, of date September 15, 1908, was indorsed on this note. After examining the papers and making a memorandum of them, Judge McDonald, as he testified, told Mr. Schwartz that the transaction seemed a suspicious one to him; that the owner of the property had gotten no benefit from the deed of trust; that it would have to be contested. Mr. Schwartz appears'to have taken umbrage at this and the interview ended. Mr. Schwartz testifies substantially as does Judge McDonald as to the call on him, and testified that after he showed Judge McDonald the deed of trust and the notes, Judge McDonald said: “This whole thing is a fraud.” Whereupon Mr. Schwartz remarked: “We will not discuss this thing further, Judge.” That, according to Mr. Schwartz, was the end of their interview.
It appears that about the time Mr. Gould had placed the Dausman note and the deed of trust and notes of plaintiff in the hands of Mr. Schwartz, that Dausman was confined in jail in St. Louis, and that Schwartz and Gould went up to the Pour Courts and saw Dausman and spoke to him concerning his own note and the deed of trust; that Dausman told him he was going to pay Gould. Mr. Schwartz told him that he would write to Mrs. Veney to see what condition the matter was in, because he (Schwartz) was worried at the time, as Dausman was then in jail under what he (Schwartz) considered a similar matter, as he testified, and he wanted to see how his client, Gould, stood with regard to the deed of trust. He thereupon wrote to the plaintiffs, wlio were sisters and living together on the property, to the effect that he represented the holder of the deed of trust on their property and asked them to call at his office at their earliest convenience, the letter concluding: “It is necessary to your interest and the interest of my client that you call immediately.” This letter from Mr. Schwartz to plaintiffs was the first the latter heard of the deed of trust being in the hands of anyone other than Dausman. Mrs. Yeney appears to have called on Mr. Schwartz a few days later and told him of the transaction between herself and sister and Dausman; told him she “didn’t know how they owed that money;” that Dausman had always said he was going to give them a statement .but had never done so. "Whereupon Schwartz undertook to get one from Dausman; met him in the hall of the office building in which he and Schwartz had their offices and told him to give Mrs. Yeney the statement he had promised. Dausman, apparently sometime after April 20, 1909, delivered to Schwartz for the plaintiffs a statement of account, of date March 26, 1909, wherein he claimed to have expended $37.05 for “repair on roof” and “improvement of Montgomery street,” and $252.21 for filing papers, advertising, court costs, sheriff’s bill, “R. Deed” and “attorney,” a total of $289.36, on which he gave a credit of $33.20 for “cash paid for costs.”
Mrs. Yeney testified that she had never authorized Dausman to employ an attorney for her and had never heard of these items until she saw them in this statement and knew nothing about them. About a month after Judge McDonald had called on Mr. Schwartz, Mr. Joseph A. Wright called on him concerning the transaction, acting as he told Mr. Schwartz, as representative and attorney for the plaintiffs. Some while after this, when does not clearly appear, Mr. Schwartz inserted an advertisement in an evening paper published in St. Louis, that the collateral to this note of Mr. Gould’s would be sold at the court house in the city of St. Louis, ten days aftér the date of the notice. How often this was published is not in evidence. Mr. Schwartz testified that he handed Dausman a copy of the advertisement cut from the paper and that he had mailed a copy to Mrs. Veney through the United States mail in a stamped envelope. Mrs. Veney and Mr. Dausman denied ever having received any such notice, and Dausman testified that he had never seen the notice and never-heard of the sale until it was over, although his office was on the floor immediately above that of Mr. Scharwtz and they had had more or less business dealings with each other.
