State ex rel. Hadley v. Bankers Trust Co.

Citation138 S.W. 669,157 Mo.App. 557
PartiesSTATE OF MISSOURI ex rel. HERBERT S. HADLEY, Plaintiff, v. THE BANKERS TRUST COMPANY, Defendant. H. A. LEE, Receiver Garland State Bank, Plaintiff in Error, v. THE BANKERS TRUST COMPANY, and IRA M. COBE, Purchaser of the Assets of the Bankers Trust Company, Defendants in Error
Decision Date12 June 1911
CourtCourt of Appeals of Kansas

Error to Jackson Circuit Court.--Hon. Hermann Brumback, Judge.

Judgment affirmed.

W. R Biddle, Keplinger & Trickett and Thurmond & Farrar for plaintiffs in error.

Frank Hagerman and Charles A. Loomis for defendant in error.

OPINION

JOHNSON, J.

In October, 1907, an action was instituted in the circuit court of Jackson county by the State of Missouri at the relation of its attorney-general against the Bankers Trust Company, a corporation organized under the laws of Missouri, relating to trust companies. The company had become insolvent and the purpose of the action was to wind up its affairs for the benefit of its creditors and stockholders. Shortly after the petition was filed the circuit court appointed a receiver who took charge of the assets and administered them under the direction of the court. After they were sold and the proceeds distributed among the creditors the receiver filed his final report and prayed to be discharged. On the day his application was set for hearing, H. A. Lee, receiver of the Garland State Bank of Garland, Kansas, asked and obtained leave of court to file an intervening petition, the object of which was to recover a judgment against the estate of the Bankers Trust Company, on a demand of $ 7300, alleged to be due the estate of the Garland State Bank, and to be founded on the liability incurred by the Bankers Trust Company under the laws of Kansas imposing a double liability upon stockholders in corporations organized under the laws of that State. It appears from the averments of the intervening petition that the Garland State Bank was incorporated under the laws of Kansas with a capital stock of $ 10,000, divided into one hundred shares of the par value of one hundred dollars each; that at various times before the failure of the bank or of the Bankers Trust Company three different certificates of stock representing in the aggregate 73 shares of the par value of $ 7300 were issued respectively to M. H. Woods, Myron A. Waterman and J. O Ellis; that said stock stood on the books of the bank in the names of said Woods, Waterman and Ellis and at no time was in the name of the Bankers Trust Company and that about eighteen months before the filing of the intervening petition, the bank failed and the intervenor was appointed its receiver in a proceeding instituted in Kansas. We quote from the petition as follows:

"Petitioner further alleges as a fact which he has learned by inquiry and upon information and belief that the Bankers Trust Company through its officer, purchased the Garland State Bank, and that the stock of M. H. Woods, M. A. Waterman and J. O. Ellis, as alleged in the petition, was paid for by said Bankers Trust Company and was taken out in the name of said J. O. Ellis in order that he might be cashier of said bank, and that M. A. Waterman was an employee and M. H. Woods was an officer in the Bankers Trust Company at the time. That the Garland State Bank declared dividends after its organization and before its failure on several occasions upon said stock of J. O. Ellis, M. H. Woods and M. A. Waterman, which was then held by the Bankers Trust Company by assignment, and that said Bankers Trust Company collected and appropriated such dividends. That at one time during said period $ 600 was distributed by said Garland State Bank upon its $ 10,000 of capital stock, and of said sum the Bankers Trust Company received $ 432.

That said Garland State Bank from its purchase as aforesaid to the time of its insolvency was controlled by the officers of the Bankers Trust Company; that said Bankers Trust Company supplied said Garland State Bank with most of its discounts during said time, and that the cashier was constantly under the direction and management of the officers of the Bankers Trust Company, and that during all of said time said M. H. Woods and Myron A. Waterman were officers and employees of the Bankers Trust Company, and said J. O. Ellis was the cashier of the Garland State Bank.

Petitioner further says that by reason of the premises the owner of the stock which stands in the name of M. H. Woods is indebted to said receiver in the sum of $ 4000; that the owner of said stock standing in the name of Myron A. Waterman by reason of the premises is indebted to said receiver in the sum of $ 2300; and that the owner of the stock standing in the name of J. O. Ellis by reason of the premises is indebted to the receiver in the sum of $ 1000, making a total of $ 7300.

