author: HOLMAN, Presiding Judge.

text:
    David PETEREIN, Anthony Peterein, Lucille Becker, John Peterein, Pauline G. Trunk, Daniel Peterein, Charles Peterein, and Christine Peterein, Respondents, v. Arthur J. PETEREIN and Nora Peterein, his wife, Appellants.
    No. 51795.
    Supreme Court of Missouri, Division No. 1.
    Nov. 14, 1966.
    Motion for Rehearing or to Transfer to Court En Banc Denied Dec. 12, 1966.

      Earl R. Blackwell, Hillsboro, for respondents.
    Brunson Hollingsworth and John L. Anderson, Anderson, Anderson & Brooking, Hillsboro, for appellants.
   HOLMAN, Presiding Judge.

David A. Peterein, Sr. died intestate on November 8, 1962. His wife, Pauline, had died October 18, 1961. On July 24, 1959, David (then 76 years old) and his wife signed a deed which purported to convey to their youngest son, Arthur J. Peterein, and his wife Nora, approximately 324 acres of land known as the Oberle farm. The grantors reserved a life estate in all of the land except a tract of ten acres upon which the house was located. David was survived by six sons and three daughters. Eight of the children are plaintiffs herein and the ninth is defendant Arthur, whose wife Nora is also a defendant.

In this action plaintiffs sought to set aside the aforementioned deed because of the mental incapacity of David. The trial resulted in a judgment and decree setting aside the deed, and defendants have duly appealed.

David and his wife owned the Oberle farm as tenants by the entirety. It was appraised in 1962 at $30,000, and there was testimony that at trial time it had a value of $81,000 which, in part, resulted from the fact that it was near one of the few exits on Interstate Highway 55. David also owned a 175-acre farm upon which he had lived most of his life.

Harry Weier, an attorney of Hillsboro, testified that in 1956 David and his wife employed him to prepare their wills. In these wills the 175-acre farm was devised to their sons, David and Tony, and the Oberle farm was devised to the other four sons. Mr. Weier testified that deceased told him he and his wife couldn’t agree on the wills and hence they were never executed. Mr. Weier further testified that Arthur came to his office in July 1959 and requested that he prepare the deed involved in this case; that Arthur came alone and instructed him as to the contents of the deed; that he had no contact with either of the grantors; that he prepared the deed and mailed it to Arthur and that Arthur later mailed it back to him and he had it recorded on July 25, which was the day after it was executed.

Linn Counts testified that he operated an automobile agency in Festus and was a notary public; that sometime in July 1959 he went with Arthur to his father’s farm and notarized some papers; that Mr. and Mrs. Peterein were sitting at the kitchen table in the family home and Arthur said, “Pop, I brought some papers for you to sign,” and that Arthur “put it in front of the old man and the old man signed it”; that Mr. Peterein did not read the paper; that “they both signed the papers and I notarized them. I don’t think we were there three minutes”; that he thought their daughter Christine was present at the time the papers were signed. This witness further testified that he did not read the paper and did not know what it was.

David Edward Peterein, a grandson of grantor, testified that he was an excavating contractor and often hauled dirt from the Peterein home place; that between 1955 and 1959 his grandfather had deteriorated mentally so that he often did not know the witness or his men; that in the summer of 1959 he dressed in heavy clothing like he would normally wear in winter; that he didn’t know anyone; that he had given the witness permission to haul dirt earlier, but during that period would often run him off of the farm; that in 1959 his grandfather never appeared to be of sound mind and that about that time his grandmother had said to him, “I wish you would help look after Papa, he’s not in his right mind any more.”

Plaintiff John Peterein testified that he saw his father and mother almost every day; that in the middle 50’s his father became confused and even doubted the integrity of the two sons who farmed the home place; that in August 1958 when his father was in the hospital he was irrational and thought the other patient in the hospital room was a crook; he complained that the streetcars kept him awake, although there were no streetcars operating near the hospital; that in May 1958, because his father had become so forgetful, some of the children designated Arthur to look after the father’s business affairs and thereafter Arthur wrote the checks and took care of other business matters for his father; that when his father was in the hospital in May 1959 he was irrational and confused, and after leaving the hospital became progressively more irrational and frequently wandered off and would get lost on his own farm; that his conversation would “drift off” from the subject. This witness further testified that a daughter, Christine, and son Daniel and Daniel’s wife, took care of the parents; that his father had given Daniel two acres of land and Tony one acre upon which they built their homes; that he did not know about the deed to Arthur until after his father’s death.

Gene Dollar, who apparently worked for grandson David, testified that he was at the farm a number of times in 1955, 1956, 1957, and 1958; that on some occasions David would know him and the next time he wouldn’t; that in 1958 he would often run him off the farm without him getting the dirt he had gone for; that on one occasion in the summer of 1959 he had seen David and, “I stopped and talked to him and he was in a daze, he didn’t even know me, he didn’t even hear me.”

Another son, Daniel, had always lived on the old home place. He testified that he saw his father frequently and helped care for him after he was discharged from the hospital in June 1959; that his father didn’t know him all of the time, and sometimes thought his mother was his sister Christine, and vice versa; that from time to time he had seen Arthur bring papers for his father to sign; that Arthur would tell him to sign them and his father would do so without having received any explanation; that he had also heard Arthur tell his mother, in 1958, that there would be trouble with the government ASC unless the Oberle farm was “signed up” differently; that he did not learn of the deed to Arthur until after his father’s death.

Plaintiff Tony Peterein testified that he had lived on the home place all of his life; that his father had given him an acre of land on which to build his house; that he and his brother David had farmed the home place and that he saw his father almost every day; that in the summer of 1959 his father failed to recognize old friends, and “you couldn’t hold a conversation with him”; that his father would get lost on the farm and on one occasion came into the barn where he was working and “stood around a little while and then he said, ‘Can you take me home? I’m lost. I don’t know where I’m at.’ ” This witness further testified that he had seen Arthur bring papers out from time to time for his father to sign and that his father would sign them; that he did not learn until after his father’s death that the entire Oberle farm had been deeded to Arthur, although both Arthur and his mother had told him that the parents had deeded Arthur ten acres around the house.

Clark Berry, vice-president of Citizens Bank of Festus, testified that in May 1958, David A. Peterein, Sr. had signed a letter authorizing his son Arthur to sign checks on his account, and that thereafter the bank honored checks so signed by Arthur.

David was in the hospital on a number of occasions during the latter years of his life and the records of the hospitals were offered and admitted in evidence. The record of St. John’s Hospital (St. Louis County) disclosed that David was in that hospital in August 1958 for a strangulated right hernia. The records show that he was also suffering from “arteriosclerosis— generalized; convalescence complicated by senile psychosis; * * * very combative and loud; appears to be confused at intervals.” David was a patient in the same hospital in May and June of 1959. The records at that time show the following: “Encephalopathy due to arteriosclerosis; patient is mentally confused; senile type; very disoriented; * * * thought orderly was his son; wouldn’t be convinced that it wasn’t his son. * * * Hand restraints applied.”

The records of Alexian Brothers Hospital show that he was admitted on December 9, 1959, troubled with retention of urine. The records also disclose the following: “Generalized arteriosclerosis, senile dementia. * * * Patient has been showing mental loss for the past 5 years * * *. Incoherent, uncooperative, restless, confused, disoriented. * * * No information is available from patient who is obviously a senile psychotic.” The records further indicate that on two separate occasions Arthur signed a consent for an operation which stated that the reason it was not signed by the patient was that “he is mentally incompetent.” It appears that David was in the hospital from December 1959 until April of 1960, and that over that entire period he had waist and ankle restraints at all times, and was confused, disoriented, and psychotic.

On the part of defendant, Lonnie Besand testified that he was a close friend of David and frequently serviced electrical appliances on David’s farm; that he saw him about a half dozen times during the summer of 1959 and when asked about David’s mental condition stated: “I can’t come up with anything specific that would indicate anything wrong, however, there may have been.”

Mr. Schumer, the father of defendant Nora Peterein, testified that he talked with David after the deed was made to Arthur and Nora, and David said he had given them the place because they wanted to build; that he didn’t say how much land he had deeded to Arthur; that at that time he saw nothing unusual about David’s conduct or conversation. This witness stated, however, that beginning about 1958 he could commence to see a difference in David; that he had spent several hours with him on the day (in October 1961) of David’s wife’s funeral (which David did not attend) and that on that day he talked and acted like a child.

The defendants also presented as a witness Dr. Curtis A. Meyer, the surgeon who operated on David in May 1959. This witness stated that the last time he saw David, in June 1959, it was his opinion that he was of sound mind. On cross-examination this witness admitted making the hospital record in August 1958 which indicated that convalescence was complicated by senile psychosis.

Defendant Arthur was also offered as a witness but the court sustained an objection to his testimony based on the disqualification of the witness under the so-called Dead Man’s Statute.

The trial court made the following specific findings of fact:

“ * * * 4. That plaintiffs had no knowledge of the purported conveyance of the above described premises until after the death of the said David A. Peterein.