Mr. Schwartz admitted that although he knew before the sale that Judge McDonald was representing, the contractors and had, on the first occasion of their interview, told him he represented plaintiffs, and knew that Mr. Wright represented them, further admitted that he had never notified either of them or these plaintiffs of the intended sale of the collateral to the Gould note. At this sale Max Haas, one of the defendants, purchased the collateral to the Gould note, that is, the deed of trust, the principal and interest notes, for about $580.50, that being a little over the amount of the Gould note, its accrued interest and the cost of advertising and sale. Prior to this sale it appears, according to the testimony of Mr. Schwartz, Mr. Haas came to the office of Mr. Schwartz and asked him about what the property was worth, and concerning the transaction, particularly whether the paper, meaning the principal note, had been “handled” before maturity, which Mr. Schwartz assured him was the fact. He also asked concerning Gould and who he was, all of which Mr. Schwartz informed him. He further asked Mr. Schwartz at that time whether he had sent notices to those several parties of the intended sale of the collateral to the Gould notes, that is the deed of trust and the notes of plaintiffs, and Mr. Schwartz told him he had, and Mr. Haas asked to look at the deed of trust and notes. Mr. Schwartz was asked if he had told Haas that the notes and deed of trust had been pledged by Dausman without authority of plaintiffs. He answered that he did not know as to that, because he had had a conversation with Mrs.. Veney before that in which they tried to square up the differences between Mrs. Veney and Dausman regarding the $256.-06 represented in the statement before referred to. Admitting that he had talked with Mrs. Veney and with Judge McDonald and with Mr.' Wright prior to the sale about the matter, he was asked: “Were you not satisfied at that time that Dausman had pledged this note and deed of trust without any authority from the plaintiffs?” He answered: “Well, that would be more or less a conclusion.” He was asked if he had not told Haas anything about that. He answered that he did not think he went into that feature of it; did not recollect that he did. We will set out Mr. Haas’s version of this conversation later.
Mr. Schwartz testified that his connection with the matter ended with the sale of the collateral to Haas. Asked by the court whether, when Haas asked him if the $1500 note had passed to Gould before maturity, and he told him it had, whether he did not then know that plaintiffs and Judge McDonald, representing the contractors and builders, were questioning the transfer of the note and claiming it as a fraud, he answered that he knew that. Asked by the court why he did not tell Haas that, he answered that he did not . think that was material; “I didn’t want to spoil the sale of the note.” By the Court: “You didn’t want him to buy a note he couldn’t collect? A. I believed he could collect it. Q. When he was asking you for information why didn’t you give him all the information you could? A. When he asked me whether I believed this transaction was square, so far as Gould was concerned, I. told him positively, yes, sir. Q. He asked you whether it was square? A. Yes, sir. Q. You told him, so far as Gould was concerned, it was? A. Yes, sir. Q. Did you tell him, so far as Dausman was concerned, it wasn’t? A. I intimated it. Q. That, you knew the thing was in question? A. I won’t say that. Q. You say you intimated it? A. Perhaps. Q. What did you say? A. I don’t recall that. Q. How did he get the exact amount due on this note? Why did he bid that amount? A. I believe I announced before the sale that the property would have to bring at least so much money. Q. And he paid just that amount? A. No, sir; I think he paid slightly over that. Q. You had told him the deal was a square one so far as Gould was concerned? A. Yes, sir. Q. How did he come to ask you that question? A. I presume because of the difference in the amount. Q. Did he ask you whether it was bona fide? A. I believe he did. I told him Miss Veney had been up to my office, in fact, had been there several times, and I had asked her whether she had executed that paper, and all those facts, and she acknowledged to me she had, and then I knew if Gould was an innocent purchaser for value before maturity, I concluded the transaction, so far as Haas was concerned, was proper. Q. If Gould knew at the time he took the note that the note was the note of the plaintiffs put in Mr. Dausman’s hands to be negotiated to raise money to pay- on the property, and he only got $500 on it, or he only advanced $515, you knew that? A. Yes, sir. Q. And did Haas know that? A. I presume he could have seen that. I don’t recall that feature of the transaction, although I should say perhaps he did; I suppose he saw it, as a business man. Q. You explained that? A. Yes, sir; possibly; he is a business man.”
Beyond acting as trustee in advertising the .sale-under the deed of trust, as attorney for Mr. Haas, Mr. Furth does not appear to have had any connection whatever with the transaction.
