Case Name: MILLIKEN-HELM COMMISSION COMPANY v. C. H. ALBERS COMMISSION COMPANY, Appellant
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1912-06-10
Citations: 244 Mo. 38
Docket Number: 
Parties: MILLIKEN-HELM COMMISSION COMPANY v. C. H. ALBERS COMMISSION COMPANY, Appellant.
Judges: Brown, G., concurs.
Reporter: Missouri Reports
Volume: 244
Pages: 38–75

Head Matter:
MILLIKEN-HELM COMMISSION COMPANY v. C. H. ALBERS COMMISSION COMPANY, Appellant.
In Banc,
June 10, 1912.
1. ASSIGNMENT OF CONTRACT: Collateral Security: Right of Assignee to Sue. The proper person to sue on contracts transferred by the covenantee to defendant as collateral security for a loan and later assigned by said covenantee to the plaintiff, with full power to collect whatever was due the assignor thereon, is the said assignee.
2. -: -: -: In Possession of Transferee. Nor does the fact that the contracts so transferred by the covenantee to the lender as collateral security for a loan were in the physical possession of such lender disable the assignee of such covenantee to sue the lender who also was the covenantor and pledgee. The writings were only evidence of the contracts, which arose from the nature of the engagements entered into by the parties. The assignee had the right to enforce the contracts according to their terms subject to the right of the depositary (the defendant) to retain out of any sum for which he was liable as the maker of said contracts, an amount sufficient to discharge the debt for which the contracts were transferred to him as collateral security for a loan.
3. PLEDGE: Duty of Pledgor to Tender Amount Due Pledgee: No Pleading. The pledgee does not take the legal title upon a deposit of non-negotiable paper or rights arising under contract, with a lender to secure a loan; in such case the pledgee acquires merely a possessory right to retain the property until the payment of the debt, or a lien upon its proceeds in case it is sold after default of the pledgor. Hence, it was not the duty of the plaintiff, to whom had been assigned certain contracts entered into by the assignor and defendant as buyer and seller of grain, which had been previously pledged to the seller as collateral security for money borrowed from the seller by the buyer, to pay, or tender in the petition, to defendant, before or when plaintiff sued on the contracts, the amount of the loan secured by the contracts. Defendant could have pleaded such debt as a setoff to the amount plaintiff was ■entitled to recover, but having failed to exercise that option it cannot complain that the judgment is for the whole amount ■due under the contracts.
Meld, by WOODSON, J., dissenting, that tht pledgor or his assignee of personal property or choses in action, pledged as collateral security for the payment of a debt, cannot sue the pledgee and receive the property so pledged or its value, without first paying or offering to pay the debt to secure the payment of which the property or contracts were pledged; and a suit brought by the assignee on contracts pledged as collateral security, without a payment or tender of the debt, is so brought for the purpose of coercing the pledgee (who is at the same time the maker of the contracts) to waive the illegality of the contracts as a defense, by pleading the debt as a setoff, and should not be tolerated. Held, also, that there is no distinction as to the right of the pledgee, whether the subject of the pledge be personal property or choses in action, such as bills, bonds, notes, contracts, etc.
4. -: Judgment Against Pledgee in Favor of Assignor for Entire Amount. Where the petition in the suit on defendant’s own contracts deposited with it as collateral security for a loan or as an advanced payment of the amount due thereon pending settlement, did not contain any averment relating to the loan, and defendant did not in its answer plead that loan or payment as an offset, and at the trial declined either by pleading or instruction to ask a reduction in the recovery on that account, there was no ruling adverse to defendant’s interest in that matter.
§. -: -: Corrected by Appellate Court. But the Supreme Court is by statute (Sec. 2083, R. S. 1909), vested with power to give such judgment as ought to have been given in such, case; and where the plaintiff, in his brief, asks that the judgment be reduced by the amount of the loan or advance payment secured by the contracts sued on, that will be done.
Appeal from St. Louis City Circuit Court. — No». Virgil Buie, Judge.
Affirmed (conditionally).
Barclay, Fauntleroy & Cullen for appellant.
