#### ST. LOUIS NATIONAL LIFE INSURANCE COMPANY, Respondent, v. INTERNATIONAL BANK OF ST. LOUIS, Appellant.

St. Louis Court of Appeals,

May 17, 1910.

1. REPLEVIN: Bills and. Notes: Recovery of Note Discounted: Principal and Agent: Authority of Agent to Transfer Premium Note: Life Insurance. An agent of plaintiff, an insurance company, took an application for life insurance and a note in which he was named as payee for the first premium, and executed a receipt for the note, containing an agreement that if the policy was not issued in sixty days after examination by the insurance company’s physicians, the note would be returned on surrender of the receipt. The note was given on Saturday, and the agent left it with plaintiff until Monday, when he called for it, stating that he wished to negotiate it. He transferred it to defendant, a bank, and received credit for the amount. Plaintiff never accepted notes for premiums, and whenever an agent took a note, he was charged with the premium, and if the company received the note, it only held it as collateral for the premium. Defendant bank, when it bought the note, knew it had been given for an insurance premium. Owing to a change of management in plaintiff insurance company before the issuance of the policy, the risk was refused, and it then brought replevin against the bank to recover the note. *Held,*that the agent had the power to discount the note, and there being no evidence of fraud on his part, replevin would not lie to recover it.

2. -: -: -: -: -: Instructions. In such a case, where the court instructed the ^ury to return a verdict for plaintiff if they found it was the owner of and entitled to possession of the note at its date and found from the evidence that defendant knew when it was discounted, or by ordinary care could have known, that the agent had no authority to discount it, or secondly, if the jury found defendant knew, or by ordinary care could have known, that the note was the property of plaintiff, and not that of the agent, or, thirdly, if the jury found the note was received by the agent as agent, and defendant knew, or by ordinary care could have known, he had no authority to indorse and discount it, the second charge was inconsistent with the third and all thrée were inconsistent with the evidence.

Appeal from St. Louis City Circuit *Court.*— Hon. *Eugene MeQuillin,*Judge.

*552Reversed.

*Harry W. Haeussler*and *Rassieur & Feuerbacker*for appellant.

(1) The insurance company, not having issued a policy of insurance on the life of Edgar B. Woodward, had no such interest in the note herein sued for, as would entitle it to maintain replevin therefor. If the International Bank of St. Louis was not the bona fide owner for value, then the Woodward & Tiernan Printing Oo. is entitled to possession of the note, and not the insurance company. Plaintiff in an action of replevin, cannot recover upon the weakness of defendant’s title, but must prevail, if at all, upon the strength of its own title. Bank v. Snyder, 85 Mo. App. 82; Kennedy v. Dodson, 44 Mo. App. 550; Moore v. Carr, 65 Mo. App. 64; Rhoades v. McNulty, 52 Mo. App. 301; Bank v. Water Power Co., 58 Mo. App. 532. (2) The receipt given by August Goerts to Edgar B. Woodward at the time of the execution and delivery of the note, should not have been admitted in evidence, as it was not shown that the International Bank of St. Louis, or the officers thereof, had any knowledge of such receipt or its contents at the time of the discounting of said note. Hunter v. Johnson, 119 Mo. App. 487; Donovan v. Fox, 121 Mo. 236; Hamilton v. Marks, 63 Mo. 167. (3) The mere fact that the note was made payable to “August Goerts, Agent,” did not impart notice to the bank that said August Goerts was not the real owner thereof, or that he did not have authority to endorse or discount the note. Bryant v. Durkee, 9 Mo. 169; Agricultural Works v. Heisser, 51 Mo. 128; Thornton v. Rankin, 19 Mo. 193; Nickerson v. Gilliam, 29 Mo. 456; Powell v. Morrison, 35 Mo. 244; Mayer v. Bank, 86 Mo. App. 108; Fletcher v. Schaumberg, 41 Mo. 501; Eyerman v. Bank, 13 Mo. App. 289. (4) The rule that a purchaser of a note is not an innocent holder thereof if there are cir-*553cum,stances connected with the transfer of same, sufficient to put an ordinarily prudent man on inquiry, is not the prevailing law of this State; and to deprive the bank of the status of an innocent holder for value, it must be proven that the bank bought the note in bad faith, with knowledge of the fact that Goerts was not the rightful owner, or had no right to endorse or discount same. Merely proving facts such as would put an ordinarily prudent party about to purchase a note, upon inquiry, is not sufficient, nor is gross negligence. Hamilton v. Marks, 63 Mo. 167; Bank v. Leeper, 121 Mo. App. 688; Wright Inv. Co. v. Realty Co., 178 Mo. 72; Bank v. Bank, 109 Mo. App. 665; Lee v. Turner, 89 Mo. 489; Mayes v. Robinson, 93 Mo. 114; Jennings v. Todd, 118 Mo. 296; Bank v. Hammond, 104 Mo. App. 403; Inv. Co. v. Yette, 142 Mo. 560; Inv. Co. v. Filling-ham, 85 Mo. App. 534. (5) The insurance company required its agent, August Goerts, to return cash for the first premium on policies issued by it, and would not accept notes in payment of such first premiums, and should not now be heard to say that Goerts had no authority to endorse a particular note, to the injury, loss or damage of an innocent purchaser for value.