Beturning now to the transaction by which Mr. Gould came into it, according to the testimony of Daus-man, this deed of trust and the notes of plaintiffs were in his possession for nearly three years and soon after the execution of the deed of trust, he says he found, on getting the title examined, that plaintiffs did not have a clear title, and all proceedings for the negotiation of the notes were stopped for the time, Dausman in the meantime keeping the deed of trust and notes in his possession. (Beyond this statement of Daus-man, there is not a particle of evidence that there was any flaw in plaintiffs ’ title. The inferences are all the other way.) It appears further by his testimony that until Dausman heard that Schwartz had written a letter to the plaintiffs, no demand had ever been made on them for the payment of their notes and deed of trust, and when Dausman contracted with Smith and Giesecke to rebuild their house, he had not told them anything about this deed of trust being pledged to Gould, although he knew that these contractors had never been paid anything on account' of their work about the house.
Dausman and Gould had been acquainted several years prior to 1907, Dausman having acted for him in making a loan on some property in Kirkwood, the loan amounting to $500. That loan had been made about three years prior to the 14th of September, 1907. The Kirkwood loan was paid off early in that month, Daus-man having collected it some little time before this 14th of September, how long before that is left entirely in the dark, neither Dausman nor Gould fixing the date. At all events, after its collection Gould appears to have called on Dausman about the matter and Daus-man told him (Gould) that he (Dausman) could use the money in another place, and proposed to give his personal note to Gould for the amount, $515, and to put up this deed of trust and the notes of plaintiffs as collateral for the payment of his own note.
Dausman testified that he could not remember the conversation that took place between him and Gould at the time but that he thought Gould asked him if this • collateral was good enough for the amount, that is for the $515. Dausman told him he thought it was. He handed Gould the deed of trust and the notes of plaintiffs; did not know whether Gould read them or not; did not think Gould asked him how it happened that he (Dausman) was named as trustee in the deed of trust and still held the notes; did not ask who Grimm was, although Dausman testified' that Gould did not know Grimm personally; did-not ask Dausman any questions about how those notes happened to be payable at his (Dausman’s) office. Asked how he (Daus-man) happened to give Gould a one day note, he answered: “Because it was an indefinite time.” “It was an indefinite time,” said Dausman, because he did not know how long he wanted it and just made it one day after date without specifying any time. When Gould came down to get this individual note of Dausman’s it was signed up. They had talked about the matter before that so that it was all signed up when Gould came in the day upon which it was delivered to him. Dausman, called as a witness by the plaintiffs, gave the above testimony in his direct examination.
While under cross-examination by counsel for one or more of the defendants, Dausman was asked by the court whether, when he passed these notes of the plaintiffs and the deed of trust to Gould, he (Dausman) was indebted to him in the -amount of his note to him. He said that he was. The court asked him if he had borrowed the money from him at that time. He said, “Tes.” The court asked Mm if the pledge by him to Gould at that time was to secure the debt “that you then owed him?” Dausman answered: “It was a payment he got.” That he gave Gould the note for the $515, and that was the money that came to him (Gould) from a loan in Kirkwood, which he (Daus-man) had collected and which'was due Gould, and that instead of giving Gould the money he (Dausman) gave him this $515 note and gave him the notes and deed of trust of the plaintiffs to secure the payment of that note; that Gould asked him if that security was good and he said it was. That Gould did not ask him whether he (Dausman) owned those notes or not; that Dausman had not told him whether he owned them or not; that he had not asked him and that nothing was said about it. The court asked him what assurance Gould had that he (Dausman) owned the notes. Daus-man answered that he did not know. The court said: “He didn’t ask for any,” to which Dausman answered, “No, sir.” The court asked him if he had given Gould any explanation as to how he came in possession of those notes. He answered, “No;” that nothing was said about it; that he had not told Gould that he had himself loaned this money to these people and Gould had not asked that. The court asked him if, generally, he explained such matters to people and told them whether notes belonged to him or not. He answered that if they asked him the question he did, or he would say: “We have such and such a paper here, and we give you this. They hardly ever ask if we own them or not;” that in this case Gould had not asked anything of the kind.