(1) The peremptory instructions to find for defendant on the admitted facts should have been given. The pledge of the grain contracts by the Thyson Company (assignor of plaintiff) to the-defendant, as collateral for a loan by the Thyson Company passed an interest or special property in those choses in action; so that after maturity of the notes, an assignee of the Thyson Company should not maintain a suit upon the contracts or claim any right of possession, until payment of the loan and interest. Yeatman v. Sav. Inst., 95 U. S. 764; Bank v. Barnett, 184 Fed. 607; Boeder v. Brewing Co., 33 Mo. App. 49; Howell v. Caryl, 50 Mo. App. 449; G-aty v. Holliday, 8 Mo. App. 118; Tennent v. Ins. Co., 133 Mo. App. 357. Law and equity agree in securing to a pledgee the possession and such title as will protect the pledgee to secure ultimate payment of the debt; and the debtor cannot, by his own act and against the protest of the pledgee, transform the pledge into a purchase or sale, as attempted in this case. Perry on Trusts (2 Ed.), secs. 438-441. (2) A pledgee of such contracts to deliver property (or choses in action) holds a special interest subject to redemption by payment of the debt for which the pledge is made, and until that payment the pledgor cannot transfer' title so as to clear the pledge of liability for the debt. Reynolds v. Railroad, 143 Ind. 579; Ware v. Russell, 57 Ala. 43; Best v. Crall, 23 Kan. 342. The pledgor could not recover without doing equity (by paying its debt) and the assignee acquires no greater title to a non-negotiable chose in action than had the assignor. Schaaf v. Fries, 90 Mo, App. 116. (3) An action on a written contract, executed by the defendant, •cannot be maintained when the plaintiff has no right to the writing itself and the latter is in possession of defendant as evidence of and upon a contract to be held as collateral security for an unpaid loan. 22 Ency. Law, (2 Ed.), p. 858. • (4) The plaintiff is not the real party in interest in the grain contracts sued upon, and hence cannot maintain this action on the facts (undisputed) touching the assignment to plaintiff by the Thyson Company. R. S. 1909, sec. 1729; Hoffman v. Columbia, 76 Mo. App. 553; Gardner v. Armstrong, 31 Mo. 535. (5) The grain contracts in suit are choses in action, arising out of contract, and hence are assignable as collateral by deposit thereof to secure the notes given for the loan then made to the Thyson Company on the notes in evidence. R. S. 1909, secs. 1729, 2775; 22 Ency. Law (2 Ed.), pp. 844, '846; Jaege v. Bossieux, 15 Gratt. 83; Cook v. Bell, 18 Mich. 387. (6) The vefdiet and judgment are-at variance with the instruction given by the court for defendant, limiting the rights of plaintiff, as assignee of the written contracts for grain as sued upon; which is obviously sound and correct. Bank v. Land Co., 152 Mo. 1. (7) The result below and the judgment expressing it are a serious invasion of the property rights of appellant under the Federal Constitution (14th Amendment) and are .an invasion of defendant’s rights under that Constitution which protects defendant against invasion of the obligation of the contract between it and the Thy-son Company for collateral security, and neither the laws nor the courts of Missouri may properly diminish or annul that obligation, a's does the judgment below in this cause. Los Angeles v. "Water Co., 177 U. S. 575; Shapleigh v. San Angelo, 167 II. S. 657.
Bchnurmacher & Ras'sieur for' respondent.
