source: Caselaw Access Project

author: WALKER, J.

license: Public Domain

text:
    ZADOCK T. RIGGS, Trustee in Bankruptcy of Estate of TOM PRICE, Appellant, v. IVA PRICE, Appellant.
    In Banc,
    March 15, 1919.
    1. JURISDICTION: Bankruptcy Court. An adjudication by a bankruptcy court is as immune from collateral attack as any other judgment. The conclusiveness of the decree is emphasized if the proceeding -was voluntary; if, for instance, the court’s jurisdiction was invoked by a bankrupt farmer, to whom the coercive provisions of the Bankrupt Act do not apply.
    2. -: Bankruptcy: Fraudulent Conveyance: Suit Within Four Months. The limitation of four months within which a trustee in bankruptcy may sue to set aside transfers bas reference to preferences and to proceedings in which, transfers are declared to be void if made within the time limited, and not to the right of action by the trustee to set aside a fraudulent conveyance.
    3. -: Fraudulent Conveyance: Suit By Trustee in Bankruptcy: Timely Brought. The State court has jurisdiction of a suit to set aside deeds made in fraud, of creditors, more than four months before the suit, brought by the trustee in bankruptcy, upon an order of the bankruptcy court.
    4. FRAUDULENT CONVEYANCE: Suit By Trustee in Bankruptcy: Prior Judgement and Execution by Creditor. In a suit in a State court by a trustee in bankruptcy to set aside a deed made by a bankrupt in fraud of his creditors, it is not necessary to allege or prove that some creditor has reduced his claim to judgment and caused execution to be issued thereon which has been returned unsatisfied. After an adjudication in bankruptcy no creditor can reduce his claim to judgment in the ordinary way, nor can the trustee do so for him; but the allowance of claims against a bankrupt’s estate partakes of the nature of a judgment for debt, and after such allowances a trustee may, as the creditor’s alter ego, file a suit to avoid the fraudulent transfer.
    5, -: -: Pleading: Application of Fund. In a suit to set aside a conveyance made in fraud of creditors brought by a trustee in bankruptcy, it is not necessary that the petition state the amount or nature of any claim to which the property if recovered is to be applied. If a decree setting aside the conveyance is rendered, the property recovered becomes a part -of the general assets of the bankrupt estate, to be distributed in a pro-rata payment of all claims of like character.
    6. -: -: Evidence: Secured Claims. Where a material allegation is that the assets in possession of the trustee are insufficient to satisfy the claims against an estate, testimony to show the amount of secured claims is admissible.
    7. -: -: -: Allowed Claims. Testimony as to claims ' allowed by a bankruptcy court is admissible, since such allowances partake of the nature of judgments.
    8. -: Husband as Witness for Wife: Curtesy Initiate. If the husband is not a party to a suit brought by a trustee in bankruptcy to set aside a deed made by the husband to his wife as being in fraud of his creditors, he is not a competent witness for her, because he has no material interest in the judgment to be rendered. The Married Woman’s Act of 1889 destroyed his curtesy initiate, and he has no such interest in the land as qualifies him to testify in his wife’s behalf. [Overruling contrary announcement in. Roberts v. Bartlett, 190 Mo. 1. c. 702.]

      9. -: Judgment: Responsive to Pleadings: Subsequent Mortgage. Where the petition alleges that the conveyance hy a husband to his wife was fraudulent, that the property was incumbered with a mortgage made before the transfer and is a homestead, and prays that the conveyance be set aside and the property sold subject to said mortgage and that the proceeds, after paying the wife $1500, be paid to the trustee in bankruptcy, and the answer avers the existence of the incumbrance and homestead but is otherwise a general denial, a judgment subject to a mortgage placed upon the land by the wife after its transfer to her is not responsive to the pleadings, but should be limited to setting aside the fraudulent conveyance subject to pre-existing liens.
    Appeal from DeKalb Circuit Court. — Hon. Alonso D. Burnes, Judge.
    Reversed AND remaNded (with- directions).

      Hewitt & Hewitt for appellant.
    (1) Tbe transfer of the homestead in question was not made within four months prior to the filing of the petition in bankruptcy. The trustee was never vested with the title of the bankrupt to said property. The bankruptcy court did not have any jurisdiction to try and determine this cause, and the. State court acquired none. Coleman v. Hagey, 252 Mo. 102; Coleman v. Dana, 191 Mo. App. 370; Mayhugh v. Todison, 246 Mo. 288; Blake v. Meadows, 225 Mo. 46. (2) There was no such creditor as contemplated in law, in existence, if bankruptcy had not intervened, who could have complained, or sustained a creditors’ bill to set aside the deed in question. Secs. 70a and 70e, Bankruptcy Act; Crim v. "Walker, 79 Mo. 335; Ready v. Smith, 170 Mo. 163; Davidson v. Dockery, 179 Mo. 687; Mayhugh v. Todison, 246 Mo. 288; Blake v. Meadows, 225 Mo. 26; Stam v. Smith, 183 Mo. 464; Scott v. Neely, 140 TJ. S. 106; Atlas Nat. Bank v. Moran P. Co., 138 Mo. 59; Mellier v. Bartlett, 106 Mo. 381. There can be no creditor unless he has a valid claim or debt against a debtor — a claim incapable of being rightfully overgrown, 8 Words and Phrases, p. 7269. (3) The admis-Mén of testimony by the court at the trial offered by the plaintiff as to the value of the homstead was error; it is not within the province of a court of equity to try and determine the value of a homestead. Courts of equity are hound by the homestead laws. E. S. 1909, secs. 6705-6706; Eeed v. Nicholson, 189 Mo. 396. (4) The court erred in admitting in evidence the debts secured by the various chattel mortgages amounting to more than $26,500, also the Stafford and Allen Trust Deeds amounting to more‘than $15,000. These being all secured claims were without the law, and without the allegations of plaintiff’s bill. There could he no intent to- delay or defraud a secured creditor. Coleman v. Hagey, 252 Mo. 132; Woodman on Trustees in Bankruptcy, sec. 358; Fraudulent Conv., 20 Cyc. 455. (5) It was error on the part of the court, in allowing the testimony of the various persons claiming debts against the husband of the defendant, to testify as to such indebtedness, this not being a suit- to try and determine the validity of claims against the alleged fraudulent grantor. And this error was magnified later, by the court’s refusal to per-'-mit Tom Price, the alleged debtor and grantor, to testify in the matter. And who would have denied the validity of many of them, and denied that many others were in existence at the time of the conveyance in question. Crim v. Walker, 79 Mo. 335; Davidson v. Dockery, 179 Mo. 163; Commercial Bank v. Ankrum, 191 Mo. App. 251; Coleman v. Hagey, 252 Mo. 125. (6) To allow alleged creditors to go upon the stand and testify to the bankrupt’s indebtedness to them in the loose manner in which they did, and refuse to permit him to testify was error. And to charge one with being- insolvent and- a defrauder and refuse him permission to deny it on the witness stand and also deny the indebtedness, is yet a more grievous error. He had such a resulting interest in the homestead as the husband of the defendant — courtesy initiate — as to entitle him to be heard. It is also against equity and justice. There was absent any conspiracy to defraud. Eoberts v Bartlett, 190 Mo. 704; Steffen v. Bauer, 70 Mo. (7) There can be no fraudulent conveyance of property as to a creditor where he has no right to subject the property to his debts. Stam v. Smith, 183 Mo. 464'; Reed v. Nicholson, 189 Mo. 404; Mellier v. Bartlett, 106 Mo. 381. (8) The • conveyance of the homestead did not make the debtor insolvent; it constituted no part of bis assets that could be reached by his creditors. (9) A voluntary conveyance is not fraudulent per se as to existing creditors; the circumstances óf each case must be considered. Lane v. Kingsbury, 11 Mo. 402; Walsh v. Ketchum, .84 Mo. 427; Welch v. Mann, 193 Mo. 325. (10) The fact of solvency is. always presumed until insolvency is established; and he who asserts the fact of insolvency bas the burden of proving it. 7 Ency. Evidence, p. 482. (11) The relationship of the parties and the insolvency of the grantor are not alone sufficient to establish fraud. Robinson v. Dryden, 118 Mo. 534. (12) To make a voluntary conveyance fraudulent as to subsequent creditors there must be proof of actual or intentional fraud. Payne v. Stanton, 59 Mo. 158; Krenger v. Yehor, 164 Mo. 163 (13) If a debtor in conveying his property does not make himself insolvent, it is immaterial whether he conveys for a valuable consideration or gives it away. It cannot be set aside for debts prior to its execution. Felig v. Bush, 165 Mo. 144; Reed v. Bott, 100 Mo. 62; Burn-ham v. Boyd, 167 Mo. 189.