*A. A. Hunt*and *John O. Marshall*for respondent.

(1) This court cannot consider the question as to whether the court below erred in overruling the demurrer to the evidence, for the reason the evidence is not set out in full and the defendant below introduced further testimony in support of his defense. Costello v. Fesler, 80 Mo. App. 107; Smith v. Sanders, 70 Mo. App. 221. (2) The question as to the inadmissibility of evidence is waived by the failure of appellant to notice them in his brief. Nor were proper exceptions saved thereto. (3) The burden of proof was on the defendant to establish that it was a bona fide holder for value before maturity, when plaintiff had first shown *554that fraud entered into negotiations of the note. Johnson v. McMurry, 72 Mo. 278; Keim v. Yette, 167 Mo. 390; Henry v. Sneed, 99 Mo. 407; Hamilton v. Marks, 63 Mo. 167; Chapman v. Hoff, 129 Mo. 317. (4) The word “agent” was sufficient to put defendant upon inquiry, and in law amounted to actual notice of infirmities of the note. Ford v. Brown (Tenn.), 1 L. R. A. (N. S.) 188. (5) The word “agent” limited negotiability of the note to the extent of agent’s authority to indorse. (6) The verdict of the trial court is supported by the evidence. (7) The answer does not bring defendant within the rule protecting innocent holders of commercial paper. There is no allegation therein that it was an innocent holder, nor that the note was taken in usual course without the knowledge of infirmities. Renshaw v. Wills, 38 Mo. 201.

GOODE, J.