■ His cross-examination resumed by counsel for defendants, Dausman stated that these notes of the plaintiffs were indorsed in blank. Asked whether they were due at the time or had matured, he said: “No, sir; I don’t know; I don’t think they had;” that they had some few months to run. Asked if at the time Gould had left the Kirkwood deed of trust to be collected, whether anything had been said about his using the money himself, he answered, “No,” but that after this Kirkwood loan had been paid he told Gould that he could use that money elsewhere. G-ould asked him whether the property was worth the money, and Daus-man told him he thought it was. The court then asked him if prior to the time he gave these notes as collateral security to Gould, Gould had authorized him to make use of the money himself. He answered that he had not done so before that time. The court then asked him this: “He was there to get his money and you gave him this note instead of the money? You gave him your own note secured by those notes instead of giving him the money? A. I told him I could give him these collaterals for the amount of the loan.” The Court: “He came to you to get the money you had collected from the Kirkwood loan? A. Yes, sir.” The Court: “You didn’t have it to give to him? A. No, sir.” The Court: “And instead you gave him your note and these notes as collateral security to secure the payment of that note due in one day A. I think I did have the money at that time; it was only a few days after I got it.” Asked by counsel for defendants if he was ready to pay the money at that time he answered: “Yes,” but that he had told Gould he could use the money elsewhere; could place it elsewhere, and he gave him his own note and this deed of trust and notes as collateral security.
On re-examination Dausman was asked why he gave his persona] note and he answered that he did not know. Asked if he could bring into court a bank book showing that he had $500 or anything like that sum on deposit on the 14th of September, 1907, he answered that he did not think he could; that he might have had more than that; that he could not produce any bank book now because he could not tell what bank he was doing business with at the time but knew he did not have the $515 in his pocket. Asked to produce his bank book and show it, he answered that he would have to find out what bank he was doing business with at the time, whereupon the court asked the witness, that if this money belonged to Mr. Gould, money he owed Mr. G-onld, which he had collected on the Kirk-wood loan, was left with him by Gonld to be loaned ont again, as the witness had said he told him he wonld place it again, why Dansman gave his individual note to Gonld for it. This witness answered: “It may have been I said that I could use it myself; I may have told him that.”
Mr. Gould’s account of the transaction is about as follows: He was conductor on a passenger train on a railroad and had been for twenty-three years past; had been acquainted with Dausman for a number of years prior to this transaction; became acquainted with Mm sometime about 1905; saw an advertisement by Dausman in the paper for money to loan,-five or six hundred dollars, or something like that; that he wanted to get to loan out; went to Dausman and loaned through him $500, secured by deed of trust on some Kirkwood property; that was a three-year loan, which fell due along about September 1, 1907; had been loaned then about three years. The loan was payable at Daus-man-’s office and Dausman received payment of it and notified Gould of that fact. Asked how Dausman happened to execute this $515 note, payable one day after date, witness said he did not know that he could explain it, except that it is usual and customary for a man to give a note for money loaned. Wh,en he went in to see Dausman about the money after it had been collected, Dausman told him he had the money and could place it for him if he (Gould) did not need it; that he could place it for him on another loan, whereupon Gould told him to place it. Dausman then executed the note before referred to for $515, Gould, as he testified, understanding at the time, that Dausman was going to use it for the improvement of the property on Glasgow avenue, described in the deed of trust; that was his understanding when he accepted Dausman’s note and the note for $1500 and the deed of trust made by plaintiffs. Asked if lie bad testified to anything like that before a commissioner when bis testimony bad previously been taken be said be did not know and did not remember now but that “it seemed like that was bis understanding” when Daus-man gave him bis personal note and the note for $1500 and the deed of trust. The court asked him if be knew that Dausman held that note for these plaintiffs. He answered that be did and that be bad given him plaintiff s’, note and the deed of trust as collateral to bis (Gould’s) own note, telling Gould that be (Dausman) wanted money “for the colored women to repair their bouse.” The court asked him if be knew that Daus-man was getting money on their note for that purpose. Witness answered, “Tes, sir; be gave me the note for $1500 and the deed of trust as security.” Counsel for plaintiffs asked him if Dausman bad told him for whom be was raising money to improve the bouse. Witness answered that be thought be did. He was asked if be knew Dausman bad not paid him the $515. He answered that be did, but Dausman was go • ing to apply that $515 which be (Gould) was to .loan him to the repairs of the bouse; that was bis understanding from Dausman. At. that time Duncan bad in bis possession this $515 “to make a loan for me,” said Gould. Thereupon this occurred in the examination of the. witness: “Q. What be was really doing was paying you off, wasn’t be? A. Paying me off? Q. Tes, sir; by giving a one day note? A. That I can’t say. Q. What? A. That I can’t say. Q. Tou didn’t advance any money? A. No, sir; be bad the money in bis possession and gave me a note for $1500 signed by Miss Veney and Taylor, and the deed of trust as security.”