      Edward G. Robison and Kendall B. Randolph, for respondent.
    (1) Where a voluntary conveyance is made by one in such pecuniary circumstances that the conveyance itself renders him insolvent the conveyance is presumptively fraudulent, and- it is immaterial that no actual fraud is shown or was intended. Where a debtor, who makes a voluntary conveyance is afterwards unable to pay his existing debts at the time of the conveyance, in ordinary course the conveyance will be held void as to such existing debts, and the bnrden of proof is' on the donee to repel the presumption of a fraudulent intent. A voluntary conveyance by a debtor to his wife is as against prior creditors presumptively fraudulent and coverture is no defense in a court of equity for fraud. The solvency essential to protect a voluntary gift consists not only in the present ability of the debtor to pay his debts, but in such a condition of his means that payment can be enforced by process of law. Scharff v. Mc~ Gaugh, 205 Mo. 364; Snyder v. Free, 114 Mo. 369. It is immaterial that no actual fraud is shown or was intended. White v. McPheeters, 75 Mo. 386; Bohannon v. Combs, 79 Mo. 305. Where a debtor who makes a voluntary conveyance is afterwards unable to pay his existing debts at the time of the conveyance, in ordinary course, the conveyance Avill be held void as to such existing debts. Headley Grocer Co. v. Walker, 69 Mo. App. 553; Lionberger v. Baker, 114 Mo. App. 353, affirmed 88 Mo. 447; St. George’s Church Society v. Branch, 120 Mo. 226. The burden of proof is on the donee to repel the presumption of a fraudulent intent. Walsh v. Ketchum, 84 Mo. 427. A voluntary conveyance by a debtor to his wife, is as against prior creditors, presumptively fraudulent. Hoffman v. Nolte, 127 Mo. 120; Garrett v. Wagner, 125 Mo. 450. The creditors may maintain a suit to set aside a voluntary conveyance to the wife, though he has a lien on other property of the husband. Patton v. Bragg, 113 Mo. 595. To make a voluntary deed void as to existing creditors, it is not necessary that the assignor should have been insolvent at the time of its execution. Potter v. McDowell, 31 Mo. 62; Up-degraff v. Theaker, 57 Mo. App. 45. The solvency essential to protect a voluntary gift consists not only in the present ability of the debtor to pay his debts, but in such a condition of his means that payment can be enforced by process of law. State ex rel. v. Koontz, 83 Mo. 332; Hoffman v. Nolte, 127 Mo. 135; Lion-berger v. Baker, 88 Mo. 447. (2) Sec. 6794, R. S. 1909, gives a homestead in the country not exceeding one hundred sixty acres of land and not to exceed the total value of $1500. Where there is a mortgage on the homestead the value of $1500 is taken out of the excess over the mortgage. Reed Bros. v. Nicholson, 189 Mo. 396; Adams v. Adams, 183 Mo. 396; Hauf v. Brown, 171 Mo. 207. The owner of a homestead may sell his homestead or may give it away and the creditors have no concern to the amount of $1590 which is éxempt. Grimes v. Portman, 99 Mo. 229. The fraudulent grantor, however, can convey only his homestead right and can convey no more, and the fraudulent grantee can acquire only the right to the $1500 exemption.
   WALKER, J.

This appeal seeks a review of a judgment rendered in the Circuit Court of DeKal'b County, in a suit brought by plaintiff, as trustee in bankruptcy of the estate of Thomas Price, to set aside as fraudulent deeds to certain land in said county, transferring the title to same to the defendant, the wife of Thomas Price. The trial court adjudged the deeds fraudulent and decreed that the title to the land was in the trustee, subject, to a homestead interest of $1500, a mortgage for $5500 of prior date to said deeds, and a mortgage for $1000 made by the defendant subsequent to the transfer of the land to her. Neither party being content with the findings of the trial court, both appealed; the defendant from the entire judgment, and the plaintiff from the finding as to the $1000 encumbrance. A single review will suffice to determine all of the matters at issue.

After the formal allegations, proper in a proceeding of this character, concerning which there is no controversy, the petition avers in substance the ownership by Thomas Price on October 8, 1913, of the land, describing it; that the same was encumbered by a mortgage theretofore given by him to secure a debt of $5500; that at the time of the making of the deeds, Thomas Price was indebted to various persons, firms and corporations in the sum of $44,647, and was insolvent, and had no property with which to pay his debts; that while so insolvent, he and his wife, Ivie Price, with the intent to hinder, delay and defraud his creditors then existing, made a general warranty deed whereby, for a fictitious purported consideration of $7500, they conveyed the land to one John Price, a brother; that the deed thereto was without consideration and was made and executed for the purpose of transferring the title of said land to grantor’s wife, Ivie Price; that on the day immediately after the execution of the deed to John Price, the latter quit-claimed and released the land to Ivie Price for a purported consideration of $10; that no consideration in fact passed; that John Price was a mere conduit for the purpose of transferring the title to the land from Thomas Price to his wife, Ivie Price; that each of said conveyances was made while Thomas Price was insolvent, for the purpose of defrauding his creditors, and that his insolvency and the purpose of said transfers were known at the time to each of said grantees; that Thomas Price has no property out of which his creditors can satisfy their debts, and has not had since October 8, 1913; that the trustee has no adequate remedy at law to subject said land to the payment of the debts of Thomas Price, nor for obtaining assets with which the claims of his creditors may be satisfied; that the land cannot be subjected to the payment of Thomas Price’s debts, and become available to the trustee in bankruptcy for that purpose, unless the conveyances aforesaid be annulled and set aside, and the land declared to be the property of Thomas Price, bankrupt; that at the time of said conveyances, the land was occupied by Thomas Price as a homestead and he resided thereon; that the value of same at the time, and at all times since has been, $12,500; that Thomas Price was entitled to a homestead therein of th¿ value of $1500; that the value of the land, exclusive of the mortgage for $5500 and the homestead interest in same, is $5000, which sum should be devoted to the payment of the claims of his creditors; that of the indebtedness of Thomas Price existing at the time of said transfers, there has been adjudicated claims in bankruptcy in the United States District Court against his estate in the sum of $14,622.97; that additional claims have since been presented for allowance; that the’ entire assets of said estate, exclusive of the land, amount to no more than $166'.

The prayer asks that the deeds to said land he canceled, and for naught held, and that Ivie Price take nothing thereby, except the value of the homestead, and that said property.be ordered .sold subject to the mortgage for $5500, and that the proceeds, after paying Ivie Price $1500 be paid to plaintiff, as trustee in bankruptcy for the benefit of the creditors of Thomas Price, and for such other orders, judgment and decree as are proper in the premises.

The answer admits the marriage relation; the. ownership of the land; that it is the homestead of Thomas Price; that deeds were'executed as stated, and the existence of the encumbrance. All other allegations are denied generally. After a hearing, the court took the case under advisement, and in October, 1915, rendered a judgment therein for plaintiff.

After formal findings as to the bankruptcy of Thomas Price, the trusteeship of plaintiff,, and his ^hority as such herein, the court finds that ” the defendant is the wife of Thomas Price; his ownership of the land, describing it, and the conveyances of same, and his insolvency at the time; that the transfer to John Price and his deed to Ivie Price were made without consideration and for the purpose of placing the title to said land in the defendant, Ivie Price, and were voluntary and void as to the creditors of Thomas Price, and as to 'his bankrupt estate, and as to the plaintiff, as trustee of same; that Thomas Price and his wife, Ivie Price, the defendant, occupied said land as a home, and that said Ivie Price is entitled to retain a homestead therein of the value of $1500; that the deeds made by Thomas Price to John Price and by John Price to Ivie Price be canceled and for naught held, except as to the homestead; and that the title to said real estate be vested in plaintiff as trustee in bankruptcy of the estate of Thomas Price, subject to the encumbrance of $5500, and one for $1000, and the homestead right of said Ivie Price.

It was developed by the testimony, but does not otherwise appear in the record, that the $1000 mortgage on the land was placed thereon by the defendant after the fraudulent conveyance of same to her.

The facts disclose that Thomas Price was adjudged a bankrupt on his voluntary petition in the United States District Court for the Western District of Missouri, March 19, 1914; that his indebtedness at the time the deeds to said land were made, and at the time of his adjudication as a bankrupt, was even greater than alleged in the petition; that his assets at said times were insufficient to satisfy same. In other respects, the facts are in substantial accord with the averments of the petition. The main issue at the trial was whether on the 8th day of October, 1913, the financial condition of Thomas Price was such as to endanger the claims of his creditors by the transfer of the title of said land to his wife, the defendant. Incidental »to this issue are other matters of fact, a presentation and discussion of the legal force and effect of which will, where necessary to the determination of this case, be made in the opinion.

The defendant’s assignments of prror are .as follows :

The absence of jurisdiction; the insufficiency of the petition; the .improper admission on the part of the plaintiff, and exclusion on the part of defendant, of testimony; and the refusal to permit Thomas Price to testify on the part of his wife, the defendant. Other assignments, formal in their nature, are incidental to and dependent for their determination upon the conclusions which may be reached in regard to the foregoing. The plaintiff’s assignment of error is that the judgment is n'ot responsive to the pleadings.

I. The defendant contends that the making of the deeds in controversy more than four months prior to the of the petition herein divested the bankruptcy court of power to direct the trustee to prosecute this action, and that the State court consequently acquired none.

First, as to the validity of the act of the bankruptcy court: Upon an adjudication of bankruptcy, the decree becomes as immune from collateral attack as any other judgment. [Chapman v. Brewer, 114 U. S. l. c. 169; Lamp Chimney Co. v. Brass & Copper Co., 91 U. S. l. c. 661; Michaels v. Post, 88 U. S. 398; Marvin v. Anderson, 111 Wis. 387; Golden & Co. v. Loving, 42 App. D. C. 489; 5 Cyc. 237n; Collier’s Bankruptcy (11 Ed.), pp. 12, 121.] If possible, the conelusiveness of the decree is emphasized where, as here, the proceeding was voluntary. Not being subject, as a farmer, to the* coercive provisions of the act, the bankrupt invoked the jurisdiction of-the court (Sec. 4a), which is required to make an adjudication, or dismiss the proceeding, upon the filing therein of a petition (Sec. 18g), accompanied as it was with, a verified schedule of the bankrupt’s property and the names of his creditors, and the statement that he owes debts he is unable to pay, and is willing to surrender all of his property for the benefit of his creditors (Sec. 7, Subd. 8). Under this state of facts, the act of bankruptcy is held to have been committed upon the filing of the petition. [Hanover Natl. Bk. v. Moyses, 186 U. S. l. c. 190.] The finality' of the decree, therefore, obviates any objection of the general jurisdiction of the bankruptcy court, and as a consequence, its authority to direct the trustee to institute the action at bar.

In addition, it is clearly indicated by the language of the statute that the limitation of four months within which a trustee may sue to set aside transfers has reference to preferences' under Section 60a, and to proceedings under Section 67e, of the act, in which transfers are declared to be void if made within the time limited (Bush v. Export Sto. Co., 136 Fed. 918; Collier on Bankruptcy, 11th Ed. p. 1062 and cases), and not to the right of action of the trustee under Section 70e to set aside a fraudulent conveyance. [Underleak v. Scott, 117 Minn. l. c. 140.]

The provisions of the act in regard to the character of the trustee’s title to the property of the bankrupt estate, and the powers conferred on him in the care and management of same, are futher illustrative of the .unsoundness of defendant’s contention in regard to the application of the bankruptcy statute of limitations to this ease.