(1) Plaintiff is the real party in interest and has the right to maintain this suit. It acquired all the-claims and demands of the Thyson Company .against defendant growing out of the contracts sued on. The legal title thereto is vested in plaintiff. Under the statute requiring suits to he brought in the name of the real party in interest, an assignee is entitled to sue in. his own name, regardless of any collateral arrangement between him and the assignor as to the proceeds. Guerney v. Moore, 131 Mo. 650; Gay v. Oreutt, 169' Mo.. 400; Young v. Hudson, 99 Mo. 102; Dean v. Chandler,. 44 Mo. App. 338; Howe v. Mittleberg, 96 Mo. App. 490. (2) Plaintiff can maintain this suit, even though defendant holds the written contracts as security for the-payment of the notes given to it by the Thyson Com-, pany. The contracts matured Dec. 31, 1903. Defendant then owed the vendee damages growing out of its default upon these contracts. When the defendant loaned the vendee money in July, 1904, the contracts, Surrendered as collateral, were merely evidence out of which the vendee’s claim against defendant arises. The deposit of these contracts did not constitute a pledge;. at most, it amounted to an agreement to permit defendant to set off the amount loaned, out of the moneys-which defendant then owed, the exact amount of such indebtedness to be ascertained later. (3) But even if the deposit of the contracts in July, 1904, be regarded as a pledge, still plaintiff can recover thereon. Dickey v. Porter, 203 Mo. 1; Tennent v. Ins. Co., 133 Mo. App. 345; Yan Idour v. Nelson, 60 Mo. App. 523. (4) No-tender was necessary to authorize plaintiff to maintain this suit on these contracts. Richardson v. Ashby, 132 Mo. 238; Craig v. McHenry, 35- Pa. St. 120; Earle v. Ins. Co., 7 Daly, 303.
STATEMENT. — In September and October, 1903, defendant sold to the Thyson Commission Company 95,000 bushels of number two red winter wheat for December delivery. These transactions were expressed in nineteen contracts which were facsimiles of each other except as to the price and date, each evidencing a sale and purchase, signed, respectively, by the seller and buyer, and all of them containing the following clause: “This contract is subject in all respects to the rules and regulations of the Merchants’ Exchange of St. Louis.” They matured on the 31st of December, 1903. Payment was demanded by the buyer and refused by the seller on March 15, 1904, seemingly for want of agreement as to the settling price. In July, 1904, the buyer borrowed from the seller $6000 on its notes, at ninety days, and as collateral security deposited with the lender all of the said contracts. Thereafter, in March, 1908, the borrower assigned all its right and ■ title to each of said contracts to the plaintiff in this action, with full power to collect the amounts due thereon, and after certain deductions to pay over the remainder to the assignor. Thereupon, May, 1908, plaintiff brought this action, setting forth in separate counts the obligations of the respective contracts and praying judgment for the difference in the prices named in them and the price of 92 cents per bushel of the grain, and alleging that this figure had been fixed as the price of said commodity on the 31st of December, 1903 (when delivery was compulsory on the seller), by proper proceedings had under and in accordance with the rules of the St. Louis Merchants ’ Exchange.
The petition averred that the written contracts sued on were in the hands of defendant, and, therefore, not filed with it.
The answer averred: 1st, That plaintiff was not the real party in interest; 2nd, That the defendant was the owner and holder of the contracts sued upon, “and that plaintiff has no legal title or right thereto what soever;” 3d, And that the price fixed as a settling basis for such contracts by the St. Louis Merchants’ Exchange was “not real but fictitious,” and caused by “a corner, conspiracy or combination in restraint of trade,” in violation of the State and- Federal constitutions. Issue was joined by reply.
For plaintiff, there was evidence tending to prove the allegations of its petition. The defendant gave evidence showing that the contracts sued on were in its possession and had been deposited with it as collateral security for the notes of plaintiff’s assignor, aggregating about $6000. These notes and said contracts it also introduced in evidence, showing that they were unpaid and had become overdue at the time the maker assigned the contracts to plaintiff.
Prior to the institution of this suit, plaintiff delivered to defendant the following communication:
“St. Louis, Mo., May 12, 1908.
“O. H. Albers Commission Company:
“We wish to notify you that the Thyson Commission . Company has assigned to us all its claims and demands against your company, and particularly its claim against your company for damages growing out of the failure of your company to deliver to the Thy-son Commission Company the wheat called for in the contracts referred to in the enclosed copy of the assignment. We herewith make demand on you for the payment of the same; unless same is paid we now notify you that we will institute suit to enforce payment. Tours very truly,
“ Miluken-Helm Commission Company,
“ (Enc.) by Louis Helm, Pres.