Asked if when Dausman’s note was banded to him the number “4116 North Taylor avenue,” bad a line through it and 2614 Glasgow avenue inserted in its place, witness answered that it was in that condition when the note was handed to him and that the alteration had not exicted his suspicion; that he had a deed of trust for some property on Kossuth avenue, west of Taylor, hut not on Taylor; that he bought that from Dausman and had turned over the collection of that along with the collection of the Dausman note and the $1500 note of plaintiffs to Mr. Schwartz as his attorney. The note on the Kossuth avenue house was for $1200. He had gone to Mr. Schwartz with the papers because Mr. Dausman had referred him to Mr. Schwartz. When witness heard that Dausman was in trouble and in jail he had gone down to the jail with Mr. Schwartz to see Dausman about his (Gould’s) matters. Ashed if he could give the entire conversation between himself and Dausman at the time he took the note and deed of trust as collateral, he said that as near as he could remember Dausman gave him the note and paper, deed of trust, and he asked Dausman if it was absolutely safe and Dausman said it was. ‘ ‘ That, ’ ’ said witness, “is about all that happened,” except that he said “he wanted to use the money for improving this Glasgow avenue property;” that he had not said anything to him about wanting to have it for his personal use. Witness testified that he would not have loaned it to Dausman or to anybody else on a persona] note and while he was giving his personal note, witness understood it was to be secured by the deed of trust and the $1500 note. The collateral was sold at the east front door of the court house in the city of St. Louis, on the 15th of February. Witness attended the sale; had not notified the plaintiffs or Judge McDonald or the contractors, who were filing a lien on the property, of the sale. None of these parties were present on the 15th of February when the collateral was sold, as far as he knew; Mr. Schwartz was looking after the business for witness. After Dausman had given him the $515 note, of date 14th of September, 1907, and it was not paid, he (witness) commenced going to Dausman for it and dunning him for it and telling him lie needed the money and Dausman put him off from time to time; had gone up to see these plaintiffs one evening about owning and holding their note and deed of trust but could not tell whether that was before or after Mr. Schwartz had written to them about it; it was something like a year prior to the daté of the trial, which was the 10th of October, 1910.
On cross-examination witness stated that Daus-man was the only man through whom he had loaned money; that when he called on Dausman, his understanding was that the Kirkwood loan had been paid and that Dausman had the money from the collection. It was perhaps a little while before that that Daus-man had asked him for the loan of this money. Nothing was said at that time about the note or the security Dausman was to give, or whether he was to give any security for it — witness did not think there was. When he went down to Dausman’s to collect this Kirkwood money, Dausman did not offer to pay it to him, made him no offer. He said he could turn the money for him or place it for him if he (Gould) did not particularly need it, and that Gould had allowed him to do, as he did not need it. When Dausman gave him his personal note for the $515, there was nothing to excite his suspicion about it. What he wanted was the loan secured and he took Dausman’s note because it was secured by the deed of trust and the note. It made no difference to witness whose note it was as long as it was secured.