“5. That for some years prior to 1959, the said David A. Peterein had been suffering from a graduated loss of mental capacity; that during the spring of 1958, all parties plaintiff and defendant designated the defendant Arthur J. Peterein to handle all of the business affairs of the said David A. Peterein; said defendant thereby came into a fiduciary relationship with the said David A. Peterein; that said fiduciary relationship between defendant and the said David A. Peterein was created by the parties hereto because of the mental incompetence of said David A. Peterein to manage his business affairs.

“6. That the said David A. Peterein was thereafter hospitalized in August of 1958 and in May and June of 1959; that he suffered from generalized arteriosclerosis, delusions, confusion, disorientation, senility, and loss of mental capacity.

“7. That on the 24th day of July, 1959, and prior and subsequent thereto, the said David A. Peterein was mentally incapacitated; that the said David A. Peterein did not know or realize the extent of his property; that the said David A. Peterein was not aware of his relative heirs and their respective potential claims to his bounty; and that the said David A. Peterein did not understand or know the nature of the transaction when he placed his signature upon the instrument purportedly conveying the premises hereinabove described.”

In our consideration of this appeal we deem it appropriate to state certain rules applicable in cases of this nature. The burden of proof was upon plaintiffs to prove by clear and convincing evidence that on July 24, 1959, David lacked mental capacity to understand the nature and effect of his act in signing the deed in question. Allen v. Kelso, Mo.Sup., 266 S.W.2d 696. “The law differentiates between the mental capacity required of grantor making a deed as a part of the arms-length business transaction and the mental capacity required when grantor is receiving but the satisfaction of heart and mind which comes from benefitting those near and dear to him. In the latter instance if he has sufficient mental capacity to know the extent of his property, his relatives and their respective claims on his bounty, the demands of the law have been satisfied.” McCoy v. McCoy, 360 Mo. 199, 227 S.W.2d 698, 704. “The cancellation of a deed is the exercise of the most extraordinary power of a court of equity and this power ought not to be exercised except when clearly justified from a consideration of all the evidence in the case.” Walton v. Van Camp, Mo.Sup., 283 S.W.2d 493, 500. “Appeals in equity cases such as this are heard de novo on the record as made below, the reviewing court determining the weight and value of the evidence, but usually deferring to the findings of the chancellor, especially where there is conflicting oral testimony involving credibility of witnesses, except when convinced that such findings are against the weight of the evidence.” Been v. Jolly, Mo.Sup., 247 S.W.2d 840, 853.

We have concluded, after a careful review of all the evidence, that the" weight of the evidence strongly supports the finding of the trial chancellor. We not only defer to his findings, but have independently arrived at the same primary conclusion, i. e., that on July 24, 1959, David did not have the mental capacity to execute the deed. We have heretofore stated the evidence in detail. It would be useless repetition to restate all of that evidence in discussing the conclusion we have reached. We will, however, refer to a few items of evidence we have considered to be particularly persuasive.

We think it significant that because of David’s mental condition the children, in May 1958, designated Arthur to handle his business affairs and that Arthur thereafter did so. We are also impressed by the testimony that David wore heavy winter clothing during the summer of 1959, and that he failed to recognize members of the family and others he had known for a long time; that, according to the testimony of a grandson, David never appeared to be of sound mind in 1959 and that his grandmother had told him that David “was not in his right mind anymore.” The hospital records are convincing evidence that David had suffered definite brain damage and mental deterioration in that he was afflicted with arteriosclerosis, senile dementia, senile psychosis, and encephalopathy. In Dorland’s Medical Dictionary, 23rd Edition, “senile psychosis” is defined as “one of the several forms of mental deterioration in old age in which the patient shows a tendency to confabulation, loss of memory of recent events, irritability and assaultiveness,” and “encephalopathy” as “any degenerative disease of the brain.” “Senile dementia” is a disease marked by progressive decay or deterioration of the mental faculties. Wharton & Stille’s Medical Jurisprudence, Vol. I, § 975, p. 794. We note also that Arthur twice signed a consenf for surgery to be performed upon David which stated that the patient did not sign because “he is mentally incompetent.”

Although undue influence is not an issue, we think it proper to consider that Arthur did occupy a fiduciary relationship with his father and often presented papers to him for his signature; that David had no contact with the attorney who prepared the deed and there is no evidence that he read the deed or knew the contents of the paper he signed.

Defendants point to the fact that Dr. Meyer expressed the opinion that David was of sound mind in June 1959. We do not think that evidence should be controlling. The witness was a surgeon and was not shown to be particularly skilled on the subject of mental diseases. Also, we note that on cross-examination he admitted making a hospital record in August 1958 indicating that David was afflicted with senile psychosis.

Defendants also contend that plaintiffs’ case must fail because there was no specific evidence that David was not mentally capable at the time and date the deed was signed. Although the notary said he saw nothing unusual about David during the three minutes he was in the Peterein home we do not consider that there was any convincing evidence on the subject of his mental condition which related to the specific time of signing the deed. As we have indicated, the evidence as to David’s condition, both before and after the date of execution, was sufficient to warrant a finding that he did not have mental capacity to execute the deed on July 24, 1959.

We have read the cases cited in the briefs but they are of little value because each case, of necessity, must be decided upon its own facts, and we rarely find two cases where the facts are even substantially the same. Defendants rely primarily upon Cruwell v. Vaughn, Mo.Sup., 353 S.W.2d 616, Edinger v. Kratzer, Mo.Sup., 175 S.W.2d 807, and McCoy v. McCoy, supra, but each of those cases are distinguishable from the case at bar upon the facts. One • important difference is that in each of those cases the grantor discussed the transaction in detail with the scrivener or notary on the day of execution, and the evidence concerning grantor’s condition on that day indicated that he fully understood the transaction and was of sound mind at that time. That was not the situation here and we therefore do not consider that any of those cases are decisive.

The next point briefed by defendants is that plaintiffs should have been denied the relief they sought because of laches. While the recording statute, § 442.390 (statutory references are to RSMo 1959, V.A.M.S.), gave plaintiffs constructive notice of the deed on July 25, 1959, we find that they did not have actual knowledge until after their father’s death in November 1962. This suit was filed in July 1964. In regard to the defense of laches we have said that “Laches in legal significance, is not mere delay, but delay that works a disadvantage to another. So long as parties are in the same condition, it matters little whether one presses a right promptly or slowly, within limits allowed by law.” Schaeffer v. Moore, Mo.Sup., 262 S.W.2d 854, 860. There is no contention that defendants suffered any substantial disadvantage from the failure of plaintiff to file the suit for about 20 months after the death of their father. Under the circumstances here presented, we rule that the defense of laches was not applicable.

The final contention of defendants is that the trial court erred in holding that Arthur Peterein (a grantee in the deed) was disqualified as a witness by reason of § 491.010, which provides, in part, that “in actions where one of the original parties to the contract or cause of action in issue and on trial is dead * * * the other party to such contract or cause of action shall not be admitted to testify * * After Arthur had been permitted to testify as to his name and address, that he was a son of David and a defendant in this action, an objection to further testimony, based upon the foregoing statute, was sustained. Defendants then made the following offer of proof: “Defendants offer to prove by Arthur Peterein the mental and physical condition of David Peterein, deceased, in July of 1959. Defendants further offer to prove by this witness that the deed in question was made for not only good consideration but for valuable and sufficient consideration in that the taxes on both pieces of property were paid during the year 1959 from personal funds of Arthur J. Peterein.” The court sustained an objection to the offer.

It is the contention of defendants that the court erred in sustaining the foregoing objections because a witness under the transactions disqualification is not disqualified for all purposes. They cite Birdsong v. Estate of Ladwig, Mo.App., 314 S.W.2d 471, wherein it is stated that “the witness would have been competent to testify as to matters which the deceased could not, if living, have refuted because they concerned things ‘with which he had no connection and of which he had no knowledge.’” 314 S.W.2d 476. While Arthur may not have been disqualified for all purposes, we have no hesitancy in ruling that the statute disqualified him from testifying to the matters contained in the defendants’ proffer and hence the court did not err in sustaining an objection thereto. See Hughes v. Renshaw, 314 Mo. 95, 282 S.W. 1014 [2], Wren v. Sturgeon, Mo.Sup., 184 S.W. 1036 [1], and Been v. Jolly, Mo.Sup., 247 S.W.2d 840 [10].

The judgment is affirmed.

All concur.


source: Caselaw Access Project

author: EAGER, Presiding Judge.

license: Public Domain

text:
    Frank. PRICE, Respondent, v. Ben SEIDLER, Appellant.
    No. 51721.
    Supreme Court of Missouri, Division No. 2.
    Nov. 14, 1966.
    Motion for Rehearing or to Transfer to Court En Banc Denied Dec. 12, 1966.

      Jack H. Ross, Coleman, Ross & Cekov-sky, Clayton, William L. Mason, Jr., Galena, for respondent.
    Lashly, Lashly, Rava, Hyndman & Rutherford, by William I. Rutherford, St. Louis, for appellant.
   EAGER, Presiding Judge.

This opinion is written on reassignment. The action is one for personal injuries in which plaintiff received a verdict for $24,-000. A motion for judgment or in the alternative for a new trial was overruled, and defendant has appealed. The facts are somewhat unusual and, since the principal contention is that plaintiff did not make a submissible case, we shall be required to state them in some detail.