“Delivered copy of above letter, together with copy of assignment to C. H. Albers and made demand, this 12th day of May,. 1908, on floor of Merchants’ Exchange, at 1:10 p. m. Louis Helm.”
At the conclusion of its testimony, plaintiff stated in open court that it would ‘ ‘ consent to a reduction of its claim hy $6000' and interest” due on the two notes of its assignor which defendant held if defendant would “hy pleading or instruction” ask this to he done. To this offer defendant replied that it would stand on its answer which contained “its complete defense,” and that if plaintiff desired to give a “voluntary credit” it was “its own affair;” hut defendant stood upon its “pleadings and evidence.”
The court instructed the jury in case they returned a verdict for plaintiff to make their calculation of the amount upon the basis of the price fixed for settlement of such contracts on December 31, 1903, by the action taken under the rules of the Merchants’ Exchange which established the settling price to be 92 cents per bushel. A verdict was rendered in accordance with this instruction, which, after some slight remittitur on some of the counts, aggregated $11,918.52.
After the overruling of its motions for new trial and in arrest, defendant duly perfected its appeal.

Opinion:
OPINION.
BOND, C.
I. • Appellant requests, in its brief,, that we shall reserve any rulings "on the effect and validity" of the rules of the Merchants' Exchange or their application to this case until the appurtenant law can be submitted in future suits, when that ruling will be controlling, and that we shall consider in the present case solely the specific points argued and presented for a reversal. We will comply with this request. This necessarily excludes from review the amount of the judgment obtained, since that was based on a price fixed under the Exchange rules, and restricts our consideration to the question of the right of plaintiff to recover at all.
The first defense in the answer is that plaintiff is not "the real party in interest" to prosecute this action. Plaintiff's right to sue is derived through a written transfer (coupled with notice to the defendant) of all the contractual obligations expressed in the several contracts made by defendant with plaintiff's assignor. The fact that the contracts so assigned were át that time in defendant's possession as security for overdue notes which it held against plaintiff's assignor, in nowise prevented the covenantee in those contracts (plaintiff's assignor) from assigning its general ownership therein, subject to any special interest or lien of the custodian (the maker of the contract). [Southworth Company v. Lamb, 82 Mo. l. c. 249; Richardson v. Ashby, 132 Mo. 245.] The deposit of these contracts as collateral security did not discharge their obligatory force nor affect the liability of the defendant as the. covenantor, nor deprive the cov•enantee of its cause of action for a breach of said agreements. The right and title to its cause of action for a breach of said contracts continued in the covenantee, and was validly transferred to plaintiff, who became as such assignee entitled to all redress which could have been had by the assignor. In such cases the assignee is the real party in interest and may sue in its own name. [R. S. 1909, sec. 1729; Young v. Hudson, 99 Mo. 102; Guerney v. Moore, 131 Mo. 669; Gay v. Orcutt, 169 Mo. 406; Dickey v. Porter, 203 Mo. l. c. 22; Conrad v. Fisher, 37 Mo. App. l. c. 403; Van Idour & Co. v. Nelson, 60 Mo. App. 523.] Hence this point is ruled against appellant.
II. Neither can we sustain the further contention that the fact of the physical possession of the written contracts by defendant disabled the assignee of the obligee in said- contracts to sue. These writings were only evidences of the contract or legal obligations expressed by their terms and which arose from the nature of the engagements entered into by the parties. Until •these were discharged by payment or satisfaction, their •enforceability'continued as-it would have survived if the written evidences had been lost or destroyed. We .rule therefore, that the fact, that the contracts assigned to it were in the possession of defendant at the time -did -not deprive. plaintiff of the' right to enforce them .according to their terms and subject to the right of .the depositary to retain out of any sum for which he was liable as, the maker .of said contracts an amount •sufficient to discharge the notes for which they were-col•lateral security.