Section 47a, Subd. 2, of the Bankruptcy Act, as amended July 25, 1910, provides: “That as to all property not in the custody of the bankruptcy court, he (the trustee) shall be deemed vested with all rights and powers of a judgment creditor holding a judgment execution duly returned unsatisfied.” This provision must be construed together with those portions of Section 70a and Section 70e (In re Hammond, 188 Fed. 1020), of the act, as amended July 25, 1910, which further emphasizes the vesting of the title of the bankrupt’s property in the trustee, and expressly includes property transferred by him in fraud of his creditors, and authorizes the trustee to institute actions to avoid any of such transfers which any creditor might have avoided by a suit in a bankruptcy court, or in a state court, which would have jurisdiction if bankruptcy had not intervened. [Parker v. Sherman, 195 Fed. 648, 28 Am. B. R. 379.] The trustee is thus subrogated to the rights of the creditors, and the limitation as to his right of action is that prescribed by the State law as to proceedings to set aside fraudulent conveyances, and not to the four months of the bankruptcy act. [Baldwin v. Kingston (U. S. Dist. Ct. N. J.), 40 Am. B. R. 641; Manders v. Wilson, 230 Fed. 536; Holbrook v. Inter. Tr. Co. (Mass. Sup. Ct.), 107 N. E. 665; Bick v. Nimmo, 88 Atl. (Md.) 116; Hobbs v. Frazier, 55 So. 848; Newcomb v. Birver, 199 Fed. 529; Hall v. Glenn, 39 Am. B. R. (U. S. Dist. Ct. Cal.) 54; McKenna v. Simpson, 129 U. S. 506.]

II. It is not necessary to tbe maintenance of an action under Sections 47a and 70e for tbe trustee to aver or show that some creditor bas reduced bis claim to a judgment and issued execution tbereon which has been returned unsatisfied, as in a like proceeding in equity. [Bean v. Parker (Vt. Sup. Ct.), 38 Am. B. R. l. c. 903.] Tbe reason tberefor being that after an adjudication, no creditor can reduce bis claim to a judgment in tbe ordinary way, nor can tbe trustee do so in bis belialf. Tbis renders the relation of those whose claims have been allowed against tbe estate that of judgment creditors, and affords a reason for .the uniform ruling of tbe courts in that behalf, that a judgment returned unsatisfied as in an ordinary proceeding in equity, is not a prerequisite to tbe right of action of tbe trustee, but that in tbe exercise of tbis right be may, as a sort of alter ego of all of the creditors (Blake v. Meadows, 225 Mo. l. c. 26), file a bill to avoid any transfer by tbe bankrupt of bis property, which any creditor might have avoided bad bankruptcy not intervened. [Coleman v. Hagey, 252 Mo. l. c. 128; Hood v. Blair St. Bk., 91 N. W. (Neb.) l. c. 705; Southard v. Benner, 72 N. Y. 424; Beasley v. Coggins, 48 Fla. 215, 12 Am. B. R. 355; Mueller v. Bruss, 112 Wis. 406, 18 Am. B. R. 442.]

Mueller v. Bruss, supra, is but one of a type of many cases we have cited bolding that jurisdiction may be exercised by tbe court of a state, under Section 70e, to set aside a conveyance of real estate, made by tbe bankrupt six months prior to the filing of tbe petition in bankruptcy; and that a judgment and return of an execution are not a necessary prerequisite to such a suit, since, under the bankruptcy act, neither the trustee nor the creditors whom he represents could obtain such a judgment. The requirement as to a judgment, and the return and issue nulla bona of an execution required in equity before proceeding to have a fraudulent transfer set aside is to show that all other remedies have been exhausted.

A New York court in discussing this question, in a ruling in harmony with the cases above cited, says: “To hold that a trustee cannot attack a fraudulent conveyance made by the bankrupt more than four months before the filing of the petition, without showing that some creditor had obtained a judgment and issued an execution thereon, so that he could maintain a similar action, would be simply to provide an easy and convenient method for a dishonest debtor to dispose of his property.” [Thomas v. Roddy, 122 N. Y. App. Div. l. c. 856.] There is nothing in the rulings in Coleman v. Hagey, supra, which militates against this conclusion. What was said in that case in regard to the rights of creditors was arguendo, in reference to such' rights in proceedings not in bankruptcy. In that case we held the petition insufficient only on account of the omission therefrom of allegations that the trustee had no adequate remedy at law, or an equivalent allegation, showing the presence of jurisdiction peculiar to a court of equity. The petition in the case at bar not only does not lack any of the averments held essential in the Coleman-Hagey case, but in other respects meets the requirements of a bill in equity. [O’Farrell v. Poston (S. C.), 37 Am. B. R. 470.]

In Davis v. Gates (U. S. Dist. Ct. Pa.), 37 Am. B. R. 818, the sufficiency of such a petition as is here under review was exhaustively considered. There the pleading was held good, except as to a failure to allege that the defendant, to whom the property had been transferred, had knowledge of and participated in same. The trustee was permitted to- amend on the testimony showing such fact, and a decree entered hi accordance with the prayer of his petition. All of the questions as to good faith and the existence of creditors at the time of the fraudulent act are fully discussed in this case. The rulings therein define the requisites prescribed for a hill of this character, and the petition at bar is in conformity therewith.

A petition even more general in its terms was held good by the United States District Court for the Southern District of Georgia, in Johnston v. Forsyth Merc. Co., 11 Am. Bk. Rep. 669. The court said that while the charges in the bill might have been more elaborately stated, they are set forth with sufficient particularity to enable the defendant to traverse and meet them (p. 673). In that case, a demurrer was interposed, but it was not accompanied by a denial of fraud. The demurrer might have been denied on that ground. In the instant case, there was no demurrer, but simply a general denial.

Tne Supreme Court of Alabama, in Cartwright v. West. 185 Ala. 41, 64 So. 293, in ruling upon a petition broughl- by a trustee in bankruptcy, as in the case at bar, says generally that: “If the property was obtained by the defendant in fraud of the bankrupt act plaintiff was entitled to recover the same, and this is the only question involved.” And, further as to the proof required and the effect of the decree, that court says: “In order that we may not be misunderstood, we' hold: First. That when a bill is filed by a trustee to set aside a voluntary conveyance made by the bankrupt, he need only show one existing creditor who could have avoided the conveyance, and the State court will set aside the conveyance in favor of all existing creditors who file and prove their claims in the bankrupt court, and which last fact is to be determined and the fund distributed by said court. Second. When the trustee files a bill to set aside a conveyance as fraudulent and void as to subsequent as well'as existing creditors the averment of bankruptcy is sufficient to charge the existence of creditors, and that their demands are due, and, if relief is granted, the conveyance will he set aside as to all creditors of the bankrupt, and the property will become assets of the estate, and subject to the claims of all creditors who have properly filed and proven their claims, and which last fact is to be determined by the bankrupt court.”

III. It is further contended that the petition identifies no creditor entitled to the remedy. We take this to mean that a designation of the creditors by names is an essential allegation. The terms of the act defining the relation sustained by the trustee to the estate and as a consequence to the creditors are sufficiently definite and ample to furnish an answer to this contention.

Section 70 of the act, so far as same is pertinent hereto, provides that the trustee,- upon appointment and qualification, shall be vested with the title to the bankrupt’s property as of the date of the adjudication, excluding that which is exempt and including that transferred by him in fraud of creditors. By subdivision e. of the same section, it is provided that “the trustee my avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was bona-fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whomever may have received it, except a bona-fide holder for value.”

While in a sense the trustee in the exercise of the powers authorized under this and other sections of the act, may be said to be the alter ego of the creditors in that his action is for their benefit, he is, in law and in fact but an arm of the court and acts not for the creditors individually or collectively, but for the estate (In re Morton, 118 Fed. 908). The powers of the creditors as such, cease upon the adjudication of bankruptcy and the allowance of their claims, and thereafter they possess neither power to sue nor be sued in any proceeding to collect, control, preserve or recover the assets, the entire administration of the estate being invested in the trustee to be exercised under the direction of the Court (Coleman v. Hagey, supra; Blake v. Meadows, 225 Mo. l. c. 26). The merger of the identity of the creditors in the estate, therefore, in that they are stripped of all power after the adjudication, renders their specific designation in a; petition of the character here under review unnecessary. [Barrett v. Kaigler, (Ala.) 76 So. 320, 40 Am. B. R. 161; Cartwright v. West, (Ala.) 64 So. 293.]

The nature of the decree to which the trustee is entitled, when a fraudulent' conveyance is set aside, is a further indication of the immateriality of the allegation urged. Upon the rendition of the decree, the property inures not to the benefit alone of the unsecured creditors, existing at the time of the transfer, and who, in the absence of bankruptcy, would have been authorized to attack the conveyance; but to all of the creditors having provable claims, including those whose claims accrued subsequent to the transfer (In re Kohler, 159 Fed. 871; In re Farmers’ Co-op. Co., 202 Fed. 1008). Considering, therefore, the nature of the proceeding and the character of the decree that may be rendered therein, it will be sufficient for the petition, in so far as the contention here made is concerned, to allege that there were unsecured creditors existing at the time of the transfer, the aggregate amount of their claims, and that the assets of the estate are insufficient to satisfy the same (Treseder v. Burgor, 130 Wis. 201; Davis v. Gates, 37 Am. B. R. l. c. 482). This requirement is met by the petition.

Nor is it necessary that the creditors be designated to inform the defendant of the nature of the action. Their particular indentification can constitute no element of the defense; and if necessary for any of the purposes of the proceeding their introduction therein must he regulated by the rules of evidence, and not of pleading.

IV. The further contention is made that the petition does not state the amount or nature of any claim to which the property sought to be recovered can be applied. Much of the reasoning and the authorities cited in support of same to show the unsoundness of the preceding contention may well be applied to demonstrate the lack of tenability of that here made.