Austin How was the owner and operator of National Brake Service, a service garage, at 309 S. 7th Street in St. Louis, and the plaintiff, Frank Price, was a mechanic who had been employed by How for six or seven years. Defendant, Seidler, operated a jewelry shop and was an occasional patron of How’s. The building occupied by How as a garage was a quonset hut which accommodated three rows of automobiles three vehicles in depth. In front of the building was a small parking area and en-tranceway sloping toward the building. In August, 1962, and about a week before the occurrences involved here, How had worked on Seidler’s 1959 Chrysler Windsor automobile, inserting a fuse in the air conditioner. Seidler saw him do this, and saw him lie down on the floor of the car to do it. The air conditioner then worked satisfactorily for “say a little over a week” when it went out again; on August 20, 1962, Seidler again took the Chrysler to How and again told him that the air conditioner would not work.

When Seidler arrived at How’s garage about 8:00 o’clock in the morning the plaintiff, Price, was working on another car toward the rear of the garage and almost in the center. He was at the back of the car jacking it up; he saw Seidler drive up and saw him stop outside the door of the garage somewhat more than two car lengths from Price. As How walked across the shop Price heard him say that he had a fuse he was going to put in Seidler’s car. Seidler, according to Price, was then “standing just aside of his car.” Price’s account of what occurred a little later was as follows: “I heard the noise of the car, like screeching, sounded like somebody tearing the door down and I turned around to look and I seen this car (Seidler’s) just coming at me, so I tried to heave myself up on the back of the car I was working on in order to get out of its way.” When he first heard the noise of the automobile and saw the car it was “about ten feet” away and “going too fast, coming so close, real fast” that he was unable to escape; he tried to do so by pulling himself up on the car he was working on. He was thus caught between the cars and suffered severe injuries which we shall refer to later.

Mr. How testified for plaintiff. In substance, his testimony was: that defendant stopped his car perhaps 15 feet in front of the open overhead door of the garage, got out, and told How of his trouble; that the fuse for the air conditioner was located under the dash near the glove compartment ; that How slid in under the steering wheel and lay on the floor on his back with his feet on the ground; that the engine was running, that there was “no doubt” in his mind about that, and that it should be running to test the operation of the air conditioner; that the emergency brake would “have to be on” to keep the car from rolling down the incline; that he could not “say for sure” whether he checked the brake and the gears, but “it’s normal” to do so; that he had no recollection of checking the gear buttons. (The gears in that car were operated by a row of buttons on the left side of the dash.) He did not not recall first trying one fuse and then having to get out and go after another one, thus re-entering the car, although that was possible; he further testified, however, that as he was on his back working on the fuse Seidler had leaned in and asked him to listen for a “hissing sound,” that he felt Seidler against his legs, and about that time he felt his feet moving and raised up; at that time the car went forward at a “good rate of speed”; it first hit the side of the door, then another car, and finally struck the car on which plaintiff was working, all while How was still on the floorboard. He specifically testified that he did not touch the gear buttons or the ignition (starter) key, that his hand did not come in contact with the gear buttons, nor did he touch any “wires”; that he “must have” hit the accelerator when he raised up’, in order for the car to “take off” at the speed it did; that, if the accelerator is depressed, this would overcome the effect of the emergency brake; that this car could not have been started except when its gears were in neutral. (There was no parking gear.) On cross-examination counsel for defendant brought out that the witness remembered that the engine was running, but also got an affirmative answer to a question asking if the “source” of his recollection was the fact that he knew the engine was running while he was lying on the floor; later, the witness testified again that the engine was running when he got into the car, obviously meaning the first or the only time, as the case may be.

There was evidence from the service manager of the agency which repaired defendant’s car that the car could not be started when the gears were in “drive,” that it could not be driven forward in neutral, and that his agency made no finding of anything wrong with the ignition or gears; also, that there were no wires near the air conditioner fuse which, if struck, would change gears; this witness did testify that a “short” in the right place in the ignition wire could permit the car to be started in any gear. There was no evidence of the existence of any short whatever.

Mr. Seidler testified, in substance, to the replacing of an air conditioner fuse by Mr. How in the same manner about a week before the present occurrences. On the morning now in question he stopped his car in front of the garage, turned the engine off, did not change the gears, pulled on the emergency brake “just tight enough so it would hold,” got out, and went in and told Mr. How of his trouble. He further testified: that How lay on the floor, took out the old fuse, got out and got a new one and inserted it, that it still did not work and he got another one; that when he was putting this fuse in, the car “took off”; that he, Seidler, did not lean in the car, and did nothing to it; he first said that How “might have” started the engine; but he further testified that he remembered turning the key off. After considerable equivocation on cross-examination he finally testified that he saw How turn the ignition key, apparently twice, for he said that on the first occasion the car stood still; he also testified that in order to accomplish this How must also have changed the gears, although he did not go so far as to say that he saw that, nor did he recall How shutting off the motor. He finally described the two times when How supposedly turned the key and started the car. He testified that there was nothing wrong with the car, except for the fuse, and that it worked perfectly.

Since plaintiff received a favorable verdict, we must accept as true the testimony favorable to him in deciding the question of submissibility. With a brief explanation to be made later, we accept these facts: that defendant got out of his car 15-20 feet from the open door of the garage, leaving it on a slight downward incline, in driving gear, with the motor running, and the emergency brake on “just tight enough” to hold the car on the incline; also, that he said nothing to Mr. How about the existing conditions; that when the accelerator of the car was depressed the action of the motor would overcome the resistance of the emergency brake; that there was no evidence of any defect in the car which would make it lurch violently forward unless the accelerator was depressed; also, that Mr. How, did not change the gears or start the motor.

Defendant’s brief contains eleven points, five going to the submissibility of the case and five to supposed errors in plaintiff’s main instruction. The first point is that plaintiff’s case is based on an “inference” that defendant left the motor running and that the evidence does not sustain that inference. That element did not depend upon an inference; Mr. How testified that the engine was running when he first got into the car (and when defendant got out) and that there was no doubt in his mind about that; in substance, he repeated this later. The fact that counsel questioned him as to the source of his memory and got him, at one point, to say that the source of his recollection was the fact that the engine was running while he was lying on the floor, and also that he was not sure whether he got into the car once or twice, did not destroy his previous positive testimony; this merely went to the effect and weight of Mr. How’s total testimony. Those cases where a party, on cross-ex-mination, completely negatives his direct testimony on a material element are not in point. Musielak v. International Shoe Co., Mo.App., 387 S.W.2d 217.

Next, defendant insists that the acts of How in failing to place the gear in neutral and in striking the accelerator constituted an efficient, intervening cause, insulating defendant against any recovery for negligence. Cases might be cited pro and con ad infinitum on this subject but, after all, each case depends upon its own particular facts and it is seldom that one decision really controls another. Dickerson v. St. Louis Public Service Co., 365 Mo. 738, 286 S.W.2d 820. It would thus be of no real .advantage to discuss individually the authorities cited by defendant. Duke v. Missouri Pac. R.R. Co., Mo., 303 S.W.2d 613; Wright v. Kansas City Structural Steel Co., 236 Mo.App. 872, 157 S.W.2d 582; Cohagan v. Laclede Steel Co., Mo., 317 S.W.2d 452; King v. Ellis, Mo., 359 S.W.2d 685, and Vandeventer v. Shields, Mo.App., 241 S.W.2d 53. The theory of such cases is that the negligence of the defendant was a remote cause which did no more than furnish a condition upon which the distinct, subsequent and unrelated act of another operated, the latter thus becoming the proximate cause. And it is also material to ascertain whether or not the negligence of the defendant had entirely ceased or was continuous and active. Dickerson, supra. This element is clearly recognized in defendant’s cited case of Duke v. Missouri Pacific R.R. Co., supra, 303 S.W.2d loc. cit. 618; and the court there stated: “Intervening is used in a time sense. It refers to later events. In the instant case defendant’s negligence had ceased to be active, had become passive. It caused no injury. The resulting danger was known. * * * In other cases, as we read them, the defendant breached a duty of a continuing nature and his negligence was active at the time of plaintiff’s injury, it not having come to rest.” (Citing many cases.) And an intervening cause “may not consist merely of an act of concurring or contributing negligence.” King v. Ellis, supra, 359 S.W.2d loc.cit. 688. In 65 C.J.S., Negligence § 111(2), p. 1208, it is said: “One whose negligence combines or concurs with an independent intervening cause in producing the injury is liable, even though his negligence alone, without such independent intervening cause, would not have produced the injury.” See also: Gray v. Kurn, 345 Mo. 1027, 137 S.W.2d 558; Dickerson v. St. Louis Public Service Co., supra; and, on liability for concurring negligence under somewhat analogous circumstances, see,—Floyd v. St. Louis Public Service Co., Mo., 280 S.W.2d 74; Cox v. Wrinkle, Mo., 267 S.W.2d 648; Snyder v. Jensen, Mo., 281 S.W.2d 802.

