Holland Banking Co. v. Continental Nat. Bank

• Decision Date: 31 October 1929
• Docket Number: 28731
• Citation: 22 S.W.2d 821,324 Mo. 1
• Parties: Holland Banking Company, in Course of Liquidation by S. L. Cantley, Commissioner of Finance, v. Continental National Bank, Appellant
• Court: Missouri Supreme Court

22 S.W.2d 821

324 Mo. 1

Holland Banking Company, in Course of Liquidation by S. L. Cantley, Commissioner of Finance, v. Continental National Bank, Appellant

No. 28731

Supreme Court of Missouri

October 31, 1929

Rehearing Overruled November 15, 1929.

Appeal from Pettis Circuit Court; Hon. Dimmitt Hoffman Judge.

Affirmed.

Omar E. Robinson, Geo. F. Longan and Henry L. Jost for appellant;

Edw. J. White and Geo. L. Edwards, of counsel.

(1) The plaintiff Finance Commissioner cannot assert and enforce any right to, or interest in, the special credit of $ 100,000 extended by defendant to the Holland Bank, other and different from the terms and conditions upon which the same was obtained and agreed to by Hine and Randall and Sanford who procured said credit; whether on the theory, that said contract, under which said credit was obtained and continued, was made by said parties for the benefit of the Holland Bank (6 R. C. L. sec. 273, p. 886; Ellis v. Harrison, 104 Mo. 278; Citizens State Bank v. Douglas, 178 Mo.App. 685; Llewellyn v. Butler, 186 Mo.App. 525), or whether said parties acted as agents of and for said Holland Bank (St. Louis v. Davidson, 102 Mo. 153; Rankin v. City Nat. Bank, 208 U.S. 541, 52 L.Ed. 614; Pensacola State Bank v. Thornberry, 226 F. 620; Ditty v. Dominion Nat. Bank, 75 F. 771; Platt v. Francis, 247 Mo. 296). (2) The Holland Bank with knowledge of defendant's action charging the Sanford note against said credit (in accordance with the terms of the contract under which the credit was procured) having acquiesced therein and never objected thereto, will be held to have approved and consented to defendant's action; and plaintiff is thereby bound and estopped to claim the contrary. Roe v. Bank, 167 Mo. 406; Armstrong v. Nat. Bank, 83 F. 573; Keyes v. Security State Bank, 300 F. 898; Keyes v. Nat. Bank, 20 F.2d 686; 1 R. C. L. 213, sec. 12; Shepherd v. Bank, 15 Mo. 151; Kermit v. Bank, 96 Mo.App. 135. (3) It was competent for Hine and Randall and Sanford, who made the contract and arrangement with defendant for the credit, to agree that the same should not be checked against, and that defendant should have the right to charge the Hine and Randall note, and afterwards the substituted note of Sanford, against said credit. 3 R. C. L. 592, sec. 219; and sec. 170, p. 541; Rankin v. Nat. Bank, 208 U.S. 541, 52 L.Ed. 610; Gaunt v. Oil & Gas Co., 281 F. 655; Whitsett v. Bank, 138 Mo.App. 90. (4) The acceptance by the Holland Bank of the credit from defendant, embraced the acceptance and adoption by said Holland Bank of the entire contract under which the credit was obtained and continued; and the Hine and Randall note, and the substituted note of Sanford, became and were the obligations of the said Holland Bank, under said contract, so far as concerned the charging of the Sanford note against said credit, as provided by said contract. Rankin v. City Nat. Bank, 208 U.S. 541, 52 L.Ed. 610; Kendrick State Bank v. Nat. Bank of Portland, 206 F. 940, 213 F. 610; Keyes v. Security State Bank, 300 F. 897. (5) The consideration for defendant extending said credit, was the Hine and Randall note, and the substituted Sanford note, and the agreement that said credit was not to be checked against or withdrawn by any method, and the further agreement and reserved power and authority to defendant to charge said note against said credit and account, any time defendant desired. To deny defendant these benefits of its contract, will amount to compelling it to lend its credit to the Holland Bank, without consideration, in clear violation of law. 3 R. C. L. 425, sec. 53; 7 C. J. 595; Merchants Bank v. Baird, 160 F. 642, 17 L. R. A. (N. S.) 530; Farmers & Merchants Bank v. Nat. Bank, 11 F.2d 85; Bowan v. Nat. Bank, 94 F. 927; First Nat. Bank v. Am. Nat. Bank, 173 Mo. 153; People's Nat. Bank v. Finance Co., 133 S. E. (N. C.) 415; 48 A. L. R. 526. (6) Under plaintiff's petition, and otherwise, evidence as to transactions between Hine and Randall and Sanford, concerning the purchase of Sanford's stock in the Holland Bank, and of transactions between said individuals and the Holland Bank pertaining to said stock transaction, was improperly admitted over defendant's objections. Rankin v. City Nat. Bank, 208 U.S. 541, 52 L.Ed. 610; Kendrick State Bank v. Nat. Bank, 206 F. 940, 213 F. 612; Keyes v. Security State Bank, 300 F. 897. Moreover defendant could not become guarantor or surety of Hine and Randall and Sanford in respect to the management of their own bank, and the performance of their duties, and discharge of their obligations to said Holland Bank. Merchants Bank v. Baird, 160 F. 642, 17 L. R. A. (N. S.) 530; First Nat. Bank v. Am. Nat. Bank, 173 Mo. 153. (7) The court erred in refusing at the close of plaintiff's evidence and at the close of all the evidence, to declare the law to be that upon the pleadings and the evidence the plaintiff was not entitled to recover upon the second count of his petition and in refusing the instructions requested by defendant to that effect, and erred in finding for and entering a judgment for the plaintiff in any amount. This court has said over and over again that where a party in a contract has obtained benefits under it "he cannot retain those benefits and repudiate the source from which they spring by denying the validity of the contract in which they originated. In short, he is estopped to grasp the benefits of that contract with one eager hand while thrusting aside its burdens with the other." St. Louis v. Davidson, 102 Mo. 153; Platt v. Francis, 247 Mo. 296; Cantley v. Drainage District, 2 S.W.2d 612; Aldrich v. Nat. Bank, 176 U.S. 633.