It will only be necessary therefore, to say in addition, that when a decree is rendered, setting aside a conveyance, the property recovered becomes a part of the general assets of the bankrupt estate, and is so distributed in the pro-rata payment of all -claims of a like character. The assumption, therefore, that upon a recovery of property by a trustee in a proceeding of the character here involved, it can be applied to the payment, of any particular claim, is wholly unfounded.

Sustained by reason, and approved by numerous authorities, we hold the petition herein sufficiently states all of the material allegations necessary to clearly present the issues involved, and that the objections made thereto by the defendant are not tenable.

V. The admission of testimony to show the amount of secured claims against the estate is assigned as error. A material allegation had been made in the petition that the assets of the estate then in possession of the trustee were insufficient to satisfy the claims against the estate. The introduction of testimony, therefore,, as to all of the claims, whether secured or unsecured, was necessary to sustain this allegation.

Objection to the admission of testimony as to other claims are based upon the ground that they had not been reduced to judgment, and hence were not such claims as were admissible as tending to show the financial condition of the bankrupt. The testimony admitted was only in regard to claims which had been allowed by the bankruptcy court, and, as we have shown, partook of the nature of judgments. No error was committed, therefore, in their admission in evidence. The ruling in Crim v. Walker, 79 Mo. 335, and in Davidson v. Dockery, 179 Mo. 687, cited by defendant in support of this contention, have reference to claims of unsecured creditors in ordinary proceedings in equity, and not in bankruptcy; hence they have no application here.

VI.' Error is also assigned in the refusal of the trial court to permit the bankrupt to testify in behalf of his wife, the defendant. This contention is based on the assumption that the husband is a. tenant by the curtesy initiate in the land conveyed to his wife; and that the interest thus created renders him, under Section 6354, Revised Statutes 1909, a competent witness in this proceeding and removes his common law incompéteney and the limitation by exclusion to his testimony under Section 6359. This reasoning would have been more cogent if he had been made a party to the suit and his right to testify had been based on an interest acquired in his wife’s property prior to the enactment of the Married Woman’s Act in 1889, when the husband was, upon the birth of living issue, seized of an estate for life in his own right as a tenant by the curtesy initiate. Since the enactment of this statute,- however, the wife as to the control and conveyance of her separate property is sui juris, and as such clothed with the right to sell her land and make a deed thereto independent of her husband. The consequent effect of this grant of power is to destroy the tenancy by tbe curtesy initiate, because it can no longer exist as an estate or intesest in tbe husband in tbe presence of tbe wife’s complete power of disposal of ber property, but is reduced to a mere interest in expectancy.

This conclusion finds its sufficient support in tbe language and purpose of tbe Married Woman’s Act itself, wbicb provides as to tbe matter bere at issue, that sbe shall be deemed a femme sole, so far 'as to enable ber to carry on and transact business on ber own account, to contract and be contracted with, to sue and be sued, and to enforce and have enforced against her property such judgments as may be rendered for or against her; and that, in law or equity, sbe may sue or be sued without ber husband being joined as a party. [Sec. 8304, R. S. 1909.].

In construing this statute, we have explicitly held in Farmers’ Bk. v. Hageluken, 165 Mo. 446, that it empowers a married woman to convey ber real estate without joining ber husband in tbe deed.

Further than this, that sbe may grant power to an agent to make a binding contract for tbe sale of ber land or to ratify such a sale when made. [Kirkpatrick v. Pease, 202 Mo. 471.]

These rulinss are in evident accord with tbe snirit and purpose of tbe act, tbe effect of wbicb as we have stated, in conferring upon a married woman tbe absolute power of disposal of ber property, destroys whatever present estate tbe husband may have therein, wbicb would, prior to tbe enactment of tbe statute, have qualified him, by reason of interest, to testify in a suit brought by or against ber concerning ber separate property.

A contrary ruling is impliedly announced in Roberts v. Bartlett, 190 Mo. l. c. 702, in wbicb it was held, in a suit brought by wives and husbands, as joint plaintiffs, after tbe enactment of tbe Married Woman’s Act, concerning tbe separate property of tbe former, that the latter were competent witnesses on account of their material interests in the properties, as tenants by the curtesy initiate. This ruling is erroneous, so far as it is based upon the assumption that the interest named exists in the husbands to the extent of rendering them competent to testify under Section 6354; such interest being, as we have shown, non-existent since the enactment of the Married Woman’s Act. Aside from this ruling, based as well upon the fact that the husbands were co-plaintiffs, not the case here, the current of authority is in harmony with that announced in the Hageluken case, as to the complete dominion and right of disposal by the wife of her separate property, and the consequent absence of such an. interest therein by the husband as to render him a complete witness in a suit against her.

Whatever doubt may seem to be cast on the Hage-luken ruling by certain language employed in Myers v. Hansbrough, 202 Mo. 495, is dissipated by an analysis of the facts in that case, in which the question involved was one of tenancy by the curtesy consummate, and not initiate. The wife died, seized of real estate. Issue had been born alive, and upon the wife’s death curtesy was cast upon the husband. The sole question upon which the language of the court -could have any. ruling force was one of preference between the creditors of the wife who had no lien, and the husband, as the owner of the estate by the curtesy consummate. This was independent of any consideration of the interest of. the husband during the life of the wife. The expression, therefore, in that .case, that curtesy initiate constitutes a vested interest cannot reasonably be construed as more than a passing remark, and being responsive to no issue is determinative of nothing. Otherwise construed, the effect of the Myers case is to declare that a husband can have a vested interest, by the .curtesy initiate in his wife’s real estate, contemporaneously with her power under the statute of 1889, to. convey same and invest the grantee with an absolute fee therein. Such a construction limits the letter and destroys the purpose of the Married Woman’s Act. It it repugnant to reason, and. despite the remark made in Teckenbrock v. McLaughlin, 246 Mo. l. c. 717, that “there are two lines of authority in this State on this question,” the rulings here and elsewhere will be found in accord with that in the Hageluken case. The Teckenbrock case did not attempt, nor was it necessary for it to define the nature of a husband’s interest as a tenant by the curtesy initiate in his wife’s property since the enactment of the Married Woman’s Act. All that it did decide was that when suit was brought by a husband and wife, to set aside a will, it could not be maintained on the ground of the husband’s interest as tenant by the curtesy initiate in the property of his wife acquired by descent since the statute of 1889. That nothing therein gave any authority to the maintenance of an action of this character under Section 555, Revised Statutes 1909; defining who may contest the validity of wills; and for the additional reason that the issue was res adjudicata, in having been determined in a former proceeding identical in its character.

Apposite precedents affirming the rule announced in the Hageluken case are to be found in Kirkpatrick v. Pease, 202 Mo. l. c. 490; Harvey v. Long, 260 Mo. l. c. 391; Moseley v. Bogy, 272 Mo. 328; Haguewood v. Britain, 273 Mo. l. c. 92; and Regal Realty & Inv. Co. v. Gallagher, 188 S. W. (Mo.) l. c. 153.

The ruling of the trial court, therefore, as to the incompetency. of the husband to testify, was not error; first, because he was not a party to the proceeding, and second, because he had no material interest in the judgment to be rendered within the meaning of Section 6354. See Layson v. Cooper, 174 Mo. l. c. 223, and cases cited, discussing the competency of husband and wife as witnesses under facts similar to those at bar.

VII. Tile relief sought was the setting aside of the fraudulent conveyance under which it was alleged that the defendant held the land. Other than formal allegations necessary to properly plead this character of action, the petition specified the existence of a prior lien, evidenced by a mortgage and homestead interest in the land, to which it was prayed that the decree, if rendered, be made subject. The answer contained nothing which in any way extended the issue, its defensive character being limited, wholly to a general denial.

Aside from the introduction in evidence of the existence of a mortgage for $1090 placed on the land by defendant, subsequent to its transfer to her, the record is silent on this subject. Despite this fact, the trial court, while finding the conveyance to the defendant fraudulent, and that the decree should be rendered subject to the pre-existing mortgage and homestead interest, also .found that it should be subject to the $1000 mortgage placed on the land by the defendant. This latter finding was unauthorized. It was not an issue in the case, and was not admitted to be so made by the parties. [Welz v. Venard, 253 Mo. 67; Davidson v. R. Est. & Inv. Co., 249 Mo. 474; Howard v. Scott, 225 Mo. 685; Charles v. White, 112 S. W. 545; Schneider v. Patton, 175 Mo. 684.]

The rule, therefore, that in a chancery case any relief may be granted consistent with the pleadings, can have no application here. [Ames v. Gilmore, 59 Mo. 537.]

Nor need the rule, in the condition of the pleadings, be invoked that if the conveyance be fraudulent, the defendant got no title, and hence could convey none. [Peyton v. Rose, 41 Mo. 257.]

But it will suffice to say that the decree should have been limited to a determination of the character of the conveyance under which the defendant held the land subject to pre-existing liens, as stated in the petition. A finding other than this did not respond to the issues, and was consequently error.

This will necessitate a reversal and remanding of this case, with directions to the trial court to enter a decree in accordance with the views herein set forth. It is so ordered.

All concur, except Blair, J., not sitting; Faris and Williams, JJ., concur in the result and in all except paragraph 6.


author: PARÍS, J.

text:
    THE STATE ex rel. GREENE COUNTY, Appellant, v. J. J. GIDEON, Mayor, and E. F. JAMES et al., Commissioners.
    In Banc,
    March 15, 1919.
    1. CONSTITUTIONAL LAW: Title: Defeating Purpose of Original Act. Although the title to an act states that its purpose is to amend a certain section of a preceding act by repealing a certain subdivision thereof and enacting a new subdivision in lieu of it, yet if the new enactment is in diametrical conflict with the previous subdivision and engrafts upon the original act matters not germane thereto, the title is insufficient. Such act is such a departure from the original act as to make necessary a specific mention in the title of the new matters not germane thereto.
    2. -:-: -: City of Second Class: Dramshop Tax. Subdivision Fortieth of Section 8 of the Act of 1913 providing a commission form of government for the cities of the second class declared that such cities shall “have the exclusive power to restrain, suppress, regulate, license and tax dramshops.” The title to the Act of 1917 said it was an act to amend said Section 8 “by repealing Subdivision Fortieth of said act and enacting a new ■ subdivision in lieu thereof;” and new Subdivision Fortieth declared that such cities shall “biave the exclusive power to define, regulate, restrain, suppress, license and tax dramshops: Provided that for every dramshop license issued by a city of the second ' class it shall pay to the State the sum of $400 per annum in quarterly installments; to the county, for county purposes, the sum of $400 per annum in quarterly installments; and to any special road district in which said city may be located $550 per annum, in quarterly installments, and the balance shall be paid into the treasury of such city, for municipal purposes.” Held, that, whether the amendment taxes a city for the benefit of the State, county and road district or makes such city their agent for the collection of the tax, it is so far a departure from and an engrafting upon the original act of matters not germane thereto as to require specific mention of such a purpose in its title; and said amended act is in violation of that section of the Constitution which declares that “no hill shall contain more than one subject, which shall be clearly expressed in its title.”
    Appeal from Greene Circuit Court. — Eon. Guy D. Kirby, Judge.
    Affirmed.