Here defendant remained at all times immediately at the scene of activity, pressed (to some undetermined extent) against How’s legs, asked him to listen for a “hissing sound,” and it is obvious that the effect of his act in leaving the car in driving gear continued until the very moment of the injury; thus, defendant did not cease to be active in the premises, and his negligence, if the jury should find any, certainly cannot be said as a matter of law to have ceased; nor can it be said as a matter of law that he was relieved by an intervening cause. It was proper for the court to submit his liability for concurring negligence, as it did.

Next, counsel say that defendant should legally be considered as a bailor, with How as his bailee, and that it thus became incumbent upon defendant to warn only of latent defects or dangerous conditions known to him and not obvious to the bailee; further, that this limitation of defendant’s duty was binding both upon How and his employee, Price, and that the condition here was “open and obvious” to How, an expert. In support of this theory, counsel cite and discuss sundry authorities on bailment law, and a few cases where the existence of true bailments were obvious. Johnson v. Buckley (C.A.5), 317 F.2d 644; Blankenship v. St. Joseph Fuel Oil & Mfg. Co., 360 Mo. 1171, 232 S.W.2d 954; American Mutual Liability Ins. Co. of Boston v. Chain Belt Co., 224 Wis. 155, 271 N.W. 828. Defendant is thus urging the application of a specific phase or branch of negligence law which would shift and limit his duty and the extent of his liability. If such a theory was to be urged, it certainly should have been brought to the attention of the trial court. The record shows no mention of it in pleadings, evidence, instructions, nor indeed in the very specific after-trial motion for judgment. The existence of such a relationship and the limitation of liability thereunder would require findings on certain specific issues not submitted to the jury, as counsel seem to recognize in their brief. Certainly, the trial court should have been advised of the theory, if it was ever to be asserted. Under these circumstances the theory is not available for the firsj: time upon this appeal. What we have said does not in any sense assume that the facts and circumstances here would have justified a finding of a true bailment relationship, involving as it does a full transfer of possession and the creation of a special property interest in the bailee. 8 Am.Jur.2d, Bailments, § 19, p. 924, § 56, pp. 961-962, and the sundry cases cited in Note 5 on p. 961; Stegemann v. Miami Beach Boat Slips (C.A.5), 213 F.2d 561.

Next, defendant argues that How was acting as an independent contractor, in control of the car, and that defendant had no duty to plaintiff with regard to the “obvious position” of the gears. The following cases cited by defendant involve the status of persons or corporations held to have been independent contractors: Hammond v. City of Eldorado Springs, 362 Mo. 530, 242 S.W.2d 479, 31 A.L.R.2d 1367; Stein v. Battenfeld Oil & Grease Co., 327 Mo. 804, 39 S.W.2d 345; Feldewerth v. Great Eastern Oil Co., Mo.App., 149 S.W.2d 410; West v. United States, 361 U.S. 118, 80 S.Ct. 189, 4 L.Ed.2d 161; McHugh v. National Lead Co. (D.C.Mo.), 60 F.Supp. 17. Some of these denied recovery to the independent contractor for alleged negligence of the defendant for the reasons that he, the contractor, was the one having control and supposed knowledge at the time, that he was an invitee, and that the defendant was not liable for the results of a condition, which was obvious to such invitee. Stein, Feldewerth, supra. The cases of Hammond, McHugh and West, supra, apparently extend this theory of no recovery to employees of the independent contractor. The usual application of the doctrine arises where one is sued because of the acts of another, who may be an independent contractor or may simply be an agent or servant. The determination of the status of the controversial party is ordinarily a question of fact for the jury to determine. Gardner v. Simmons et al., Mo., 370 S.W.2d 359. One highly material factor, and probably the ultimate test in most cases, is the right of the employer to control the work of the employee, and particularly the details or physical conduct. MAI 13.06 expresses the distinction and should be used where a factual controversy exists.

We seriously doubt the applicability of the doctrine under the facts and circumstances of this case, for the jury had the right to determine that defendant himself left the car in driving gear, that such act was negligent, and that his own negligence continued to be operative and active throughout the whole occurrence. One whose negligence combines and concurs with that of another, or even with an independent intervening cause, to produce injury to another, is liable. Christiansen v. St. Louis Public Service Co., 333 Mo. 408, 62 S.W.2d 828; Dickerson v. St. Louis Public Service Co., 365 Mo. 738, 286 S.W.2d 820. As stated in Dickerson, at loe. cit. 824: “If some injury is reasonably to be anticipated or is reasonably probable as a result of the defendant’s act of negligence, then the added act of a third person, though he also be negligent, does not break the chain of causation and defendant is liable; in such event the act of the third person is mere concurring negligence.” (Citing sundry authorities.) In any event, we hold that the facts in evidence here did not, as a matter of law, establish that How was an independent contractor at the time. Plaintiff remained with How at all times, physically touching him, he made suggestions, he pulled the seat back to allow more room, and he was waiting to take the car away as soon as the supposedly simple operation was completed. This is not the ordinary situation where the relationship has been held to exist and where there is generally a more complete and lasting transfer of the chattel and of control. We do not hold that there was no submissible issue of fact, but no such issue was tendered, and we do hold that How was not established as an independent contractor as a matter of law.

Lastly, on the submissibility of the case, counsel say that injury was not reasonably foreseeable as following from defendant’s acts. Such, of course, is an ultimate test of liability. Actually, in making this contention, defendant is saying that How should have seen and corrected defendant’s supposed negligence by changing the gears. Counsel cite several cases, most of which we shall not be able to discuss; they rely largely, it seems, on the cases of Kettler v. Hampton, Mo., 365 S.W.2d 518, and Hall v. Lewis, 364 Mo. 1096, 272 S.W.2d 260. In Hall, the defendant, in driving his car into a car wash, had complied with all directions, and he was held not liable for the supposedly negligent act of a passenger in sliding across the seat and apparently striking the gear shift lever causing the car to lurch forward. The court did not discuss the question of foreseeability. In Kettler, the plaintiff had placed his car on the grease rack in a filling station, leaving it (as he testified) in neutral, with the motor running as directed, and with the brake released; defendant, the station operator, was standing at the driver’s side when plaintiff got out; plaintiff then moved to the front of his car, saw defendant lean inside the car, and then leave it for a short time. Plaintiff then heard a “tapping” noise in the motor, raised the hood and standing in front of the car “jiggled the throttle,” or “gunned” the motor. The car immediately lurched forward, pinned plaintiff against a work bench and broke his legs. The theory of recovery was that the defendant had shifted the gears from neutral to drive when he leaned into the car; the court held that plaintiff made a submissible case thus holding, at least by inference, that some injury was foreseeable. The detailed discussion of foreseeability was made in connection with an instruction which omitted specific mention of that element; the opinion, as contrasted with the court’s actual decision, held the instruction erroneous; on that question two of the three judges dissented, but the case was reversed on another ground. The opinion does affirm the necessity of foreseeability as a basis for actionable negligence, but, it necessarily held that the element of foreseeability could properly be submitted there, under circumstances which to us, did not demonstrate so great a probability of injury as do the circumstances in our case.

All that is necessary to establish foreseeability is knowledge, actual or constructive, on the part of the defendant that there is some probability of injury sufficiently serious that the ordinary person would take precautions to avoid it. Zuber v. Clarkson Construction Co., 363 Mo. 352, 251 S.W.2d 52, loe. cit. 55, and cases there cited. This does not require a balancing of “probabilities.” id. And, as said in Zuber, supra: “ * * * ‘If the realizable likelihood that a third person may act in a particular manner is the hazard or one of the hazards which makes the actor negligent, such an act whether innocent, negligent, intentionally tortious or criminal does not prevent the actor from being liable for harm caused thereby.’ Restatement, Torts, § 449; Christiansen v. St. Louis Public Service Co., 333 Mo. 408, 62 S.W.2d 828.”

For somewhat analogous situations concerning the liability of owners for the leaving of cars in situations involving varying degrees of hazard or danger see, generally: Myers v. Hauser, Mo.App., 61 S.W.2d 214; Moody v. Clark (Tex.Civ.App.), 266 S.W.2d 907; Block v. Pascucci, 111 Conn. 58, 149 A. 210; Storey v. Parker, La.App., 13 So.2d 88; Schattilly v. Yonker, 347 Mich. 660, 81 N.W.2d 343; Craddock v. Torrence Oil Co., 322 Mich. 510, 34 N.W. 2d 51; Waltzinger v. Birsner, 212 Md. 107, 128 A.2d 617; Hughes v. Rentschler Floral Co., 193 Wis. 49, 213 N.W. 625. It would seem that a reasonable inference might be drawn that the defendant should know that a mechanic would not wish to work on an air conditioner with the motor running and the car in driving gear, when he wanted to keep the car stationary. We conclude that the evidence was sufficient to permit a jury to find that defendant might reasonably have foreseen a probability of harm to someone under these circumstances. On all the foregoing points we hold that a sub-missible case was made.