III. ' The next error assigned is, that it was plaintiff's duty before or. when it filed this suit to pay or fender to defendant the amount of the notes due from plaintiff's assignor to. secure which, its own contract •obligations had been deposited.- This position is -based on the assumption that plaintiff's assignor and the defendant, .under-the facts in this record, stood-in-the technical relation of pledgor and'pledgee as"-to'thé grain contracts which had been deposited (pending the settlement of defendant's liability on said contracts) to secure, a loan made to such assignor. - -
The. law on' the'siibject of pledges is plain and well •defined. The pledgee of tangible personal property; such as gold nuggets," lumber, cattle or physical things of intrinsic value, does not take the' legal title to the property put in his possession.' He may take the legal title to commercial paper held as collateral security- or to shares of corporate-stock when caused-'to be issued in-his name,'"hut these are-'exceptional instances; - He does not take the legal title iipon a deposit of'non'-negotiable páper or rights arising, under contract; -As to these ánd as to articles 'ordinarily pledged," the-pledgee acquires merely a possessory right to -retain the "property until'the payment-'of. the debt,"Or a-lien-upon-its proceeds'in case it.id sold... after default pf-the ffiedgdri The implied right of the pledgee to sell for non-payment of the secured debt at its maturity does not extend to commercial paper, or choses in action having no marketable value, for as to these he cannot sell without either the aid of the court or the authority of a contract with the pledgor. The general title of the pledgor of goods and chattels is vendible, or may be levied upon by execution or attachment subject to the pledgee's lien. [Jones on Mortgages (2 Ed.), 651; Richardson v. Ashby, 132 Mo. l. c. 246; Trust Co. v. McMillan, 188 Mo. l. c. 569.] On the other hand, the pledgee upon default may pursue any of several remedies: ' ' 1st, He may bring an action upon the debt secured; 2d, He may make sale of certain things pledged as at common law without judicial proceedings; 3d, He may proceed under statutory provisions where these exist; 4th, He may make sale by decree of a court of chancery; 5th, He may sell under special power of sale executed by the pledgor. He may use any one of these remedies against the debtor or his property for the collection of the principal debt without destroying or impairing the security for the debt until it is actually paid." [Jones on Mortgages (2 Ed.), secs. 589-590.]
If these rules should govern the case at bar (as claimed by defendant), then it is clear that thé defendant may avail itself of the remedy of an independent suit on the notes made to it by plaintiff's assignor. And it is equally dear that defendant was not compelled to plead such notes as an offset in the present action. It had the full option to do so, for that right enured to it when it became possessed of the grain contracts as security for the notes given by plaintiff's assignor. Whether it would do this, or whether it would enforce the indebtedness shown by the notes in a separate suit, was a matter resting in the choice of the defendant. With full knowledge of its rights as the custodian of these causes of action sued on, its answer in this case wholly fails to plead that the causes of action sued on are 'subject to any lien or offset in its favor as pledgee. The answer simply denies that plaintiff is the real party in interest; denies Ms title to the causes of action; and avers that defendant "is the legal owner and bolder of each and all of the instruments of writing sued upon herein," and avers that "plaintiff has no legal right or title thereto whatsoever." None of these defenses, by any just legal intendment, conveys the idea that defendant relied upon its status as pledgee, or desired to enforce its right as such in the present action. The answer contains no affirmative defenses, but mere denials. An examination of the petition discloses that the nineteen causes of action contained therein are based only on the alleged infraction by defendant of its contracts to deliver certain grain, and that the recovery sought is for the damages caused by the alleged breach by defendant of its contracts mentioned in the petition. The petition contains no allegations referring to defendant as the pledgee or custodian of such contracts, or as possessed of any special interest or lien therein of any description. It merely alleges the .execution of the contracts, their assignment to plaintiff and the breach thereof by defendant. The defendant did not see proper to plead its status or right as the possessor of the grain contracts to this action, based on them. Neither plaintiff nor the court had any power to require defendant to set up his special defenses to this action, or to plead otherwise than as in its answer. The result of this suit has not precluded the defendant from instituting an action against the maker of-the notes held by it. The defendant is free to pursue its remedy in that respect. But defendant is not entitled to