      Warren L. White and Oliver J. Page for appellant.
    (1) Of the two conflicting provisions of tire Act of 1917, tie one which provides for the payment to county of the fixed sum of $400 is the law, because, first, it is the last in order. Second, it was put-into the act as an amendment after the introduction of the hill. State ex rel. v. Gideon, 273 Mo. 79. Third. The condition of the existing law should he considered in construing new statutes. Under the prior law (Laws 1915, p. 345), the State and county received nothing from dramshop licenses in Springfield, and the obvious intention of the Legislature was to remedy that defect. State ex rel. v. McQuillin, 246 Mo. 534; Grimes v. Reynolds, 184 Mo. 688. (2) The Act of 1917 does not violate Section 28 of Article 4 of the Constitution. The distribution of funds collected by the city is clearly related to the matter of city government and is within the subject as expressed in the title. Hannibal v. Marion County, 69 Mo. 571; Elting v. Hickman, 172 Mo. 237; Barnes v. Kirksville, 266 Mo. 270; State ex, rel. v. Gordon, 261 Mo. 631, 639'; State ex rel. v. Taylor, 224 Mo. 393, 468; State ex rel. v. Clayton, 226 Mo. 292. (3) Dramshop licenses are not taxes within the meaning of the Constitution but are an exercise of the police power. Laws providing for licensing dramshops are not subject to Article 10 of the Constitution, which relates to taxation. State ex rel. v. Hudson, 78 Mo. 302,- State v. Distilling Co., 236' Mo. 219; Winona v. Whipple, 24 Minn. 61; State ex rel. v. Burton, 266 Mo. 712; Elting v. Hickman, 172 Mo. 237, 258. (4) The provision of the Act of 1917 .that the State and county shall receive a part of the dramshop licenses collected by the city is not an unlawful grant of public money to an individual, association or corporation in violation of Sections 46 or 47 of Article 4 of the Constitution. Funds so collected do not belong exclusively to the municipality. It is competent for the Legislature to make the municipality an agent of the State for the purpose of collecting such revenue. A county is not an “individual, association or corporation” within the clauses of the Constitution forbidding a grant of public money to “any individual, association or corporation.” State ex rel. v. Burton, 266 Mo. 721; State ex rel. v. Gordon, 261 Mo. 641; State ex rel. v. Taylor. 224 Mo. 468; Elting v. Hickman, 172 Mo. 258; State ex rel. v. County Court, 128 Mo. 427; Winona v. Whipple, 24 Minn. 61; State v. Spokane, 25 Pac. 903; County v. Aberdeen, 31 N. W. 735; Sibley County v. Gibbon. 131 N. W. 786; 23 Cyc. 151.

      Fred A. Moon for respondents.
    (1) The Act of 1917, Laws 1917, p. 357, is unconstitutional because it conflicts ■ with that provision of the Constitution which reads, “No bill shall contain more than one subject which shall be clearly expressed in its title.” Wolf v. Taylor*, 13 So. 688; Thompson v. Luverne, 29 So. 326; Douglas v. Hays, 49 Atl. 372; State ex rel. v. Revelle, 165 S. W. 500; Williams v. R. R. Co., 233 Mo. 676; State ex rel. v. Gordon, 188 S. W. 576; Sliivley v. Lankford, 174 Mo. 544; St. Louis v. Wortman, 213 Mo. 138. Courts take judicial notice of fact that' the members of the Legislature, on account of the great number of bills introduced and the limited time in which they, have to consider the same. are forced to' rely on the title of the hills for information as to their contents. State v. Rawlings, 232 Mo. 558. Even though the 'subject-matter of a certain provision of an act be germane to the subject specified in the title, still it is not “clearly expressed in the title” if it be misleading. State v. Rawlings, 232 Mo. 556. The history of the development of the dramshop act shows the licensing and taxing of dramshops for county and State purposes is a power that has been consistently vested in the county court by provisions contained in that act. R. S. 1855 to 1909; Laws 1917, p. 317. Hence the dramshop act had become a separate subject of our statutory law. Naturally then, a member of the Legislature would expect to find any provision of law which had as its purpose the fixing the amount of the State and county dramshop license tax and providing for its collection under a title which purported to amend the dramshop act. and obviously not in an act the title of which gave notice of an intention to amend an act, providing for the government of cities. That the latter title would be misleading is perfectly apparent. (2) The Act of 1917, Laws 1917, p. 357, is unconstitutional because violative of Sections 1 and 10 of Article 10 of the State Constitution, in this: It levies a direct-tax upon the city of $400 per year for each saloon license issued. That a dramshop license tax is not a tax within the meaning of the foregoing provision of the Constitution does not preserve the constitutionality of the provision of the act in question, for the reason that the tax is not on the dramshop, but is on the city. In other words, it is not a dramshop tax because not levied on the saloon, but on the city. Courts must not go contrary to the plain meaning of words even to preserve a statute from unconstitutionality. Austin v. Cahill, 99 Tex. 172; Sec. 8057, R. S. 1909; 36 Cyc. 1115; State ex rel. v. Gammon, 73 Mo. 421; State v. Riley, 203 Mo. 187; Henry v. Evans, 97 Mo. 55; Martin v. Hunter, 14 U. S. 326; Johnson v. Railroad Co., 196 U. S. 1. (3) Or, if not a tax, then the Act of 1917 is a grant of the city’s money (public money) by the Legislature, contrary to Section 46 and 47 of Article 4 of the Constitution. State v. Court, 142 Mo. 575. A county is a municipal corporation. Rathbone v. Hopper, - 45 Pac. 610; Ex parte Selma & G. R. Co., 45 Ala;-696; Railway Go. v. Porter, 74 Oal. 261; West Plains Tp. y; Sage,' 69 Fed. 943;In Re Dowlen, 36 Minn. 430.. (4) Where there is an irreconcilable conr flict in' meaning between two provisions of the same act, the one destroys the ■ other and renders nugatory the act. In Re Hendricks, 57 Pac. 965.
   PARÍS, J.

The County of Greene, as relator, brought this action by mandamus' in the Circuit Court of- Greene County against the respondents herein, who constitute the mayor and the commissioners, respectively,. of the city of Springfield, said city being under a commission form of government. Upon a trial nisi plaintiff lost, and after the .conventional procedure has appealed.

The facts of the case are few and simple. In 1917 the Legislature amended a certain section of the’ chapter of the Revised Statutes of Missouri which governs cities of the second class, in such wise, it is averred and contended by appellant, as to require cities of the second class — such as the' city, of Springfield is— to "pay to the county wherein such a city is located the sum of $400 per annum for every dramshop license issued. This action is brought by Greene County for the purpose of compelling respondents to audit and pay to that county the sum of $5900, which is caeteris paribus its proportionate part of all the dramshop license taxes which were collected by the city of Springfield 'during the period embraced in this' controversy. Respondents- havng refused to pay the above sum of $5900, which is conceded to be correct if the act under which the samé is demanded is valid, Greene County instituted this action and, as stated, having lost below, has appealed.

The defenses, among others nrged by respondents, as excusing their refusal to pay the amount demanded, are that the act under which appellant bottoms its demand for payment is unconstitutional. The grounds of unconstitutionality of the Act of 1917 so urged by respondent are, (a) because the act is in conflict with Section 28 of Article 4 of the Constitution, which provides that “no bill shall contain more than one subject, which shall be clearly expressed in its title ”; (b) because said act violates Sections 1 and 10 of Article 10 of the Constitution, in that it levies a direct tax upon cities of the second class of $400 per year for the benefit of the county in which a city of the seconjd class is located, for each and every saloon license issued by such city, and (e) because, if such levy of the tax aforesaid is not in fact a tax, then the Act of 1917 is a grant of the public money of the city by the Legislature to the county in which the city is located, contrary to Sections 46 and 47 of Article 4 of the Constitution of Missouri.

Other contentions, as forecast, are made, but since one of these at least has already been decided against respondent, and as in the view we take of the case mention of others is unnecessary, we content ourselves with the above recital of respondents’ contentions. We think the above facts, together with such others as we shall find it necessary to refer to in our discussion of the points made in the case, will be sufficient to an understanding thereof.

Appellant bottoms its right to demand from the city of Springfield payment of the sum here in dispute upon Subdivision 40 of Section 8 of “An Act to amend an act approved on the 26th day of March, 1915, entitled, ‘An act to amend section 8 of an act, approved on the 25th day of March, 1913, entitled, “An act to repeal article 3 of chapter 84 of the Revised Statutes of Missouri of 1909, with all amendments thereto, said article being entitled ‘Cities of the second class,’ and to enact in lieu thereof a new article providing for the government of cities of the second class,” ’ by repealing subdivision fortieth of said act and enacting a new subdivision in lieu thereof.” [Laws 1917, p. 357.]