Counsel make various attacks on plaintiff’s Instruction No. 2. We quote it as follows: “Your verdict must be for the plaintiff if you believe: First, defendant caused the gear control of his automobile to be in driving position, with the engine operating and with no one at the controls, when he knew, or in the exercise of ordinary care should have known, that Austin How would be lying on the floorboard in such close proximity to the accelerator pedal that he was reasonably likely to depress said pedal and thereby cause the automobile to be propelled forward, and when defendant knew, or in the exercise of ordinary care should have known, that there was a reasonable likelihood that persons would be within the garage and would be likely to be struck and to suffer injury, and

“Second, defendant was thereby negligent, and

“Third, such negligence directly combined with the acts of Austin How to cause damage to plaintiff.”

The first objection is that the instruction submitted a theory not pleaded. The petition alleged, in substance: that defendant’s car was parked near the garage, that it was propelled into the garage and against plaintiff, injuring him, all of which was caused by defendant’s negligence, in that he “caused” the parked car “to be placed in gear” with the engine running and “with no one at the controls * * * when he knew, or * * * should have known that there was a reasonable likelihood” of injury to persons in the garage.

What counsel seem to contend is that because there was no mention in the petition of How, or of How’s action or non-action, or of any reasonable anticipation thereof, the petition necessarily stated as its sole theory that the defendant personally and physically caused the car to go forward, by leaning into it or otherwise; and further, that there was no substantial evidence to support any such theory. We do not construe the petition so narrowly as defendant seems to do. No motion was filed to require it to be made more definite; depositions were taken and the parties were presumably well advised of the facts. Under the circumstances the petition was and is reasonably susceptible of the construction that the defendant left the car in driving gear with the motor running, and that the circumstances were such that he should have anticipated danger. The evidence of the actions and nonactions of How, all of which was received without objection on this score, was a more specific demonstration of how the car was caused to be propelled forward and why defendant should have foreseen some danger. The instruction was within the general scope of the pleadings and the point is denied.

Next it is said that the instruction fails to distinguish between supposed negligence in leaving the car in gear, and negligence in later “leaning” in and placing it in gear. The argument is very technical. So far as we are concerned, if the car was in driving gear at the time of the injury because of defendant’s act, it makes no difference how or when defendant placed it or left it in that condition. Perhaps the instruction could have been simpler, but it is not erroneous for the reason thus urged.

Further, counsel say that the instruction assumed (1) that if How was in close proximity to the accelerator he was likely to depress it; and (2), that if defendant knew of the proximity he also knew of that likelihood. Several cases are cited as holding that assumptions of issuable facts are improper; these all arose under our former practice on instructions, but such assumptions are still improper. The court and the Bar have, however, sought to simplify that confused and confusing system; all instructions are now required to be “simple, brief * * * and [they] shall not submit to the jury or require findings of detailed evidentiary facts.” This statement, we realize, does not per se answer defendant’s argument but it presents a background. Our instructions need not now be so specifically detailed as they formerly were, and they should submit only the ultimate factual issues. The opening phrase of the present instruction directed a verdict only “if you believe” the hypothesized facts which followed. In such form we hold that it required the jury’s findings that How did lie in such close proximity that he was likely to depress the accelerator and that defendant knew of the proximity and the likelihood. The instruction could not have misled a reasonably intelligent jury.

Further objections are made to the instruction. We have considered them and they are denied. It would unduly lengthen this opinion to discuss them in detail. The last point made is that the verdict is excessive and that a remittitur should have been ordered. The verdict was for $24,000, and defendant suggests a remit-titur of “at least $5,000.” Bones in both of plaintiff’s legs were fractured, both bones in his left leg, and various small bones in the right foot; some of these were comminuted fractures; a metal rod 13 inches long and %sths of an inch in diameter was driven into the marrow of the bone of one leg, and removed about a year later; casts were applied to both legs and, after their removal, plaintiff used crutches, a cane or a brace for approximately 10 months; it was necessary to straighten some of his toes by cutting nerves and inserting nails or pins in the bones. Plaintiff was confined to the hospital on three occasions, the first for about seven weeks. At the time of trial he still had difficulty with his right foot, a substantial limitation in the use of the left ankle, with pain and numbness at times in that ankle and foot. He was working at trial time on a different job and at a compensation somewhat higher than previously. He lost approximately forty-four weeks of working time, at a “take-home” pay of $100 per week; his total medical expense was $2,336.12. The medical evidence was that, with reasonable medical certainty, there would be some permanent disability of the left foot and toes, and in the scarring of the tissues and the thickening of bones from the fractures, with some continuing pain and other symptoms. In this situation we do not deem it necessary to compare the amount of this verdict with other verdicts in other cases. It is obvious that there was substantial evidence to support the verdict, and it is not our function, under these circumstances, to “second guess” the jury and the trial court. We rule that the verdict was not excessive.

Plaintiff filed here a motion to dismiss the appeal on the ground that appellant had failed to include in the argument portion of his brief page references to the transcript. Counsel had included numerous such references in their statement of facts. Appellant thereafter tendered as a supplemental brief copies with numerous references so included. We reserved our rulings; we now grant leave to appellant to file the supplemental brief and overrule respondent’s motion to dismiss or affirm, which ruling is now of little moment in view of our decision on the merits. However, the occasion requires a few suggestions. Respondent’s counsel have not been satisfied to state their position fully in the motion (as they did), but have persisted in arguing the same matter, most repetitiously, throughout their respondent’s brief. Seven separate points of that brief begin with the injunction that the corresponding point or points of appellant’s brief should be ignored because appellant’s argument made thereunder is unfair to plaintiff and violates Rule 83.05(a) (4) and (d) [V.A.M.R.] in that said argument contains no specific references to the transcript on appeal.” The same matter is repeated, with additions (in one place a full page), under each point in the body of the argument. We do not wish to restrict parties in the filing and presentation of legitimate motions to dismiss under our rules, and we intend to dismiss appeals which constitute substantial and unwarranted violations. However, we feel that we are fully capable of understanding such points, once they are properly raised, and we intend to enforce the rules reasonably, having in mind the interests of the court, of counsel and of the litigants. In this instance our task would have been much easier if counsel, after making the point, had applied themselves more assiduously to the substance of the questions legitimately raised by the appellant on the merits.

The judgment is affirmed.

All of the Judges concur.


author: FINCH, Judge.

text:
    JEFFERSON BANK AND TRUST COMPANY, a Corporation, Plaintiff-Appellant, v. CENTRAL SURETY AND INSURANCE CORPORATION, a Corporation, Defendant-Respondent.
    No. 51209.
    Supreme Court of Missouri, Division No. 2.
    Dec. 12, 1966.

      Buckley & Campbell, R. Forder Buckley, Robert Lee Campbell, St. Louis, for plaintiff-appellant.
    Fred J. L. Schuler, St. Louis, for defendant-respondent.
   FINCH, Judge.

This case comes to the writer on reassignment.

Plaintiff bank, herein sometimes referred to as “Jefferson,” brought suit on its Bankers Blanket Bond for $20,621.06. Both plaintiff and defendant surety, sometimes referred to as “Central,” filed motions for summary judgment. The trial court entered judgment for Central on its motion for summary judgment and Jefferson has appealed.

Jefferson seeks recovery of the amount it was required to pay Brede Decorating, Inc., as a result of the judgment of this court in the case of Brede Decorating, Inc. -v. Jefferson Bank and Trust Co., Mo., 345 S.W.2d 156, plus costs and expenses incident to that suit. The bond covered losses of specified types and included the following provisions upon which Jefferson seeks recovery:

“ON PREMISES
“(B) Any loss of Property through robbery, burglary, common-law or statutory larceny, theft, false pretenses, hold-up, misplacement, mysterious unexplainable disappearance, damage thereto or destruction thereof, whether effected with or without violence or with or without negligence on the part of any of the Employees, * * *.”
“FORGERY OR ALTERATION
“(D) Any loss through FORGERY OR ALTERATION of, on or in any checks, drafts, acceptances, withdrawal orders or receipts for the withdrawal of funds or Property, certificates of deposit, letters of credit, warrants, money orders or orders upon public treasuries; or any loss (1) through transferring, paying or delivering any funds or Property or establishing any credit or giving any value on the faith of any written instructions or advices directed to the Insured and authorizing or acknowledging the transfer, payment, delivery or receipt of funds or Property, which instructions or advices purport to have been signed or endorsed by any customer of the Insured or by any banking institution but which instructions or advices either bear the forged signature or endorsement or have been altered without the knowledge and consent of such customer or banking institution, * * *. Mechanically reproduced facsimile signatures are treated the same as handwritten signatures.”

Losses covered were those “sustained by the Insured at any time but discovered after noon of the 1st day of November, 1957, and prior to the termination or cancelation of this bond. * * *.”

Two basic disputes exist between the parties on this appeal. They are (1) do the bank’s losses fall within coverage provided by the Bankers Blanket Bond (false pretenses on the premises or forgery), and (2) assuming that they do, were the losses discovered during the term of the bond?

Our opinion in the Brede case, supra, recited in considerable detail the transactions out of which the recovery by Brede from Jefferson arose. Except as necessary for clarity, we will not recite those facts again. Those interested may refer to 345 S.W.2d 156 for further details. Suffice it to say here that during the period from January 6,1955, to October 16, 1955, sixteen checks payable to Brede Decorating, Inc., were deposited in Jefferson to the credit of Acme-Williams Decorating Co., a partnership consisting of Egan, the treasurer of Brede, and Siviur, a salesman for Brede. The name “Brede Decorating, Inc.,” was stamped with a rubber stamp on the back of each of the sixteen checks. Below that wasi typed or written the words “Acme-Williams Decorating Co.” None of the checks bore any individual signature or name. These endorsements were placed on the checks and the deposits were made by Egan or Siviur, but the evidence did not clearly establish which one performed the acts with respect to particular checks.