withhold its defense of an offset in the present action, thus retaining possession of the notes which it was privileged to use in that way, and thereafter complain of a recovery by plaintiff for the full amount of the liability of the defendant under the con tracts sued upon. Nor can defendant insist that its impleaded status and rights as to the contracts sued on could he taken cognizance of as a defense, pro tanto, to the present action. The rule is axiomatic that triable issues are formed by the pleadings and cannot be expanded either by-evidence or instructions. [Lynch v. Morrow's. Adm'r, 28 Mo. 357; Currier v. Lowe, 32; Mo. 203; Greene v. Gallagher, 35 Mo. 226.] Whatever, rights defendant had by its custody of the causes of action were special. The assertion of -these' rights by defendant in' this action or in' a suit on its notes was optional. Defendant chose not to'assert them in this suit. Hence,, it cannot assign error for a recovery which ignored defenses which it did not assert. . ,
' . We have considered the contention of defendant, that plaintiff was precluded from bringing the present suit before paying Or tendering to pay the' notes' given defendant by plaintiff's assignor,, and to secure which defendant's grain contracts had been left with it, as if .the-transaction was strictly within the principles applicable to ordinary pledges of personal property. We have seen that defendant, under the pleadings and issues joined in this case, cannot .avail itself of the rule; preventing .a pledgor from recovering the" subject" of the pledge from the. pledgee, in invitwm, without paying or offering- to pay the debt secured. And while that is sufficient to dispose of the points under'review,' yet we do not wish to be understood as conceding that the transaction shown by this record partook of " the essential characteristics and attributes of a pledge .of goods and chattels, as that subject is defined by law."
In its essence, the present transaction was nothing more than an advance in the form of a loan byra debtor to his creditor, to be secured by leaving with the debtor the written evidences of its. own obligations to. the-creditor. - It was, inferably, a convenient business way cf possessing .a creditor with some, part of what was; due him, pending a dispute as to the fpll.amount;:..;
We do not hold that the legal effect of this action -of the two parties made it the duty of the creditor to repay the loan before calling on the debtor to pay what was dne from it. It was at most a transaction result-: ing in the creation of reciprocal indebtedness, and one wherein the contractee (as may be assumed from the verdict in this case) was entitled to a much larger sum than was loaned him by the contractor. '
IV. It is finally suggested for defendant, that the judgment herein deprives it of a property right or impairs the contract under which it held the grain contracts as collateral. We cannot assent to that view: Defendant declined to plead or set up its rights to the collateral when sued upon the obligations expressed in them. When the interest of defendant later appeared from the evidence, defendant also declined (though plaintiff consented this might be done) "either by pleading or instruction" to ask a reduction of any recovery by plaintiff to the amount of the notes and interest given by its assignor. Defendant lost no constitutional protection by any ruling adverse to its special interest. For no issue presenting it was before the court, and defendant refused to assert it under the offer made by the plaintiff on the trial. Necessarily -therefore the court did not rule against such interests
V. Circuity of action may be avoided by a disposition of this case whereby complete justice may be done to the parties without further litigation or delay. Interest reipubKcae ut sit finis litium. — Broom's Legal Maxims. This court is invested with statutory power, after an examination of the record, to ' ' give such judg-' ment as [the trial]; court ought to have given, as to them shall seem agreeable to law." [R. S. 1909, sec. 2083.] The defendant has in its possession two notes-representing loans made by it to plaintiff's assignor, aggregating about $6000 and interest. Counsel for- plaintiff, in their brief and oral argument in this court, have requested, if the judgment in its favor should be affirmed, that this court enter a decree adjudging that such judgment shall be reduced by the amount of said notes and interest, provided defendant will deliver* them up for cancellation.
We, therefore, order that the judgment heretofore recovered by plaintiff be affirmed for the amount thereof less the principal and interest thereon of the two-notes in the possession of the defendant executed by plaintiff's assignor, provided defendant shall within ten days deliver up said notes duly cancelled. Cost of this appeal to be taxed against defendant. Otherwise the judgment recovered herein by plaintiff is affirmed.
Brown, G., concurs.
PER CURIAM.
The foregoing opinion of Bond C., is adopted as the opinion of the Court in Banc on rehearing.
All the judges concur, except Woodson, J who dissents in opinion filed.