Subdivision 40 above referred to and herein relied on by appellant as furnishing its sole right to the money demanded from respondent city, reads thus:

“Fortieth. — To have the exclusive power to define, regulate, restrain, suppress, license and tax dramshops and to revoke dramshop licenses, and to regulate and control the giving or selling of intoxicating liquors at any place or places in such cities: Provided that for every dramshop license issued by a city of the second class it shall pay to the State the sum of $400 per annum in quarterly installments; to the county,_ for county purposes, the sum of $400 per annum in quarterly installments; and to any special road district in which said city may be located $550 per annum in quarterly installments, and the balance shall be paid into the treasury of such city, for municipal purposes. Provided, further, that no special road district within which such county [city] may be located shall be entitled to any part of the amount paid by such city to the county.” [Laws 1917, sec. 8. p. 367.]

It is clear that appellant is entitled to the money demanded and should prevail, if Subdivision Fortieth is valid. But respondent, admitting so much, urges that for numerous reasons said subdivision is invalid, becaue its provisions are in irreconcilable conflict with other provisions of the amended act, and because both its title and contents offend against express provisions of the Constitution.

In the view which we are constrained to take of this case we need burden the books with but one of respondents’ contentions touching the unconstitutionality of the act. That one is that “it conflicts with that provision of the Constitution which reads: . ‘No bill shall contain more than one subject, which shall be clearly expressed in its- title.’ ” [Section 28, Art. 4, Const.] Whether this contention is well taken may he demonstrated by a reference to the legislative history and career (the latter of which must be conceded to have been a veritable “Comedy of Errors”) of said Subdivision 40.

In 1913 the Legislature passed an act entitled: “An Act to repeal article 3 of chapter 84 of the Revised Statutes of Missouri of 1909, with all amendments thereto, said article being entitled, ‘Cities of the second class,’ and to enact in lieu thereof a new article providing for the government of cities of the second class.” [Laws 1913, p. 420.] The above act contained in Section 8 thereof a subdivision numbered Fortieth, which, setting forth some of the powers of a city of the second class, read in full, thus: “Fortieth. To have the exclusive power to restrain, suppress, regulate, license and tax dramshops, and to revoke dramshop licenses.” [Laws 1913, p. 434.]

In 1915 the Legislature undertook to modify’ the thoroughgoing and exclusive - power of licensing and taxing dramshops, which was conferred upon cities of the second class pursuant to the above quoted provisions of the Act of 1913, supra, by an amendment which added to said Subdivision 40 certain further provisions designating the manner in which the money derived from licenses and taxes on dramshops should be divided [Laws 1915, p. 353.] The latter provision was by this court declared unenforceable, for that no method or means was provided “to fix what part of the dramshop license shall be paid to the State and county, or to designate a means by which that part can be ascertained.” [State ex rel. v. Gideon, 273 Mo. 79.]

Thereafter in 1917, as we state above, the act now before us in the instant case was passed by the Legislature. [Laws 1917, p. 357 et seq.] Obviously, this was done in an effort to correct the omission in the Act of 1915 pointed out by us [State ex rel. v. Gideon, supra.] In the beginning of our discussion we set forth in full both the title to the Act of 1917, and Subdivision 40 thereof, herein relied on. Even a casual examination of the title to this amendatory act shows that it makes no reference to the fact that it attempts to provide for the payment, by all cities of the second class to the county where such a city is located, of the sum of four hundred dollars per year for each and every dramshop which such a city may see fit to license. Obviously such a provision is in diametrical conflict with the provision of the Act of 1913, whereby cities of the second class were given exclusive power to license and tax dramshops. For if, as the provisions of said Subdivision 40 now; require the county in which a city of the second class is located is to collect from such city the sum of four hundred dollars, per year, and the State the further sum of, four hundred dollars, and special road districts, if such there be, the further sum of five hundred and fifty dollars, but little is left of the so-called exclusive power to tax and license which the original act conferred upon cities of the second class. For while ostensibly possessing exclusive power to tax and license dramshops and to fix the rates thereof, this power is by the amendment curtailed by the necessity of fixing the license tax at not' less than $1350 per year. It is too plain for argument that an amendment which thus, either taxes a city for the benefit of the county, State and special road district on each dram-shop license which it issues, or makes such a city the agent of the county, State and special road district for the collection of licenses and taxes on dramshops, is (to say no more) so far a departure from and an engrafting upon the original act of matters not germane thereto as to require specific mention of such a purpose in the title of the act. [State ex rel. v. Revelle, 257 Mo. 529; Williams v. Railroad, 233 Mo. 676; Shively v. Lankford, 174 Mo. l. c. 544; Wolf v. Taylor, 13 So. 688; Thompson v. Luverne, 29 So. 326; State ex rel. v. Gordon, 233 Mo. 383; State v. Parker Distilling Co., 236 Mo. 219.] This was not done and we think the contention of respondents that the title to the Act of 1917, Laws 1917, p. 357, is violative of Section 28 of Article 4 of the Constitution is well taken and should he sustained.

Other grounds of alleged unconstitutionality of the act under consideration are urged, some of which may well prove to he well-taken. But since the point discussed disposes of the whole case, no occasion arises to lengthen our views by a discussion of other points, even though such may seem upon a merely casual view to be well-founded. It results that the case must be affirmed. Let it be so ordered.

All concur except Blair and Williams, JJ., who dissent.


author: WHITE, C.

text:
    HIGHLAND INVESTMENT COMPANY v. KANSAS CITY COMPUTING SCALES COMPANY, T. M. WALKER et al., Appellants.
    Division Two,
    March 17, 1919.
    1. NEGOTIABLE NOTE: Extension: Pleading: Evidence Contrary to Exhibit. The statutes do not make an exhibit filed with the pleading so far a part thereof as to dispense with allegations necessary to a statement of a cause of action; but when a suit is founded upon a written instrument and the petition bases the right to recover on the instrument as filed, plaintiff is bound by its terms when it comes to the introduction of evidence. In the absence of pleading showing an unauthorized extension or an extension by mistake, plaintiff cannot be permitted to show that the note sued on, filed as an exhibit and made a part of the petition, is not what it purports to be, or that it contains matter which is not in the contract sued on.
    2. -: Alteration. An alteration by the principals to a negotiable note, without the consent of the surety or indorser, will release the surety or indorser. But the former rule which avoided the note whether the alteration were material or immaterial has been modified by the Negotiable Instrument Act (Sec. 10095, R. S. 1909), which restricts the rule to material alterations, and sets out. what alterations shall be deemed material.

      3.-: -: Premature Payment of Interest. The payment of interest in advance, when the note called for interest to he paid annually, without an agreement that it should operate as an extension of time or in any way affect the terms of the contract, is not material alteration, but is an act done in performance of the contract.
    4. -: -: -: Limitations. The payment of interest by the maker, in advance or after due, although it tolls the Statute of Limitations, does not release 'indorsers. Besides, while such payment tolls the statute as to sureties or joint makers, it does not interrupt its running as to those whose undertaking is collateral, such as indorsers, or accommodation parties.
    5. -: Mortgage: Surrender: Pelease of Indorsers. The failure of the payee of a note to record a mortgage on personal property worth more than the amount of the note, given by the maker to secure its payment, and the sale of all the mortgaged property by the maker without applying any of the proceeds to the payment of the note, released those indorsers who did not consent to a withholding of the mortgage from record or assisted in disposing of the property contrary to its terms.
    6. -: -: Privilege of Sale. A provision in the mortgage conveying 700 machines to secure the payment of a note, that the mortgagor might sell the machines as their manufacture was completed and out of the proceeds of the sales apply $25 for each machine on the note, did not affect the validity of the mortgage as between the parties, and in a suit by the holder of the note against the maker and indorsers it is not necessary to determine the validity of the mortgage as against creditors.
    Appeal from Jackson Circuit Court. — lion. Joseph A. Guthrie, Judge.
    REVERSED AND REMANDED.

      Gage, Ladd & Small R. E. Ball for appellants.
    (1) Tke petition alleged that the interest was paid in advance to March 29, 1913, and alleged and therefore admitted that a true copy of the note was attached to the petition. The attached copy had memoranda written on the face and also on the back of it, that on January 19th, the interest was paid in advance to March 29, 1913, and the note extended to that time. There being no allegation in the petition or reply that this was done by mistake or without authority — and no denial in the reply of the allegations of the answer that such payment of interest and extension was written on the note by the hank — it was error for the court to admit testimony tending to prove that it was so written there by mistake or want of authority. (2) The uncontradicted evidence of both parties was that the appellants never consented to any extension of the note. If, therefore, the interest was paid in advance and the bank and scales company agreed to extend the noté for ninety days, as stated on the face and back of the note and on the books of the bank, the appellants were released. Nelson v. Brown, 140 Mo. 580; Still-well v. Aaron, 69 Mo. 539; Insurance Co. v. Hauck, 71 Mo. 465. (3) The uncontradicted evidence of plaintiff shows that if there was want of authority or mistake on the teller’s part in extending the note in the first place, the bank with full knowledge of all the facts, before the ninety days extension expired, kept the interest charged and made no change of any kind on the note or on its books. It therefore ratified the extension. It cannot blow hot and cold. Therefore, the appellants’ demurrers should have been sustained. Smith v. Richardson, 77 Mo. App. 432; First Natl. Bank v. Fricke, 75 Mo. 178; Krause v. Uedelhofer, 193 Ill. 477; Donovan R. E. Co. v. Clark, 84 Mo. App. 163. (4) The note provided on its face that it should bear interest “from date” at the rate of six per cent per annum “until paid,” and that the interest should be paid annually.” It therefore provided that if the note was allowed to run beyond maturity the interest should be paid annually and not in advance. If, therefore, there was an agreement between the bank and the Scales Company, as testified to by plaintiff’s witness, Pollard, that after maturity the interest should be paid for ninety days in advance, and it was so paid, this was a change in the terms of the note, to which these appellants did not agree, and they are, therefore, released. Any change in the instrument- without his consent, releases . a surety. or accommodation endorser. For this reason also the demurrers offered by appellants should haye been given. Schuster v. Weiss, 114 Mo. 166,- See also cases cited below. (5) There was an alteration of the instrument without the consent of any one, either the Scales Company or the endorsers. On January 19, 1913, without consent of the Scales Company, the bank took $120 out of its account to pay interest for ninety days in advance on this note, although the interest w.as .not payable in advance, kfo was . payable annually, and directed to be endorsed on the face and back of the note “Int. paid to March 29, 1913.” This was a willfully false statement when it was made and put on the note. It tolled the Statute of Limitations in favor of the bank, if true, to that date. It changed the amount due and payable on the note according to its terms. It was a material alteration of the note. It changed its legal effect, and avoided the note as to all parties. In this State, any tampering with a note by the holder whether material or not, even though beneficial to the makers or the endorsers, avoids the note. Carson v. Woods, 177 S. W.622; Evans v. Foreman, 60 Mo. 450; Kelley v. Thuey, 143 Mo. 434; Harvesting Coi v. Blair, 146 Mo. App. 382; Miller v. Gillelarid, 19 Pa. St. 119, cited in Bank v. Fricke, 75 Mo. 183; ' Johnston v. May, 76 Ind. 293; Bobb v. Taylor,'184 S. W. 1028; MeMurty v. Sparks, 71 Mo. App. 126; 2 Am. & Eng. Ency. Law (2 Ed.), 262-3; Gardner v. Gibbons, 91 Mo. App. 412; Haskell v. Champion, 30 Mo. 136; Bank v. Fricke, 75 Mo. 178; Higgins v. Harvester Co., 181 Mo. 399; R. S. 1909, sec. 10095; Hardewick v. Barnes, 179 Mo. 387; Brit-ton v. Dierkes, 46 .Mo. 591. (6) There was abundant evidence to show that the mortgage was purposely withheld from record against the protests and consent of these defendants, and not recorded until May 21, 1913, nearly eight months after it was given. In the meantime, the property was depreciated and many intervening debts created, by reason of all of which the security of the mortgage for these defendants was lost or greatly damaged. They were thereby entirely released, or at least, released to the extent of their injury, and the court erred in refusing the instructions. 1 Brandt on Suretyship (3 E-d.), secs. 480-1-2-3; White v. Smith, 174 Mo, 208; Bank v. Woods, 56 Mo. App. 219; Sullivan v. State, 59 Ark. 47; Gotzian & Co. v. Heine, 87 Minn. 429; Monroe v. DeForest, 53 N. J. Eq. 264; Long v. Mason, 200 S. W. 1064; Bank v. Kilpatrick, 204 Mo. 119; Atlanta National Bank v. Douglas, 51 Ga. 209.