Action of replevin to recover possession of a negotiable promissory note, dated September 5, 1908, due January 5, 1909, for the sum of $3506, payable to August Goerts, agent, and signed by the Woodward & Tiernan Printing Company. Said note is alleged to be of the value of its face, and plaintiff asks to recover it and one hundred dollars damages for its detention. Answer denied plaintiff was entitled to possession of the note at the filing of the petition or since, denied defendant ever wrongfully took the note from the possession of plaintiff or wrongfully detained it from plaintiff, and averred that long prior to the institution of the present action and before the maturity of the note, the payee endorsed, assigned and delivered it for a valuable consideration to defendant, whereby defendant became the owner. Plaintiff is engaged in the life insurance business in the city of St. Louis, and August Goerts, at the date of the note, was its agent and vice-president. He solicited risks, and in the course of that business induced Edward Woodward, president of the Woodward & Tiernan Printing Company, to take out a policy of *555insurance. Woodward was a heavy man and classed as an “o ver-weight;” but plaintiff company insured that kind of risks. Goerts offered to sell Woodward a policy of the fifteen-years endowment variety, insuring him for $50,000. During the negotiation, not only Goerts, the vice-president of plaintiff company, but Starnes, its president, saw Mr. Woodward and agreed to issue the policy; in fact Woodward applied for a policy of $25,-000, but Starnes offered to write one for $50,000. Woodivard submitted to an examination by physicians Avho acted for the company and was passed as a “first-class risk.” Thereupon he executed the note in controversy for the first premium. Though the note Avas signed by the Woodward & Tiernan Printing Company, it was given for the accommodation of Edgar B. Woodward. On the same date Goerts executed a receipt to the Woodward & Tiernan Printing Company for the note, said receipt being also a contract which contained one term material to the present case, namely, if a policy Avas not issued to the applicant Woodward in sixty days after he had been examined by the company’s physicians, the sum paid (i. *e.,*the note) would be returned on surrender of the receipt to the company. That instrument was admitted in evidence at the trial of the present case over the objection and exception of defendant, on the score that it knew nothing of the receipt having been given. The note was negotiated probably on September 7, 1908, to defendant, a banking institution in the city of St. Louis, which credited Goerts as agent, with the proceeds on the books of the bank and he checked the credit out in the regular course of business. Bfefore a policy was issued to Woodward, a change in the management of the directory of plaintiff company occurred, Starnes ceasing to be president and Goerts vice-president and agent, and thereafter, in November, 1908, the company refused in writing to issue the policy. Meanwhile Woodward had been demanding his note back or the policy, and the company’s refusal was made to him, *556Afterward, on December 2, 1908, tbe present action was instituted to recover the note back from tbe bank. Other facts must be stated. Tbe chief witness for plaintiff was Goerts, tbe payee of tbe note. He testified tbe insurance company refused to accept notes for premiums and ivhenever a soliciting agent took a note for tbe first premium, he was charged with tbe premium; that if tbe company received tbe note, it only held it as collateral for tbe debt, and the agent was charged with tbe amount. This Avas tbe uniform testimony on that issue. ' Agents were in the habit of taking notes for premiums and discounting them in banks, but tbe notes were regarde 4 as the property of tbe agent and not of tbe insurance company, except as already stated, when occasionally tbe company held them as collateral until tbe obligation of tbe agent for tbe premium was paid in cash. Goerts bad been accustomed to take premium notes, payable to him as agent, and to discount them with defendant and other banks. When defendant bought tbe note in controversy, it did not know what insurance company Goerts represented, but knew tbe note bad been given for tbe premium on tbe insurance contract; and, in truth, inquired of Goerts about tbe origin of tbe note. Goerts had taken notes payable to him as agent, as tbe one in question was, and when be did not have “facilities for discounting them for several days, be gave them to tbe company, but did not receive credit for commission until tbe company bad received tbe amount it bad charged against him.” When Goerts received tbe present note, be showed it to tbe officers of tbe insurance company, declaring be was proud of tbe application. Tbe note was given on Saturday; we suppose, after banking hours. Anyhow, Goerts testified be could not discount it that day, and' not wishing to carry it around with him, he left it with the officers until tbe next day (probably meaning Monday) telling them to take care of it for him. Afterwards be called for it, asking them “to give it to me to negotiate myself,” as be testified. *557They turned it over to him on his demand and he negotiated it with defendant. We find nothing in the record contradictory in any degree of the testimony of Goerts. The witnesses for defendant, among whom was the superintendent of agencies of plaintiff company, corroborated what Goerts said. The superintendent of agencies testified that if an agent brought in a note for a premium it would be simply an act of courtesy on the part of the company to accept and hold it until such time as the cash was paid for the premium; that the company looked to the agent for the net cash, did not accept notes as premiums, but only held them as collateral ; that the company advised agents to handle their own paper and not to bring it into the office at all, and agents were not authorized to take a note payable to . the company for the first premium. Such, in substance, are the material facts. In our opinion their only result is to defeat plaintiff’s action. This case is governed less,. perhaps, by the law merchant, than by the law of principal and agent. It is an ordinary action of replevin for a piece of personal property. If any wrong occurred in connection with the note, the wrong was the negotiation of the note by Goerts before the policy had been issued. We do not say he committed any wrong in that respect, because, as far as appears, the only reason the policy was not issued was a change in the management of the company, and in everything Goerts did about agreeing to take the risk he had the approval of the management in charge at the time. The risk had been passed as first-class, and there is nothing to show Goerts had reason to believe the policy would be refused. However, at the most, the insurance company, after declining to issue the policy, had a claim against Goerts for the proceeds of the note, as a receipt had been given by him, or an agreement in the form of a receipt, which declared the note would be returned to Woodward if the policy was not written. What is clear on the facts before us is, that Goerts had the power to discount this note — to ne*558gotiate it to defendant bank. Even granting the title to it was in plaintiff, the nncontradicted evidence shows plaintiff’s officers, after it had been turned over to them by Goerts for safe keeping, redelivered it to him on his demand and did so in order to enable him to negotiate it. That is, the officers of the company turned it back to Goerts for the express purpose of negotiating it. This being so, we can conceive of no contingency in which the title of defendant could be defeated unless its officers were aware of some fraudulent motive on the part of Goerts. Suffice to say there is no proof he had any fraudulent motive, nor a shadow of evidence tending to prove defendant was in collusion with him or acted in bad faith. Two sections (55, 56) of the Negotiable Instrument Act bear on the infirmities in the title of holders of negotiable paper and notice of such infirmities. [1 Mo. Ann. St., p. 530.] The first says a title of a person who negotiates an instrument is defective when he obtained the instrument or any signature by fraud, duress, force and fear, or other unlawful means, or when he negotiates it in breach of faith or under such circumstances as amount to a fraud. Only the latter clause could apply to the negotiation of the note in dispute by Goerts, and how can he be said to have breached faith or committed a fraud, when he did with the note what the officers of plaintiff intended he should do when they redelivered it to him?

The case was submitted to the jury in the court below on instructions which authorized them .to return a verdict for plaintiff if they found it was the owner of and entitled to the possession of the note at its date, and found from the evidence defendant knew when it was discounted, or by ordinary care could have known, August Goerts had no authority to discount it; or, secondly, if the jury found defendant knew, or by ordinary care could have known, the note was the property of plaintiff and not the property of Goerts; or, thirdly, if the jury found the note was received by Goerts as *559agent and defendant knew, or by ordinary care could have known, he had no authority to indorse and discount it. The second charge was inconsistent with the third and all three were inconsistent with the evidence in the case; for, as said, both by custom and, in the present case, by special conduct equivalent to express authority, Goerts was authorized to discount the note. As plaintiff’s officers had accepted the risk and had turned the note over to Goerts to negotiate it, defendant could have learned nothing against Goerts’ right to dispose of the paper by any degree of diligence in prosecuting inquiries.

The judgment is reversed.

All concur.