On re-examination by counsel for plaintiffs, this witness, Gould, admitted that when his testimony was taken before a commissioner, he had stated that after the Kirkwood loan was paid off he had a talk with Dausman, and Dausman had asked him if he (Daus-man) could use the money, and that he had then answered, “Yes,” and he now said that answer was correct; that they had spoken about Dausman using the money at different times when witness was down at Ms office and that Dausman had told him several times that if he (witness) did not need it when it was paid he eonld place it for him. He also admitted that in the testimony he gave before the commissioner, when asked what he had told Dausman when Dansman had asked him if he could use' the money, he had answered, “Of course he could use it if he could furnish collateral;” that he had the money to loan and wanted to make out of it all he could. Dausman said he could use it and would fix up a note and handed him the papers. The papers were all made out when he went to Dausman finally and Dausman handed them to him for the money he had collected. That might have been a week or two weeks and might not have been more than a day or so after Dausman first told Mm about collecting the money. Asked why he had not said anything in his testimony before the commissioner about Dausman telling him he was going to use that money for a building loan, he answered: “The question perhaps wasn’t put to me.” Asked if he had testified that Dausman said he wanted the money for’ his personal use, he answered that he did not think that he had; that he would not have loaned it to him for his personal use. Asked by Mr. Furth, “When you say there that Dausman said that he could use the money, that doesn’t mean that he was going to use it personally? A. No, sir; I wouldn’t take it that way; I took it for granted that he would place, it for me and furnish me collateral. . . . That was the understanding, that he was going to use it and place it as a loan and furnish me collateral. I didn’t understand him that he was going to use it for his personal use.”
Recalled for examination by the defendants, Mr. Gould was asked to state what the transaction was when these notes were pledged to him by Dausman, as nearly as he could remember to state what hap-pexied. Pie answered: “I understood that to be a straight, honest and bona fide transaction.” The Court: “Which? A. When Dausman delivered me the $515 note and the $1500 note and deed of trust. Q. You understood what? A. I understood it to be an honest and honorable transaction; the $1500 note and deed of trust was to secure me on the $515 note. I took that to be an honest and honorable transaction on the part of Mr. Dausman.’’ By Mr. Purth: “What did Mr. Dausman say to you and what did you say to Mr. Dausman on the ■ occasion when that pledge of those notes was made? A. He gave me those papers to secure me. Q. Yes, sir; what did he say to you? A. He said: ‘These are absolute security for this note of $515.’ Q. Did you look at those notes and that paper at the time? A. Yes, sir. Q. Were these notes (indicating) in that condition at that time? Turn them over and look at them. Have they been altered in any way? A. Not as I know of. Those were signed by Henry J. G-rimm, without recourse; I don’t know about his (indicating), but that (indicating) was on there. (What is refered to is not clear by the record). Q. They were indorsed in blank at that time ? A. Yes, sir. Q. Were they due at that time, do you know? A. I can’t say. Q. According to the dates they matured April 26, 1908, and yon got them September 14, 1907, didn’t you? A. Yes, sir. Q. Now, what information, if any, did you have about the transaction between Mr. Dausman and Mrs. Yeney and Mrs. Taylor, what knowledge or information? A.. I don’t know that he gave me any information about them. Q. Did you ask him anything about them? A. No, sir, I didn’t; I didn’t ask him anything about them at all. He simply said that their paper secured me. Q. You had this $515 coming from him? A. Yes, sir. Q. And took this as security for your debt? A. Yes, sir; took the $1500 note and the deed of trust as security. ’ ’
Mr. Gould further testified that after receiving the note from Dausman, Dausman liad paid the $30.90 to him which was indorsed on the back of the note and that because he had paid that year’s interest he had not pushed him for collection for the year following; that after that year was out he began to crowd him for the money and Dausman kept putting him off from time to time. He was asked by the court if he had asked Dausman if he owned that $1500 note or not. He answered, “No, sir; I didn’t; I didn’t ask him if he owned it; ” that he took it for granted that' the transaction was absolutely honorable and square.
So much for Mr. Gould’s account of the transaction.