Petitioner further says that said Woods, Waterman and Ellis are hopelessly insolvent and unable to pay any of said indebtedness.

Petitioner further says that he is reliably informed and believes, and states and avers it as a fact, that said stock so held by said Woods, Waterman and Ellis was paid for by the Bankers Trust Company; that the stock was issued to said Woods, Waterman and Ellis, but the certificate thereof was assigned and delivered by them to said Bankers Trust Company, but that such assignment and transfer was never carried out on the books of the Garland State Bank, nor had the depositors of said Garland State Bank, any knowledge of the same; that all of these transactions occurred before said Bankers Trust Company was placed in the hands of a receiver, and before the Garland State Bank was placed in the hands of a receiver, and the said H. A. Lee as receiver is informed and believes and alleges the fact to be that said Bankers Trust Company was the real owner of said stock and had the physical possession thereof and well knew that said M. H. Woods, Myron A. Waterman and J. O. Ellis were insolvent and that they knowingly and purposely failed to have said stock transferred into their own name for the purpose of escaping double liability.

Petitioner further states that by reason of said transaction the Bankers Trust Company was the equitable owner of said stock.

Petitioner further says that the assets of the Garland State Bank, when converted into cash, will not pay the indebtedness of the same, and that said double liability on said stock is necessary in order to assist in paying the creditors.

That there was proved up before said H. A. Lee, receiver, as liabilities of said Garland State Bank, the sum of $ 67,597.95; that there has been paid on said liabilities the sum of $ 43,957.66, leaving a balance unpaid of said liabilities of over $ 23,000, and with expenses incident to said receivership will make the liabilities of said bank at least $ 25,000; that the receiver has proceeded against and collected the double liability from each and every stockholder in said bank residing in Kansas, and excepting the claims herein presented for the stock standing in the names of M. H. Woods, J. O. Ellis and Myron A. Waterman there is only one other stockholder that has not paid the double liability, and that the said H. A. Lee as receiver does not know the whereabouts of said stockholder.

Petitioner further avers that the Bankers Trust Company, through Mr. Marks, its receiver, has sold to Ira M. Cobe, a resident and citizen of Chicago, in the State of Illinois, all of the assets in said defendant's hands and belonging to said Bankers Trust Company, in consideration for which said Ira M. Cobe has paid and agreed to pay a sum equal to forty-nine per cent on all of the indebtedness of said Bankers Trust Company, and that by reason of the premises this plaintiff is equitably and legally entitled to a participation in the benefits derived from said sale, and that unless such relief is granted said H. A. Lee, receiver, will be unable to derive any benefit from the double liability on said stock as provided for under the laws of the State of Kansas."

The prayer of the petition is "for an order and decree allowing said claim of $ 7300 against said defendant and order that said petitioner may participate in the proceeds of the sales of the assets of the Bankers Trust Company to said Ira M. Cobe, and for such other and further relief as the facts and the equities of the case may permit."

The receiver of the Bankers Trust Company and Ira M. Cobe separately demurred to this petition on the following grounds:

"First. Because it appears on the face of said petition that the said receiver, H. A. Lee, has no right to sue herein in this court.

Second. Because it appears from the facts alleged in said petition that neither this court, nor the court that appointed H. A. Lee, receiver of the Garland State Bank, has granted to said receiver authority to bring this suit.

Third. Because it appears from the facts alleged in said petition that M. H. Woods, J. O. Ellis and Myron A. Waterman are the owners respectively of the stock of the Garland State Bank described therein and are alone liable for any stockholders' liability arising out of the ownership of said stock.

Fourth. Because said petition does not allege facts sufficient to show that the Bankers Trust Company was or is a stockholder in the Garland State Bank, or liable as such.

Fifth. Because the Bankers Trust Company has no power or authority in law to purchase or become the owner of any stock in the Garland State Bank, or to become liable as a stockholder therein.

Sixth. Because the estate of the Bankers Trust Company has been liquidated and closed up and the proceeds thereof paid out to the creditors by this court, and there is now no assets in the custody of the receiver of said Bankers Trust Company...

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