41 Mo. App. 1 | Mo. Ct. App. | 1890
This action was commenced before a justice of the peace, upon , a promissory note of the following tenor:
“$10.00. Springfield, Missouri, May 19, 1888.
“Pour months after date we promise to pay to Thompson Manufacturing Company, or order, ten dollars, for value received, negotiable and payable without defalcation or discount, at the Central National Bank, Springfield, Missouri, with interest at the rate of eight per cent, per annum from date until paid.
“Jones Bros.
“By J. W. P. Jones.”
“Pay to the order of M. D. Wells & Co.
“Thompson Manufacturing Co.
“Per G. A. Frizzell, Treasurer.”
The circuit court, sitting as a jury, made a finding and rendered a judgment for the plaintiff, and the defendant appeals to this court.
There were no written pleadings. At tüe trial, one of the defendants, J. W. P. Jones, by whom the note was executed, testified that the only consideration for the note was capital stock of the Thompson Manufacturing Company; that Mr. Frizzell, the secretary and treasurer of that corporation, came to the defendants and wanted them to sign ten notes of ten dollars each for two shares of the capital stock of the corporation; that Mr. Frizzell had the notes all made out, and the certificate of the stock executed and signed and ready to deliver. The witness also testified that Mr. Frizzell, at the time, stated to the defendants that the Thompson Manufacturing Company had then fifty thousand dollars’ paid up capital; that said corporation had purchased the Cotton Mill building, so called, in Springfield, Missouri,- and was going to use it as a factory for the manufacture of willowware; that the machinery for that purpose had been bought by the company and shipped, and would soon arrive and be put up, and the factory in operation ; that the corporation was desirous of closing up all matters concerning its stock; that he, Frizzell, wanted to deliver the certificates, and would take the notes for the same ; that it was all right; that others were taking stock in the same way and giving notes for it, and that the factory of the company would soon be running. The witness further stated that, relying upon these representations, he signed the ten notes, each for ten dollars, and all of the same date, payable to the Thompson Manufacturing Company, one
It appeared by the testimony of Mr. Frizzell, one of the incorporators and secretary and treasurer of the company, in consequence of whose representations the defendants were induced to purchase the shares and give the notes in question, that, notwithstanding the above recitals in the articles of association, he had never paid anything on his eighty shares, of the aggregate par value of four thousand dollars, except in services. It was understood that he was to hold but five hundred dollars’ worth of the stock. The reason why the additional thirty-five hundred dollars’ worth was issued to him was to complete the organization of the company and to place the stock, so that it could be assigned to other parties ; and it was transferred back to the company for that purpose. For this five hundred dollars’ worth of stock, a certificate was issued to him and remained in his name. This was all he was to pay for. He had not paid for all of it. He was to pay for it out of his salary every three months. He had paid about one hundred dollars in that way. The remaining thirty-five hundred dollars’ worth of stock remained as it was
“ Q. How much was taken by parties in this way ? A. Between seven and eight thousand dollars.
“ Q. How much money altogether has been paid into your hands, as treasurer of the company for stock ? A. To estimate it, I would say in the neighborhood of eight hundred dollars.
“ Q. By whom was this paid ? A. That was paid • by parties around town here, who took stock.
“ Q. Has other property, other than money and the notes of parties around town, come into your hands, as treasurer of the company, in payment for stock ? A. Mr. Ramsey gave a lot, valued at three hundred dollars, for six shares ; that is all that has come into my hands as treasurer.
“ Q. Has any money or other property been paid to you as treasurer of the company in payment for stock, by Mr. Pomeroy, or Mr. Thompson, or Mr. Kirst? A.. No, sir.
‘ ‘ Q. Has any been paid by Mr. Phillips ? A. He was to pay for his out of his salary.
*9 “ Q. Did the Thompson Manufacturing Company, as a company, ever have any money, except this you have mentioned ? A. Nothing from the sale of stock, but it has had from the sale of goods, and money borrowed by the company.
“ Q. How much money has the company borrowed ? A. In the neighborhood of thirty-eight hundred dollars.
“ Q. How did the company pay for goods they have purchased from time to time ? A. What has been paid was paid by the sale of goods, the money borrowed, and also some of the eight hundred dollars, mentioned, may have been applied in that way. The money borrowed was secured by F. S. Heffernan, as security on the notes at the Bank of Springfield. * * *
“ Q. Where, now, are all the notes given by parties about town for their stock % A. They are given as collateral security to parties to whom we owe bills, not as security for money borrowed.”
It also appeared that the certificate for two shares of the capital stock of the corporation, which was issued to the defendants as the consideration of their ten notes above spoken of, recited: “Capital stock, fifty thousand dollars, fully paid.” It certified that Jones Bros, were the owners of two shares of the capital stock of the Thompson Manufacturing Company, “fully paid up and of the par value of fifty dollars each,” etc.
The plaintiffs gave evidence tending to show that, the Thompson Manufacturing Company purchased a bill of boots and shoes from the plaintiffs, who were merchants doing business at Chicago, aggregating fifteen hundred and ninety-five dollars and thirty-five cents ; that this bill was placed in the hands of Mr. Heffernan, an attorney at Springfield, for collection, about the twenty-fifth or twenty-sixth of August, 1888 ; that Mr. Heffernan presented the bill to the manufacturing company ; that they declined to pay it, claiming that it was not due, and for the further reason that they had no money. Mr. Heffernan testifies: “I found that said
There was other evidence which we do not deem it material to recite. Much of the above evidence was objected to, and exceptions were duly saved to the admission of it; but we do not deem it material to consider these exceptions in detail. It seems to us sufficient to state our views as to the theory on which the case should have been tried.