Mr. Haas testified that he had purchased the deed of trust and the principal and interest notes at the sale on February 15, 1910; that before the salé he had inquired whether the note had been pledged before maturity; also inquired whether there was a chance of their being forged. Mr. Schwartz assured him that there was no forgery. Witness asked him what was wrong with the paper and Schwartz said there was something in a deed from the grantor to these grantees, Yeney and Taylor, and there was another party. Witness then looked at the deed as recorded at the City Hall, consulted his attorney, and found, in his own opinion at least, that plaintiffs had a perfect title and concluded that the deed of trust, that is the security for the $1500 note, was perfect, and on that conclusion went to the sale and bid when the deed of trust and notes were put up and purchased them. Asked if he had inquired whether Gould had given any value for his pledge he answered, “I made every inquiry necessary to assure myself that the transaction was in every way bona fide.” The Court: “That is not an answer.” By Mr. Furth: “Did you inquire whether Gould had given any value for his pledge? A. I did. Q. What information did you have on that subject? A. I was shown the note which G-onld had. Q. As to what value he gave for the pledge? A. Five hundred and fifteen dollars, I understood. Q. Who told you that? A. Schwartz. Q. Was that before the sale?” Witness' answered that it was. He further testified that neither plaintiffs nor any one for them had ever tendered him any money for the surrender of these papers before the beginning of the suit.
On cross-examination he testified that he was a dealer in real estate mortgages and in real estate; dealt a good deal in “seconds” and “firsts;” had been in the business since 1902; did not do much real estate business, apart from purchasing deeds of trust. Witness’s office is on the second floor below that of Mr. Schwartz and he went into the latter’s office to inquire about this, deed of trust; had simply asked Mr. Schwartz about the validity of the transaction, whether the transaction was all right as between G-ould and Dausman, whether the deed of trust was a forgery or whether it was a bona fide deed of trust, and Mr. Schwartz had given him a satisfactory answer in both instances; that he asked Mr. Schwartz about the title and Mr. Schwartz referred him to a title examiner, whom he saw, and concluded that the title was good in these plaintiffs. Asked if he did not know at the time that Dausman had been in jail for some such similar offense, he answered that he did not know there was any offense connected with this transaction; that if he had known it he would not have touched it; that he knew Mr. Dausman had been arrested. Asked if he did not know that he had been arrested for taking money from people on deeds of trust, he said: “I don’t know about that.’’ Counsel for defendants objected to this line of questioning, arguing that if Dausman was in jail for taking somebody’s money, it did not follow that three years before he had done the same thing. To which the court replied: “No, sir. He says he started to find out and inquired whether this was a bona fide note. Now, then, what he inquired is one thing and what he knew may go in to show whether he availed himself of all the sources he had of ascertaining. I think that may go in.” This was objected to by counsel for the defendants and exceptions saved, no ground of objection, however, being stated. He was then asked if .he did not know that Dansman had been arrested on the charge of appropriating the money of his customers before that. This was objected to, no ground stated, objection overruled and exception saved. Witness answered : “You asked if I knew he had been arrested?’’ Counsel: Q. £<Yes, sir. A. I knew Dansman had been arrested; I think it was before that time. ” Asked if he had looked at the $515 note before the sale, he said he thought he had. Asked if he had noted the erasure on it by scratching out 4116 North Taylor and writing 2614 Glasgow under it, he said he may have noticed it but that it did not excite his suspicion; had noticed that it was a one day note; noticed that Dans-man was the trustee in the deed of trust but that would not have made any difference to him; noticed that the notes secured by the deed of trust were payable at Dansman’s office but that did not “hurt the note any;” had noticed all that before the sale; had looked at the property before the sale
Witness testified that he was familiar with the fair market value of real estate in St. Louis and was of the opinion that on the 15th of February, 1910, the date on which he purchased the collateral, it was reasonably worth between twenty-seven hundred and fifty and three thousand dollars, that is, in the shape it was at the time he saw it, and provided everything was paid, with no debts against the property and assuming the title was perfect.
This is substantially the testimony in the case.
At its conclusion the trial court found for plaintiffs and entered up a decree directing the cancellation of the deed of trust and of the note securing it. Prom this the defendants Haas and Fnrth, as'trustee, interposing a motion for new trial and excepting to its overruling, duly perfected their apeal to this court. Pending the .appeal here, the plaintiff Sarah Yeney died and her death being suggested the cause proceeded, so far as respondent is- concerned, under the provisions of section 2075, R. S. 1909, in the name of the surviving respondent, Laura Taylor.
Syllabus and headnotes are prepared by the reporter or publisher, not the court, and are not part of the opinion.