Roscoe C. Patterson, Orin Patterson and Farrington & Curtis for respondent.

(1) Where a bank holding the note of an officer of another bank, which evidences an individual debt of such officer, takes or accepts money belonging to the corporation and appropriates it to the payment of such note, having actual knowledge that the corporation's funds are being wrongfully taken to pay such individual indebtedness, an action in conversion will lie to recover such misappropriation by the bank, or the Finance Commissioner in charge of same. Banks v. Edwards, 243 Mo. 553; Walton v. Chalmer, 205 S.W. 90; McCollum v. Hotel Co., 199 S.W. 417; Randalls v. Trust Co., 189 S.W. 33; McCollum v. Jewelry Co., 218 S.W. 354; Griffin v. Bank, 246 S.W. 180; Biederman v. Jewelry Co., 242 S.W. 126; O'Bannon v. Marschel, 222 S.W. 1035. When the bank has actual knowledge of the wrongful taking the rule has not been changed by Sec. 996, R. S. 1919. Fisse v. Blanke, 127 Mo.App. 431. (2) An account stated cannot be bottomed on a wrongful and illegal or fraudulent claim or charge. Grain Co. v. Stonbraker, 202 Mo.App. 81; Barr v. Khar, 147 Mo.App. 252; 1 C. J. 699, sec. 306, sub-sec. 7. In order that a written demand may ripen into an account stated the demand must have been one made in good faith and not one made by a demandant who knew that the demand contained a wrongful and fraudulent item classed as a charge. 1 R. C. L. 217, sec. 16.

Frank, J. Blair, Atwood and Gantt, JJ., concur; Ragland, J., dissents in a separate opinion in which White, C. J., and Walker, J., concur.

OPINION

FRANK

This is a suit in conversion. It was begun in the Circuit Court of Greene County on August 19, 1926, by C. E. French, then Commissioner of Finance in charge of the business and property of the Holland Banking Company, which we will call the Holland Bank, against the Continental National Bank of Kansas City, which we will call the National Bank, and E. L. Sanford. Later the action was dismissed as to defendant Sanford, and by agreement S. L. Cantley, who succeeded C. E. French as Commissioner of Finance, was substituted for said French as party plaintiff.

The petition is in two counts. The first count charges that defendant on September 9, 1922, converted $ 25,000 belonging to the Holland Bank.

The second count of the petition charges that defendant converted the sum of $ 75,212.55, belonging to the Holland Bank and prayed judgment for said sum with interest. The cause went on change of venue to the Circuit Court of Pettis County, where it was tried to the court, a jury being waived, resulting in a judgment for defendant on the first count of the petition, and for plaintiff and against defendant on the second count in the sum of $ 97,274.85, being the full amount asked for in said count with interest. Defendant appealed from the judgment on the second count. No appeal was taken from the judgment on the first count.

Prior to and during the times in question, appellant National Bank was a banking corporation transacting a banking business in Kansas City, Missouri, and the Holland Bank was a banking corporation organized under the laws of Missouri and engaged in the banking business in Springfield, Missouri. The National Bank continued to transact a banking business as such until October 17, 1922, on which date it was succeeded by the Continental National Bank & Trust Company. The Holland Bank ceased to function as a bank, and was placed in charge of the Commissioner of Finance on January 15, 1924.

The facts, stated in a light favorable to respondent, tend to show that shortly prior to the time of the happening of the events giving rise to this lawsuit, E. L. Sanford owned a majority of the capital stock of the Holland Bank. On April 9, 1921, J. L. Hine and C. E. Randall, then vice-president and cashier, respectively, of said Holland Bank, desiring to purchase E. L. Sanford's stock in said bank, applied as individuals to the National Bank of Kansas City for a loan of $ 100,000, with which, together with funds raised from other sources, they expected to pay Sanford for said stock. The National Bank made...