      George L. Davis for respondents.
    (1) There was no such an extension of time as to release the indorsers on the note. Welch v. Kerheck, 126' Wis. 419; Meradith v. Dibroel, 155 S. W. 163; Citizens Bank v. Móoran, 38 Mo. App. 484; ' Eussell v. Brown, 21 Mo. App. 51; American National Bank of Springfield v. Love, 61 Mo. App. 378; First National Bank v. Wells, 98 Mo. App. 573; First National Bank v. Livermore, 90 Kan. 395. (2) Appellants failed to cite any agreement of any character with the maker that there was any extension of' the note, hut merely referred to the inadvertent inscription made on the note, which the teller himself testifies was made by mistake, and stand upon that, and assume, to say that the jury should not determine what all other facts, are with reference to the transaction. There was no alteration in the instrument by the notation made by the teller. It was merely a memoranda. With reference to such notation, the court without contradiction has stated the rule that such a notation is merely a memoranda. 2 Cyc. 241; Moore v. Macon Savings Bank, 22 Mo. App. 684. (3) The mortgage executed was void,' and if recorded would not have been binding on any person whatsoever. The mortgage specifically provides “it is understood that the grantors may sell said scales as they are completed, the proceeds of said scales to the extent of $25 per scale to be applied to the payment of the debt executed.” In other words, the mortgage authorized, the mortgagors to sell- the scales and the mortgage was void on account of said provision. Vermont Marble Company v. Ragsdale, 74 Mo. App. 42; Helm v. Helm, 52 Mo. App. 51; Sec. 28-80, R. S. 1909. There is no evidence that the mortgage in this case was withheld from records purposely, save that the parties interested in the Scale Company, all of them being appellants, did not want it recorded. It would have been void and the recording of the mortgage would have availed the respondents nothing. There is not one word of evidence that interested parties wanted the bank to take possession of the scales, but if demand was made that they take possession, the bank was under no obligation to the indorsers to do so. There was no obligation on the bank of record the mortgage, even if demand was made by any or all of the appellants, as they were either directly or indirectly the owners of the property and could easily have-sold the property and have applied the proceeds upon the mortgage.
   WHITE, C.

This suit is on a promissory- note made payable to the order of the maker, the Kansas City Computing Scales Company, and negotiated to the G-ates City National Bank, which transferred it to the plaintiff. The defendants, other than the maker, are accommodation indorsers, whose names appear on the back of the note. The note, with all indorsements, is as follows:

Form No. 3 Plaintiff’s Ex. ‘A’
Bal. $8000.00
This note is secured by
$8,000.00 Kansas City, Mo., September 30, 1912.
Ninety days after date we promise to pay to ourselves -or order Eight Thousand- 100-Dollars at Gate City National Bank. For value received, with interest thereon at Six per cent per annum from date until paid, interest payable - annually. ,
Ext. to Mch. 29, 1913.
No. 16051
Due Dec. 29, 1912.
Kansas City Computing Scales Co.,
by K. L. Beowne, President.
For sale by Kansas City Stationery Co., 808 Delaware Street, Kansas City, Mo., both Phones 2385 Main.
(Exhibit 1 indorsed on back as follows):
Protest waived
T. M. WALKER
K. L. .Beowne
H. B. Sheewood
O. B. Blankenship
Z. M. Williams
M. V. Watson
Y. M. Cockrell
R. B. Hall
Pay to the Highland Investland Company or order without recourse. ■
Gates City National Bank,
by J. B. Pollaed, Pt.
Kansas City Computing Scales Co.,
by K. L. Beowne, Pt.
Oct. 17, 1912, Paid $120.00
Jan. 9, 1913, Int. Pd. & Time Extended to 3-29-1913
May 26, 1913,.:.Cr. Holley Note 5.00
Jan. 12, 1913, . Cr. Pope Note 4.01
July 9, 1913, . Cr. Lewis note 6.50
July 16, 1913. Cr. Hoffman 6.58
v '. v Holly 5.00
.27.09

Tlie Scales Company filed no answer. ‘ The defendant Williams filed a separate answer, and defendants Walker, Browne and Watson filed their joint separate answer. Other defendants were not served. After a general denial these answers alleged that the defendants indorsed their names on the back of the note as accommodation indorsers and set forth three separate and distinct defenses: First, that before the maturity of the said note the time of payment of the same was extended by agreement of the bank, holder, with the Scales Company, maker, without the knowledge or consent of the answering defendants; second, that the bank, while holder of -the note, altered the terms of the' same without the consent of the defendants by writing on the back of the same: ‘‘January 9, 1913, interest paid and time extended to March 29, 1913;” third, that at the time of the execution of the note a chattel mortgage was given by the Scales Company securing to the bank the payment of the note; that the chattel mortgage covered a large number of scales and material for making scales and the answering defendants indorsed said note on' the representation that said mortgage would be made, that the bank negligently failed to put said mortgage on record and neglected to foreclose the same until the Scales Company had created a large amount of indebtedness to other persons and become Avholly insolvent and the security was thereby lost.

In reply to the separate answers the plaintiff denied specifically each of the allegations of the said answers except that the defendants were accommodation indorsers. There was no general denial. The issues were submitted to a jury and there was a verdict for the plaintiff for the amount of the note and all accured interest, against all the defendants, except the defendants who were not served with process; the cause was dismissed as to them. The judgment defendants, except the Scales Company, appealed. •'

I. On the trial of the case the plaintiffs offered in evidence the note with the exception of the entry on the face: “Ext. to Mch. 29, 1913,” and the entry on the back: “lnt. pd. & time extended to. 3-29-1913.”

Defendants objected to the offer of part of the note without the whole of it. The objection was sustained, whereupon the plaintiffs offered the entire note with all indorsemefits. The plaintiff then, over the objection of the defendants, introduced J. B. Pollard, who was president of the bank at the time the note was owned by the bank, and W. S. Butler, who was discount clerk at tbe time.

Mr. Pollard swore that the two entries mentioned, showing time extended, on the face and on the back of the note, were in the handwriting of Mr. Butler and that Mr. Butler had no authority to make such entries except by instruction from a higher officer;, that he had instructed Butler when the note came due to charge interest for ninety days in advance on it, but furfhur instructed him not to extend the time of payment. The amount of interest due for ninety days on the note was charged to the account of the Scales Company. At the time he had talked with Mr. Browne, the president of the Scales Company, requesting him to get the consent of the indorsers for an extention of the note; Browne promised to do so, but never did. The liability ledger of the company contained an entry corresponding to the indorsement on the note, showing the payment of interest and the extension of time to March 29; this was also made in the handwriting of Butler, and made without authority. Pollard further testified that it was the custom of the bank, in order not to have overdue paper, when the note of a solvent customer fell due, to charge up the interest and extend the time.

Butler testified, corroborating the statement of Mr. Pollard, that he was instructed to charge up interest on the 9th of January for the eleven days’ interest due, but “overlooked the fact of which note it was and I made the calculation for 90 days” and charged it up and made the entries mentioned. He made entries, both on the note and the liability ledger, contrary to instructions. His tesimony, and that of Mr. Pollard, shows that the liability ledger was often before the discount cbmmittee . and the officers of the bank; that the entries on the note and the liability ledger could easily have been noticed at any time by those in charge of the bank’s’ matters. Butler’s attention was called to the mistake by the officers of the bank some time before the 29th of March; he could not remember how long, it might have been a few days or two months after the notations were made, but nothing was ever done by any of the officers of the bank to correct the alleged mistake in making the entries.

The defendants objected to this testimony on the ground that such facts were not within the scope of the pleading. The petition declared on the note as it stood, entries and all. These entries, in addition to mere payment of interest in advance, showed an agreement to extend the time of payment; such payment of interest would not of itself be evidence of such agreement. [Merchants Ins. Co. of St. Joseph v. Hauck, 83 Mo. 21; Nelson v. Brown, 140 Mo. 580; Elliott v. Qualls, 149 Mo. App. 482, l. c. 488; St. J oseph Fire & Marine Ins. Co. v. Hauck, 71 Mo. 465.] The evidence introduced tended to prove the absence of the agreement in contradiction of the entries. There is no allegation in the petition that such entries were made by mistake or contrary to instructions.