This is not a proceeding by a creditor of a corporation to collect from a stockholder what is due upon his subscription to the capital stock of the corporation, or what remains unpaid upon shares of such capital stock, of which he is the holder. It is not a direct action
Whether he can set up such defense against one who has acquired the note before maturity as collateral security for a pre-existing debt due him from the payee, is a question which rests in a very unsatisfactory shape upon the judicial decisions in this state. Those decisions were reviewed in the opinion of this court delivered in the case of Conrad v. Fisher, 37 Mo. App. 352, at pages 414 to 418. It was there shown that the initial case of Goodman v. Simonds, 19 Mo. 106, in which our supreme court held that one who thus acquires a negotiable note is not a purchaser for value, and does not get it discharged of equities, has been twice overruled in this state upon cases in judgment, once thereafter reaffirmed and applied, and nine times thereafter expressly or impliedly recognized as the law. It was there said, after reviewing the cases in this state: “If the doctrine of stare decisis were strictly adhered to, it would unavoidably result in the conclusion that one, who takes negotiable paper as collateral security for an antecedent indebtedness, takes it as purchaser for value; for such was ruled in our supreme court in Boatmen’s Savings Institution v. Holland, 38 Mo. 49, where the question was before the court in judgment, which is the
Regarding it as an open question, we find that the decisions in other jurisdictions on the question are conflicting, as pointed out in that opinion. We also find that in Railroad v. National Bank, 102 U. S. 14, 25, the question has, in the highest federal court, been finally resolved in favor of the dictum of Mr. Justice Story in Swift v. Tyson, 16 Pet. (U. S.) 1, and contrary to the doctrine of our supreme court in Goodman v. Simonds, supra, and in conformity with the later holding in Boatmen’s Savings Institution v. Holland, supra.
But this holding seems to be contrary to most of the analogies of the law which bear upon the question. Take, for instance, the analogy of conveyances of lands or goods in fraud of the creditors of the transferor. All the decisions of which we have knowledge are to the general effect, that, to entitle the transferee to be treated as a purchaser for a valuable consideration, it must appear that he actually paid the purchase money before he had any notice of the fraud; it is not sufficient that he had agreed to pay it, or even that he had given his check in payment, unless the check had also been paid. Arnolt v. Hartwig, 73 Mo. 485; Dougherty v. Cooper, 77 Mo. 528; Young v. Kellar, 94 Mo. 581; McNichols v. Rubleman, 13 Mo. App. 515, 522. Another well-known analogy is that of conveyances of land, subject, in the hands of the grantor, to prior unrecorded conveyances, vendor’s liens, resulting trusts or other secret equities. In modern times land has entered into the operations of commerce almost to the same extent as personal property. And yet, upon this
We conclude, then, that the plaintiffs, when they acquired the note which is the subject of this suit, acquired the same rights against the defendants, as the holders of it, which the manufacturing company had. What those rights were, upon the undisputed evidence in the case, appears to be fully settled by two decisions in this state, one of them rendered by this court, and the other by the supreme court. The case of the Occidental Ins. Co. v. Ganzhorn, 2 Mo. App. 205, shows that no action can be maintained against one who, acting in good faith, has been induced by fraudulent representations to give his note as a stock subscriber to a sham corporation set on foot without authority of law. We need not enlarge upon this decision. Many of the facts were strikingly like those in the case before us. So far as we know, it has not been trenched upon or overruled by any subsequent decision in this state. The case arose between the sham corporation and the subscriber, and of course it was not decided with reference
The other decision, to which we allude, is that of our supreme court in the somewhat recent case of Haskell v. Worthington, 94 Mo. 560, loc. cit. 572, 573. That was an action by the assignee of a corporation, upon a subscription to its capital stock, to recover the par value of the shares for which the defendant had subscribed. The court held, that, as the assignee stood in the shoes of the corporation, it was á good defense to show that the corporation had entered into active business with less capital stock subscribed than the amount stated in its articles of incorporation, — the defendant not having by his conduct estopped himself from setting up the defense. The statute, under which this present corporation purported to have been authorized, provided that the articles of agreement should contain “the amount of the capital stock of the corporation ; the number of shares into which it is divided, and the par value thereof ; that the same has been bona fide subscribed, and one-half thereof actually paid up in lawful money of the United States, and is in the custody of the persons named as the first board of directors -or managers.” Revised Statutes, 1879, sec. 926. The undisputed evidence in this case showed that articles of incorporation were filed containing this recital, and that it was grossly and shamefully false; and while the defendants admit that they were not misled by this, not having examined the public record, their undisputed evidence shows that they were induced to subscribe for the shares by fraudulent representations made by the financial officer of the corporation in respect of existing facts of the most important character. With this evidence before him, the learned judge gave an instruction, declaring the law to be that the plaintiffs were entitled to recover. In other words, he held that, conceding the truth of the defendant’s evidence, it did not state a defense, as matter of law. .Judging from the theory on
The judgment will be reversed and the cause remanded. It is so ordered.'