This court held in the Brede case that the resolution furnished to the bank by Brede did not authorize Egan to do what was done here; that Egan had no authority, express or implied, to endorse corporate checks for deposit to any other account; and that under the evidence Jefferson was put on inquiry to determine whether Brede had authorized the actions in question. We held that the trial court was justified in entering judgment for Brede on its after-trial motion, notwithstanding a jury verdict in favor of Jefferson.

Jefferson notified Central of the Brede suit when filed and called upon Central to defend and hold Jefferson harmless under its blanket bond. Central denied liability and declined to defend. Jefferson now seeks recovery of the judgment entered against it therein, plus attorneys’ fees and expenses.

Both motions for summary judgment were submitted originally to Judge Reagan. He overruled both motions, reciting that there were issues of fact in dispute which would require a jury trial, these including a sharp dispute as to. when the loss was discovered

Subsequently, a pre-trial conference was held before Judge McMillian and he filed a memorandum for the clerk reciting that the parties had stipulated that there was no issue of fact involved and that the issues were entirely ones of law which could be decided by the court. It was stipulated that the motions of both parties for summary judgment should be treated as refiled and the case submitted to the court thereon. The stipulation provided for consideration of the transcript in the prior Brede case and the Supreme Court’s opinion therein, as well as the pleadings, interrogatories, depositions, requests for admissions, and affidavits in the case then pending before the court.

Thereafter, the trial court made findings of fact and conclusions of law and entered judgment for Central. Findings of fact included ones that Egan, by the endorsements and deposits, wrongfully converted the funds of Brede; that the circumstances surrounding the negotiations were so unusual as to put Jefferson on inquiry to determine whether the acts were authorized by Brede; that prior to November 1, 1957, officers of Brede made inquiry at the bank in connection with the sixteen checks and the handling thereof; and that the loss thereby was discovered prior to November 1, 1957. There were conclusions of law that there was no loss either by false pretenses or by forgery; that there was no evidence to show that the loss occurred on the premises; that the bank was guilty of conversion; and that the loss was discovered prior to November 1, 1957.

Considering first the question of coverage, we have concluded that the acts complained of do amount to false pretenses on the premises which fall within coverage B of the bond. It is true, as Central points out, that there was no evidence as to where the endorsements on the checks were made by Egan or Siviur, or that they occurred at the bank. However, when the checks, with the endorsement of Brede thereon, were presented at the bank for deposit to the account of Acme-Williams, that constituted a representation to Jefferson that the checks had been endorsed on behalf of Brede by an authorized person for the purpose of negotiating the checks. Such representation was false, and it was a false representation to the bank on its premises at the time the checks actually were presented for deposit. Federal Deposit Ins. Corp. v. Hartford Accident & Indemnity Co., D.C., 106 F.Supp. 602, 604 [2]; affirmed 8 Cir., 204 F.2d 933, 937[S],

Central asserts that the Brede opinion has determined, as a matter of law, that what occurred was a conversion and that the blanket bond does not cover loss by conversion. This contention overlooks the fact that the suit by Brede against Jefferson was for alleged conversion by the bank of Brede’s funds as a result of the bank’s handling of checks which belonged to Brede. When the opinion speaks of conversion or diversion of funds, it is characterizing what the bank did, not the nature of the acts of Egan or Siviur. The Brede opinion does not hold that the acts of Egan and Siviur were not false pretenses on the premises or, for that matter, that they were not forgeries.

In this action by Jefferson against Central we are concerned with the acts of Egan and Siviur. More specifically, we are concerned with whether they amount to false pretenses on the premises or forgeries which, in turn, induced Jefferson to convert or divert Brede’s funds. We hold, as above indicated, that the acts of Egan and Siviur did constitute false pretenses on the premises. Under these circumstances, we need not extend this opinion by considering whether the acts also would fall within the coverage against loss by forgery under coverage D.

This brings us to a consideration of the second question which is whether the losses were discovered during the term of the bond written by Central for Jefferson. The trial court adopted the view of Central and held as a matter of law that the losses were discovered prior to November 1, 1957, and not covered by its bond.

Central, seeking to sustain the action of the trial court, asserts on appeal that the opinion of this court in the Brede case established that Jefferson was put on inquiry in 1955 when the checks were presented for deposit. This, says Central, constituted discovery of the loss prior to November 1, 1957, as a matter of law. We do not agree. We did hold in Brede that when the checks were presented with the endorsements heretofore described, the bank, for the purpose of determining its liability to Brede, was put on inquiry to determine whether Brede had authorized the endorsements. This did not amount to a holding, for purposes of recovery on the blanket bond, that Jefferson in fact knew at that time that the endorsements were not authorized. The holding also does not mean that a loss to the bank had occurred or been discovered at that time as a result of its handling of the checks. The language of the Bankers Blanket Bond provides coverage for losses to the bank which are discovered (not merely discoverable) during the term of the bond. The issue of when or whether there was actual discovery by the bank of a loss to it was not in issue in Brede and was not settled by that opinion.

Next, says Central, a series of six letters between Brede and Jefferson in March and April, 1957, all part of the record on appeal, should have put the bank on inquiry and constituted notice of loss to the bank. In brief, the letters from Brede contained requests for certain information and records from the bank in connection with the handling of the checks in question. The replies from Jefferson transmitted records and information to Brede. None of Brede’s letters express any intention to assert a claim against the bank. On the contrary, they stated an intention to proceed against Egan and Siviur. The matter - of intention is dealt with expressly in Brede’s letter of March 16, 1957, as follows: “We also would like a copy of all deposit slips so that we may be able to identify the names of the various customers who sent us checks for deposit in the Brede Decorating account. We believe this will be of some help in setting up our case against Dick Siviur and James W. Egan.” Instead of placing any blame on the bank, Mr. Brede was blaming himself and his associates in the following language from that letter: “Jim Egan was one of four of us who owned the Brede Decorating Company. He was supposed to handle sales and complete management and he had full control of everything. That was the mistake we made.” In addition, Brede’s letter stated: “I am sure that with your help and with the bank’s records we can accomplish what we want. I am certainly pleased with the information you have given me and it gives us something to work with. I will be waiting to hear from you with the photostatic copies of records I have indicated I would like to have.”

Again, in a letter dated April 19, 1957, the last of the series, Brede acknowledged further information and arranged a personal conference in St. Louis on May 1, 1957. He stated: “My reason is to see how many deposits have been made so we will know what steps to take against Jim Egan and Dick Siviur. This will be our deciding point. In other words, if we feel that there was not enough money taken we won’t bother. I hope that you will go along with me on the program * *

These letters do not provide a basis for us to hold as a matter of law that discovery of a loss by the bank occurred upon their receipt. We cannot affirm the action of the trial court in sustaining Central’s motion for summary judgment.

We next proceed to a consideration of Jefferson’s motion for summary judgment. Its position can be summarized in this manner: It had no notice of a claim or intended claim by Brede against the bank until receipt of a letter from Brede dated February 24, 1958, wherein demand was made for reimbursement for alleged loss resulting from handling of the sixteen checks. The letters exchanged in March and April, 1957, made no reference to any claim against the bank but talked of possible claims of Brede against Egan and Siviur. An affidavit of Jefferson’s vice-president as to a conversation with Mr. Brede on May 1, 1957, recites that Mr. Brede mentioned sums due to Siviur and Egan by Brede which might offset the sums received by Egan and Siviur by means of the checks in question. The affidavit also states that the letter of February 24, 1958, was the first word the bank had that Brede claimed any rights against the bank. These letters and the affidavit, says Jefferson, establish as a matter of law that discovery of loss by the bank came upon receipt of the letter of February 24.

The blanket bond “undertakes and agrees to idemnify and hold harmless” the bank “from and against any losses sustained by the insured at any time but discovered after noon of the 1st day of November, 1957, and prior to termination” of the bond. In order to decide the issue as to discovery, we first must consider the kinds of losses which the bond covers. In general there are two categories. One is where the bank suffers a direct loss of its money or property for any of the causes mentioned in the bond, such as by theft.. The other is where the bank does not suffer a direct loss but incurs a liability and as a result thereof has to pay money to another on account of a risk covered. This latter category is insurance against liability and is the kind with which we are concerned. Brede suffered an immediate loss when Egan and Siviur, by false pretenses and possibly forgery, converted the proceeds of Brede’s checks to their our use, but the bank at that time suffered no loss or financial detriment although it may or may not have incurred a liability by reason of what it permitted to be done with Brede’s money. If it developed that there were offsetting amounts due from Brede to Siviur and Egan, a possibility which Brede indicated to Jefferson’s vice-president, or if Egan and Siviur reimbursed Brede, or if Brede concluded not to assert a claim, then the bank would not sustain any loss.