The plaintiff claims that the note, being attached to the ' petition merely as an exhibit, is no part of the petition and therefore the plaintiff is not bound by the terms of the note except as alleged in the petition and may show those entries- were made by mistake.

It. has always been held that an instrument filed with a pleading as an exhibit is not to be considered in determining the sufficiency of the pleading. [State ex rel. v. McQuillin, 256 Mo. 693, l. c. 708; Hanks v. Hanks, 218 Mo. l. c. 679; Keator v. Realty Co., 231 Mo. 676, l. c. 680.] And that is true even though the petition allege expressly, as it does in.this case, that the exhibit is made a part thereof. But it will be noticed that in all such cases the exhibit is to be ignored only in determining the sufficiency of the pleading as such. “An exhibit attached to the petition is not so far a part of the petition itself as to save the petition from being bad on demurrer.” [State ex rel. v. McQuillin, 256 Mo. 708.]

In some jurisdictions where the question has arisen it is held that while an exhibit attached to a pleading does not tender an issue so as to involve an assertion of the truth of the statements recited in the exhibit, it does constitute an allegation of the existence of the instrument at the time and place and for the purpose alleged. The exhibit may be considered not as a substantive allegation of fact, but in aid and explanation of the fact formally lodged in the body of the pleading. It may not supply allegations to set out a cause of action, but may aid the petition and make certain what would otherwise be uncertain. [Caldwell v. Village of Mt. Home, 156 Pac. (Idaho) 909, l. c. 912; Realty Co. v. Farm, etc. Pub. Co., 79 Minn. 465; Tube City Mining & Milling Co. v. Otterson, 146 Pac. (Ariz.) 203, l. c. 207; Hayt v. Bentel, 130 Pac. 432, l. c. 434; Pt. Huron Engine & Thrasher Co. v. McGregor, 131 S. W. (Tex.) 398.]

Our statute, Section 1844, Eevised Statutes 1909, requires, when a petition is founded upon an instrument in writing charged to have been executed by the other party, that such writing shall be filed with said petition; and Section 1985, Eevised Statutes 1909, provides the execution of such instrument shall be adjudged confessed unless its execution is denied by an answer verified by affidavit While these sections do not make an exhibit filed with the pleading á part of the pleading so as to dispense with allegations necessary to state a cause of action, nevertheless, when a suit is “founded upon” a written instrument and the petition bases the right to recover upon the instrument as filed, then the plaintiff is bound by the terms of the instrument when it comes to the introduction of evidence. Having thus stated his cause of action and having alleged the instrument as containing the obligation upon which he seeks to recover, he cannot then be heard to change the force and effect of that instrument. In the absence of pleading to that effect he cannot be permitted to show it is not what it • purports to be, or that it contains matter -which, is not in the contract upon which the suit is brought. If no such extension was made and the entry which showed it was a mistake, then it was necessary for the plaintiff to plead that fact in order to admit evidence of it.

II. Appellants contend that there was an. alteration of the instrument which would release them from liability. After eliminating that part of the indorse-ments showing extension of time which, it is claimed, were made without authority, there remained an indorsement as follows: “Jan. 9, 1913 Int. pd. to 3/29, 1913.” Plaintiff does not claim that part was by mistake. On the same day $120 was charged to the Scales Company and taken out of its account for the payment of interest for ninety days ending March 29th.

It is true that any alteration of a written contract by one party to it will release the other party and an alteration by the principals, without the consent of the surety, or indorser, will release the surety or in-dorser. According to the rule which formerly prevailed in this State it did not matter whether the alteration was material or immaterial. [Haskell v. Champion, 30 Mo. 136; Harvesting Co. v. Blair, 146 Mo. App. l. c. 382; Evans v. Foreman, 60 Mo. 449; First National Bank v. Fricke, 75 Mo. 178; Schuster v. Weiss, 114 Mo. 158, l. c. 164; Higgins v. Harvester Co., 181 Mo. 300, l. c. 309.] But that rule has been modified by the Negotiable Instrument Act, Section 10095, Revised Statutes 1909, which applies the rule to a material alteration and sets out what alterations shall be considered material.

A disinction is drawn between an alteration which affects or attempts to affect the terms of the contract and a mere memorandum or a collateral agreement which does not in any way change the force and effect of the instrument. [American National Bank v. Bangs, 42 Mo. 450; Moore v. Macon Savings Bank, 22 Mo. App. 684; Merc. Co. v. Tate, 156 Mo. App. 236.]

It is claimed by appellants that the payment of interest in advance, when the note called for interest to be paid annually, is not according to the terms of the contract and therefore is an alteration. Of course, if there was an agreement in consideration of such payment to extend the time of payment of the note, then the indorsers would be released, but that is another proposition considered elsewhere. This transaction, as we are now considering it, was merely the payment of interest before it was duq without any agreement whatever that it should operate as an extension of time or in any way affect the terms of the. contract.

While the decisions in this State go to the extreme in holding that the alteration of an instrument releases the party not consenting to it, yet such alteration must purport to effect some change in the meaning or legal operation of the instrument as a contractual obligation —not a change caused by part performance. An examination of cases where the rule is applied will show the alteration in each case was of that character. None of them will show that mere performance of the contract, out of time, and that performance indorsed on the instrument, would be an alteration.

It was held by this court, in the Evans case, supra, that the addition of the words “after due ten per cent” on the note was such an alteration as to release the sureties. In the Blair case, changing the terms requiring payment of interest from maturity so that the interest should be paid from date, was such material alterations as to release the makers. In the ease of Miller v. Grilleland, 19 Pa. St. 119, cited by appellants, it was held that an alteration in the date of the note, by agreement of the maker and the payee, released the surety; the reason presented was that the change extended the time when the statute of limitations should begin to run and therefore was a material alteration.

The memorandum, in this case simply notes what has been done in carrying out the contract and does not attempt to change the effect of what should be done. The payment of interest is what the parties to the note undertook. There is no more reason to hold that a premature payment of interest would release an in-dorser than a belated payment.

If the payee should change the amount of the note the alteration would release the obligors, and a like result would follow if he should indorse a fictitious credit upon it and thereby reduce the amount to be paid. [Johnston v. May, 76 Ind. 293; Washington Finance Corp. v. Glass, 134 Pac. 480, 46 L. R. A. (N. S.) 1043.] A reduction of the amount due by actual payment indorsed on the instrument would likewise be a change in the operation of the instrument, but would not release the sureties or indorsers. In the one case the change is in the terms of the undertaking and in the other it is incidental to actual part performance.

Appellant argues that the indorsement tolled the Statute of Limitations and therefore affects the operation of the contract as to these defendants. The payment of the interest by the principal in a promissory note tolls the Statute of Limitations as to the surety, or joint maker, or any whose undertaking is original with the principal, but does not interrupt the running of the statute as to those whose undertaking is collateral, such as an indorser. [Maddox v. Duncan, 143 Mo. 613; Clinton Co. v. Smith, 238 Mo. 118, l. c. 129; Regan v. Williams, 185 Mo. 620, l. c. 629.] The defendants in this case were accommodation parties as the pleadings admit (Sec. 10000, R. S. 1909) and were liable as indorsers only (Sec. 10033; Walker v. Dunham, 135 Mo. App. 396). Even if the payment did toll the statute as to these defendants there is no precedent for holding such result would release them. Many cases have arisen where a payment by the principal was held to toll the statute as to his surety, but in no case brought to our attention was it held that the surety was thereby released before the statute had run. A payment of interest after it was due would have had the same effect, so far as the Statute of Limitations is concerned.

III. On their third defense a chattel mortgage was introduced, dated the same day as the note, but acknowledged about two weeks later, whereby the Scales Company, to secure the note, conveyed 700 Kansas City Automatic Computing scales then in process of building, including the material for the completion of the same. Evidence was introduced to show that the property covered by the mortgage was of much more value than the amount of the note. The mortgage was not recorded until in May, 1913, and that was after the Scales Company had sold out all its property, without applying any of the proceeds to the payment of the note in suit. The plaintiff offered evidence tending to show that the mortgage was kept off record by request of the defendants. This was denied by the defendants, who in turn offered evidence tending to show that some of them, at least, urged the bank to foreclose the mortgage. There was a provision in the mortgage that the grantor might sell the scales as they were completed and out of the proceeds of such sales pay $25 per scale on the mortgage. Respondent calls attention to that provision and claims that it rendered the mortgage fraudulent and void under the statute. As to whether such provision would render the mortgage void as against creditors we need not consider; it did not affect its validity as between the parties. It is not claimed that the mortgage was attacked by creditors and thereby rendered inoperative. On the contrary, the .evidence tended to show the security was lost because the mortgagee negligently failed to enforce its claim.

Several instructions were offered by the defendants covering that feature of .the case to the effect that if the defendants signed the note with the understanding that the mortgage was executed at the time upon property sufficient to secure a debt and it was understood between the bank and defendant indorsers that the property covered by chattel mortgage should be applied in the discharge of the debt on or before its maturity, and if the bank failed or neglected to record the mortgage and failed to apply the proceeds of the sale of the property’to the payment of the note and permitted the Scales Company to dispose of the same from time to time without requiring that’ application of such proceeds, and if the property which the bank permitted the Scales Company to dispose of in that manner would have yielded enough to satisfy the debt, then the plaintiff is not entitled to recover against any of the defendants who did not consent to such sale and disposition of the property. These instructions were refused. The ruling in that respect was error.

If any of the defendants consented to keeping the mortgage off the record, or assisted in disposing of the property contrary to the terms of the mortgage, that defense would not be available to them.

The judgment is reversed and the cause remanded.

Roy, G., absent.

PER CURIAM. — The foregoing opinion by White, C., is adopted as the opinion of the court.

All of the judges concur.