Section 3 of the Bankers Blanket Bond provides for notice to the surety company “at the earliest practicable moment after discovery of any loss hereunder,” and there is a section of the bond applicable to court costs and attorneys’ fees which provides, in part, as follows: “The Underwriter will indemnify the Insured against court costs and reasonable attorneys’ fees incurred and paid by the Insured in defending any suit or legal proceeding brought against the Insured to enforce the Insured’s liability or alleged liability on account of any loss, claim or damage which, if established against the Insured, would constitute a valid and collectible loss sustained by the Insured under the terms of this bond. Such indemnity shall be in addition to the amount of this bond. In consideration of such indemnity, the Insured shall promptly give notice to the Underwriter of the institution of any such suit or legal proceeding; at the request of the Underwriter shall furnish it with copies of all pleadings and other papers therein; and at the Underwriter’s election shall permit the Underwriter to conduct the defense of such suit or legal proceeding, in the Insured’s name, through attorneys of the Underwriter’s own selection. * * * ”

It is to be noted that these clauses refer to the bank’s liability on account of any claim which, if established against the bank, would fall within the provisions of the bond. This indicates that the time of discovery of loss mentioned in the bond is not intended to be the time when a claim of the depositor or customer is established ultimately by entry of judgment. The provisions for notice to the surety and for handling of the defense indicate otherwise.

What, then, does the bond mean when it refers to losses to the insured discovered during the period of coverage?

We are of the opinion that the proper principles for determining when discovery occurs under the terms of the Bankers Blanket Bond are announced in Wachovia Bank and Trust Co. v. Manufacturers Casualty Ins. Co., 171 F.Supp. 369, 375, wherein it is stated:

“In order to constitute a ‘discovery’ in accordance with the terms of the policy * * * there must be facts known, at the time it is asserted that the discovery was made, which would lead a reasonable person to an assumption that a shortage existed. The facts must be viewed as they would have been by a reasonable person at the time discovery is asserted, and not as they later appeared in the light of subsequently acquired knowledge. * * * [T]he mere discovery of certain facts which later lead to other facts which reveal the existence of a shortage does not necessarily constitute a discovery. Knowledge available to the insured must rise above a mere suspicion of loss. The fact that an investigation after the termination of the policy leads to the disclosure of an actual defalcation does not raise a previous suspicion to the level of a discovery. Inefficient business procedures, or irregularities and discrepancies in accounts, if as consistent with the integrity of employees as their dishonesty, does not constitute a discovery, even though dishonest acts may later be found to exist.”

The above principles are in harmony with the definition of “discovery” given in Webster’s Third New International Dictionary, as follows: “1 a: the act, process, or an instance of gaining knowledge of or ascertaining the existence of something previously unknown or unrecognized.” In other words, not only must the facts be known, but they also must be recognized for what they are, which in this case would be a claim against the bank. The same thought is expressed in Insurance Law and Practice by Appleman, Vol. 10, § 6195, page 537, as follows: “A provision requiring a bank to notify the surety in case any act of dishonesty came to its knowledge, was held not to become operative because the officers or directors of the bank learned of acts of the cashier which were in fact dishonest, if they were not known to be so at the time.”

The Wachovia case dealt with the first category of loss insured against in the blanket bond, namely, a direct loss by the bank. However, the principles stated therein are applicable to the second type of loss based on legal liability of the bank for loss of another. Paraphrasing the Wa-chovia language, it can be stated that in order to constitute a discovery in accordance with the terms of the policy there must be facts known, at the time it is asserted that the discovery was made, which would lead a reasonable person to an assumption that the bank has suffered a loss by reason of its handling of the account of its customer. Stated otherwise and applied to the facts of this case, the time of discovery of the risk insured against is when the bank must reasonably have known and recognized that Brede had suffered a loss and that Brede apparently intended to attempt to hold the bank liable for such loss.

On the record before us, there is no dispute as to what occurred between Brede and Jefferson with reference to the handling of these checks. The first contact by Brede with Jefferson was in March of 1957. The letters which were exchanged at that time are before us. The affidavit of Jefferson’s vice-president recites what was said in his talk with Brede on May 1, 1957. No counteraffidavit was filed by Central. Nothing further was heard from Brede after May 1, 1957, until receipt of the February 28, 1958, letter. Meanwhile, Brede did not intimate that it claimed any rights against the bank. On the contrary, Brede told the bank that there might be offsetting amounts due from Brede to Egan and Siviur and that they were investigating to determine whether to assert a claim against Egan and Siviur for any balance due. Under these undisputed facts, we hold as a matter of law, applying the principles of Wachovia, that discovery of the loss to the bank occurred upon receipt of that letter, which was within the period covered by the blanket bond written by Central. We do not mean by this holding to state that in each and every instance the time of discovery of a loss of this character necessarily is simultaneous with formal demand by the customer on the bank, but we do hold under the particular facts of this case that this was the time of discovery of Jefferson’s loss.

The pleadings and depositions indicate that Jefferson had a blanket bond from the American Automobile Insurance Company which covered a period of time expiring November 1, 1957, and that Jefferson called upon both American Automobile and Central for protection and indemnity following demand on the bank by Brede. It also was indicated that American Automobile paid Jefferson the sum of $1000 and took a covenant not to sue, apparently sometime in 1961. If these be the facts, then Jefferson was obligated to credit the $1000 recovery against the amount which it sought from Central; otherwise, it would in effect have a double recovery to the extent of $1000 for its loss arising from its handling of the Brede checks. The record is not sufficiently clear with reference to this transaction for us to make the deduction and enter judgment accordingly. Consequently, the case is reversed and remanded with directions to the trial court to ascertain the facts with respect to the transaction between Jefferson and American Automobile Insurance Company, and if, in fact, payment was made by American Automobile to Jefferson on a covenant not to sue in connection with liability of Jefferson to Brede for its handling of the checks involved herein, then such recovery shall be credited against the amount sought in this suit by Jefferson from Central, and judgment in favor of Jefferson shall then be entered by the trial court for the net amount of loss, attorneys’ fees and interest in accordance with the views expressed in this opinion.

EAGER, P. J., and STORCKMAN, J., concur.

DONNELLY, J., not sitting.


author: HYDE, Judge.

text:
    INTERNATIONAL BUSINESS MACHINES CORPORATION, a Corporation, Appellant, v. Thomas A. DAVID, Director of Revenue, State of Missouri, and Albert S. Arenson, Collector of Revenue, Respondents.
    No. 51918.
    Supreme Court of Missouri, En Banc.
    Nov. 14, 1966.
    Rehearing Denied Dec. 12, 1966.

      Walter R. Mayne, N. W. Hartman, Thomas Rowe Schwarz, Fordyce, Mayne, Hartman, Renard & Stribling, St. Louis, for appellant.
    Norman H. Anderson, Atty. Gen., Walter W. Nowotny, Jr., Asst. Atty. Gen., Jefferson City, for respondents.
   HYDE, Judge.

Declaratory judgment action to determine the constitutional validity of Sec. 144.-020, subd. 1(8) and its applicability to plaintiff’s rental transactions. The case was decided on plaintiff’s motion for summary judgment or judgment on the pleadings. (Statutory references are to RSMo and V.A.M.S.) The Court entered judgment for defendants, declaring Sec. 144.-020, subd. 1(8) constitutional and that it “validly imposes a tax upon all sellers for the privilege of engaging in the business of rendering taxable rental service at retail.” Plaintiff has appealed.

There was nothing before the trial court except the plaintiff’s petition, the exhibits attached to plaintiff’s petition (sales and rental agreements and a rule and a regulation of the Department of Revenue) and the admissions in defendants’ answer of the relevant facts. Therefore, we will consider the submission as one for judgment on the pleadings.

Sec. 144.020, subd. 1 (8) is as follows r “A tax equivalent to three per cent of the amount paid or charged for rental or lease of tangible personal property, provided that if the lessor or rentor of any tangible personal property had previously purchased the property under the conditions of 1sale at retail’ as defined in subdivision (8) of section 144.010 and the tax was paid at the time of purchase, the lessor or rentor shall not apply or collect the tax on the subsequent lease or rental receipts from that property, and provided, further, that the purchase or use of motor vehicles and trailers shall be taxed and the tax paid as provided in sections 144.070 and 144.440 and no such tax shall then be collected on the rental or lease of motor vehicles and trailers; and provided, further, that tangible personal property which is exempt from the sales or use tax under section 144.030 upon a sale thereof is likewise exempt from the sales or use tax upon the lease or rental thereof.” (Emphasis ours.)

Plaintiff claims the italicized provision makes this statute unconstitutional. Plaintiff is a New York corporation authorized to do business in Missouri. It sells business machines in Missouri and collects and pays sales tax on such sales to the Missouri Department of Revenue. There is no dispute about a tax on these transactions. Plaintiff also rents business machines in Missouri and the right of this state to collect sales tax on the rentals received for these machines is the issue in this case. The tax on these rentals is being collected from customers and paid under protest. Any refund would be returned to plaintiff’s customers. All machines, sold or rented, are manufactured by plaintiff outside of this state and all machines sold or rented in this state are shipped into Missouri prior to their sale or lease. Plaintiff claims its only tax liability to this state on the machines it 'rents here should be for our use tax on the materials used to make these machines. The State contends Sec. 144.020, subd. 1(8) properly classifies the rental of these machines as a taxable sale of service.

Plaintiff argues that the purpose of Sec. 144.020, subd. 1(8) is to reach rentals of tangible personal property, where the rentor had not been subject to sales or use tax on the acquisition of such property, but it says that plaintiff is subject to the use tax on this tangible personal property brought into this state for its rental business. (Plaintiff means use tax on the value of the material used by it to make these machines and not on the value of completed machines.) Therefore, plaintiff says the denial to it of the right to avail itself of the opportunity to avoid rental tax under the first proviso of Sec. 144.020, subd. 1 (8) is arbitrary discrimination against it and its customers. Otherwise stated plaintiff claims if the owner of a machine who has purchased it, and paid sales tax or use tax on its purchase price at the time of purchase, is made exempt from sales tax on rentals he receives then an owner who has manufactured a machine and has to pay a use tax on the materials that went into it (because the materials were bought in another state) must also be made exempt on the rentals he receives. Plaintiff claims it arbitrary discrimination to do otherwise. Plaintiff says : “Defendants have no power by Regulation and Rule to classify lessors into two different groups: (1) those who purchase goods requiring no further steps prior to being rented, and (2) those who purchase goods requiring further processing before being rented. There is no basis in the Sales and Use Tax Laws for such classification or provision for exemption from sales or use tax to one such group and not the other.”

Defendants’ position is that plaintiff was not required to pay use tax on its machines brought into this state for rental or on the material used to make them. Defendants say: “The finished product is what is introduced into Missouri and imposition of the use tax depends on whether that finished product was purchased outside Missouri and used in Missouri by the purchaser. Thus before the enactment of subdivision 8, IBM and persons like IBM, who manufactured machines and leased them in Missouri, would not be liable for a use tax on that machine.” If defendants are correct and plaintiff has no use tax liability on the machines it manufactures elsewhere and brings into this state to rent, then there is no basis for its claim of discrimination.

Plaintiff cites no specific provision of our statutes which imposes liability for use tax on material bought in another state to manufacture a machine that is brought into this state by the manufacturer for his own use or to be rented by him and we have found none. The value of such material would surely be a small part of the value of the machine, the cost of which also would include labor cost, know-how and reasonable profit. Thus the amount of tax on the materials would be small compared to the tax on the completed machine, so that rentals would have some relation to the value of the completed machine but almost none as to the value of the raw material of which it was composed. For reasons hereinafter stated, we do not need to decide whether such differences would justify separate classification but we do think these facts have some bearing on the determination of the applicability of our use tax.

Our use tax is imposed by Sec. 144.610 “for the privilege of storing, using or consuming within this state any article of tangible personal property purchased on or after the effective date” of the use tax act. Furthermore, “[t]his tax does not apply with respect to the storage, use or consumption of any article of tangible personal property purchased, produced or manufactured outside of this state until the transportation of the article has finally come to rest within this state or until the article has become commingled with the general mass of property of this state.” (Emphasis ours.) Exempt from our use tax by Sec. 144.615(3) is: “Tangible personal property, the sale of which, if made in this state, would be exempt from or not subject to the Missouri sales tax under the provisions of subsections 2 and 3 of section 144.030”. These subsections include materials, replacement parts and equipment for replacing other equipment used in manufacturing. Also exempt from our use tax by Sec. 144.615(5) is: “Tangible personal property which has been subjected to a tax by any other state in this respect to its sales or use,” providing for collection of the difference if the tax is less than ours. In Southwestern Bell Telephone Company v. Morris, Mo.Sup., 345 S.W.2d 62, 66, 85 A.L.R.2d 1033, we approved the characterization of a use tax as “ ‘ * * * a levy on the privilege of using within the taxing state property purchased outside the state, if the property would have been subject to the sales tax had it been purchased at home.’ ” From all of these provisions, our view is that our use tax applies to the completed article (machine here) that is brought into this state and not the items of raw material that went into its manufacture, which, of course, are greatly changed in form and could not be identified as separate articles. Because the machines involved herein were not purchased by plaintiff, but manufactured by it, they are not subject to our use tax. Likewise, because the raw material used to make these machines was never used in this state as such, it seems reasonable to hold there is no basis for a use tax on its value because it is part of a machine which is the article used in this state. Our conclusion is that defendants are correct as to this alleged use tax liability. Of course, if plaintiff does not have use tax liability it claims it has, there is no discrimination and we so hold.

Plaintiff further contends that a valid tax on its rentals could be enacted only by amending Sec. 144.010, subd. 1(8) to-include rentals of tangible personal property, made taxable by Sec. 144.020, subd. 1(8), in its definition of sale at retail, citing International Business Machines Corporation v. State Tax Commission, Mo.Sup., 362 S.W.2d 635, and Federhofer v. Morris, Mo.Sup., 364 S.W.2d 524. Plaintiff says in those cases we pointed out to the Legislature this simple method of subjecting such rental transactions to tax. Plaintiff says the failure of the Legislature to use this method, and instead providing a tax on the rental use of property which had not been subjected to sales or use tax on its purchase, caused uncertainty, confusion, conflict and vagueness which would render the rental tax enactment unconstitutional. Sec. 144.010 is a definition section while Sec. 144.020 is the section that imposes the tax. We see no good reason why the tax could not be imposed by amending Sec. 144.020 to tax these transactions as a rental service charge without defining it as a sale at retail. In the 1962 IBM case, we did not say that defining such rental service as a sale at retail was the only way to impose a valid tax on it. We said (362 S.W.2d l.c. 639) : “By carefully defining ‘sale at retail’ and purposefully embracing in the definition and the tax certain rental-type transactions, it would appear that other rentals and leases were not embraced.” In that case there was then nothing in the tax imposition statute, Sec. 144.020, to impose a tax on such rentals and the only claimed basis for taxing rentals of IBM machines was that such rentals constituted sales at retail. Thus the basis of that decision was that since several rental-type transactions were included in the definition (in the definition Section 144.010) and rental of business machines were not included, we would not hold such transactions taxable as sales at retail. There is no basis for any doubt that Sec. 144.020, subd. 1(8) specifically makes these rental transactions taxable.

In view of our ruling that plaintiff has no use tax liability in bringing into this state for rental purposes the machines it manufactures, it is not necessary to consider its contention that certain regulations and rules of the Department of Revenue authorize an optional tax. Plaintiff says these authorized a purchaser of tangible personal property to be rented to pay the sales tax on the purchase price and have no liability for sales tax on rentals or to pay no sales tax on the purchase price and be liable to collect sales tax on the rentals. Plaintiff says this would violate Secs. 1 and 2, Art. X of the Missouri Constitution. Defendants say this option theory is not being followed but there is nothing in the record about it. This all goes to plaintiff’s claim that Sec. 144.020, subd. 1(8) is so vague, confusing and inconsistent with the provisions of the sales and use tax laws as to constitute a violation of the constitutional provisions of equal protection and due process. Our ruling as to the meaning and application of the use tax provisions and the validity of the amendment to Sec. 144.-020 disposes of these contentions.

Plaintiff also claims the title of the 1963 act amending Sec. 144.020 was constitutionally defective because it did not adequately describe the content of the part of the bill which became Section 144.-020, subd. 1(8). The title to this- act was: “An Act to repeal section 144.020, RSMo 1959 and sections 144.140, 144.285 and 144.-440, RSMo 1961 Supp., relating to sales and use tax and to enact in lieu thereof five new sections, relating to the same subject, with a severability clause.” Laws 1963, p. 195. The requirement of Sec. 23, Art. Ill of the Constitution is that “[n]o bill shall contain more than one subject which shall he clearly expressed in its title”. Plaintiff says: “The purpose of the constitutional provision that the subject matter of all bills shall appear in the title, is to permit the legislators to determine by examining the title of a proposed act, what its purpose is, so that proper consideration may be given it,” citing State ex rel. United Railways Co. v. Wiethaupt, 231 Mo. 449, 133 S.W. 329; State ex rel. Niedermeyer v. Hackmann, 292 Mo. 27, 237 S.W. 742; State ex rel. Normandy School District of St. Louis County v. Small, Mo.Sup., 356 S.W.2d 864. Plaintiff argues that this title does not show that a new service was to be taxed or that there was an exemption from the tax on rental charges when a purchase for rental is made under conditions of sale at retail. However, the title did show what sections relating to sales and use tax were to be repealed (including 144.020) and that new sections relating to the same subject were to be enacted. Sec. 144.020 already included sales tax on several kinds of service or rental transactions and the amendment only added another so that the amendment did relate to the same subject. It does not seem reasonable to believe that members of the Legislature or others interested would be misled as to the subject matter of this amending act. Sec. 144.020 previously has been amended by acts using the same form of title. See Laws 1947, V. 1, p. 546; Laws 1945, p. 1865. Plaintiff cites the title to the 1935 act (Laws 1935, p. 411) and the 1937 act (Laws 1937, p. 552) but these were complete new acts. Our conclusion is that the title was sufficient.

The judgment is affirmed.

All concur.