Josephine Hospital Corporation v. Modoc Realty Co.

• Decision Date: 19 March 1925
• Docket Number: No. 23919.,23919.
• Parties: JOSEPHINE HOSPITAL CORPORATION v. MODOC REALTY CO. et al.
• Court: Missouri Supreme Court

270 S.W. 638

JOSEPHINE HOSPITAL CORPORATION v. MODOC REALTY CO. et al.

No. 23919.

Supreme Court of Missouri, Division No. 2.

March 19, 1925.

Appeal from St. Louis Circuit Court; John W. Calhoun, Judge.

Suit by the Josephine Hospital Corporation against the Modoc Realty Company and others. From judgment dismissing its petition, plaintiff appeals. Affirmed.

Anderson, Gilbert & Wolfort, Frank X. Hiemenz, and Edw. W. Foristel, all of St. Louis, for appellant.

C. William Koenig and Julius T. Muench, both of St. Louis, for respondents.

DAVID E. BLAIR, J.

Suit in equity to cancel a deed to real estate and for other relief. From the judgment of the trial court dismissing its petition, plaintiff has appealed.

In substance, the petition alleged that plaintiff is a corporation, organized under chapter 33, art. 10, R. S. 1909, to conduct a hospital, and that defendant Modoc Realty Company is a Missouri business corporation; that on June 6, 1903, one Josephine M. Heitkamp (hereafter referred to as "testatrix") made and executed a 99-year lease covering the real estate in the city of St. Louis here involved to John P. Hermann, Jr., Real Estate Company, on certain terms and conditions ; that said testatrix died January 29, 1904, seized of an estate in fee simple in said real estate, subject to said 99-year lease; that, by her last will and testament, duly probated February 2, 1904, testatrix named said John P. Hermann as executor and that he qualified as such and duly administered said estate and was finally discharged; that, among other things, testatrix devised to plaintiff corporation the real estate here involved, in trust to apply the net income thereof, or the income of any fund or property into which same might be converted, to the maintenance and support of Josephine Hospital at St. Louis (hereinafter referred to as "hospital"), giving said hospital full power to sell, lease, and incumber said real estate and to reinvest the proceeds; that such devise by testatrix was in addition to other money and property testatrix had provided in her lifetime for the support of said hospital and for the purchase of a site and the erection of buildings therefor; that said hospital corporation was organized as part of the plan of testatrix to endow said hospital, to be operated by the plaintiff corporation, and to receive such endowment and gifts of land; that testatrix was one of the trustees of plaintiff corporation during her lifetime; that the board consisted of seven trustees, to be elected pursuant to by-laws enacted by plaintiff corporation, the officers thereof to consist of president, vice president, secretary, and treasurer, and to be elected annually from said trustees; that plaintiff corporation accepted the gift of site and buildings from testatrix and has ever since operated said hospital.

It is further alleged that on October 1, 1904, John P. Hermann, Jr., Real Estate Company leased the premises here involved for the remainder of said 99-year term to defendant Modoc Realty Company; that on December 3, 1913, the John P. Hermann, Jr., Real Estate Company conveyed said real estate to John P. Hermann, Jr. (the same person referred to herein as "John P. Hermann"); that on May 8, 1914, Frank J. Lutz (referred to as "Dr. Lutz") was president of plaintiff, and that, on said date and without authority of the plaintiff corporation or its board of trustees and without their knowledge or consent, he executed a deed to John P. Hermann, Jr., wherein and whereby he attempted to convey said real estate to said Hermann, and that said deed came into the possession of said Hermann and was placed of record on May 9, 1914; that the execution of said deed by Dr. Lutz was carefully concealed from the trustees of the plaintiff corporation, and that they did not learn of its existence until shortly before the filing of the petition; that Dr. Lutz did not affix the corporate seal of plaintiff corporation to said deed, but did affix thereto the seal of a different corporation.

It was further alleged that on July 6, 1914, Hermann, as record owner of the fee, and Modoc Realty Company, as owner of the lease, jointly executed a deed of trust conveying said real estate to one Julius L. Winkelmeyer, trustee, to secure payment of certain promissory notes aggregating $10,000, and that said deed of trust was duly recorded; that on May 27, 1917, John P. Hermann conveyed the said real estate to the Modoc Realty Company, whereby the reversion and the leasehold merged and said Modoc Realty Company became the record owner of the fee-simple title to said real estate; that on September 27, 1917, defendant Modoc Realty Company executed its deed of trust thereon to defendant Christopher Winkelmeyer, trustee, to secure payment of a note of $4,500 and interest.

It was then alleged that unknown persons are interested in the subject-matter of the suit to an extent unknown to plaintiff corporation ; that the alleged deed by Dr. Lutz to Hermann and the other conveyances constitute a cloud upon the title of plaintiff corporation, and, if allowed to stand, will continue to cloud said title, to the irreparable damage of the plaintiff corporation.

The prayer of said petition was that said instruments be canceled and that the court decree plaintiff to be the owner in fee simple. The separate amended answer of defendant Modoc Realty Company contained a general denial and alleged that, on and prior to May 8, 1914, the date of the Dr. Lutz deed, plaintiff corporation was owner of the real estate here involved and other property, and that all of such property was heavily incumbered for general and special taxes, and that said real estate was subject to the unexpired term of said 99-year lease; that said real estate was reasonably worth $6,700, without improvements; and that Hermann purchased the same for the sum of $7,272.72. It then alleged that a deed therefor was duly executed by plaintiff corporation and recorded; that the purchase money was paid to plaintiff corporation by Hermann and by it applied to the payment of debts and taxes due on said real estate and other property, and, after a commission was paid, $6,433.12 was duly paid to plaintiff corporation. Said answer then alleged the execution of two deeds of trust and the conveyance by said Hermann to said defendant, as alleged in the petition. It was then alleged that the sale of the real estate to Hermann was made with the knowledge and consent of plaintiff corporation and for the purpose of protecting it from the loss of all its property; that such purchase was made by said defendant from Hermann in good faith and without knowledge of the facts set out in the petition; that the trustees of the hospital knew, or by the exercise of ordinary care would have known, all the facts and circumstances surrounding and in connection with the business of plaintiff corporation, including the transactions of its president, Dr. Lutz, and either approved thereof or connived therein and stood by and made no complaint; that Dr. Lutz died September 3, 1917, and that the estates of both were administered and finally settled, and that said defendant is barred from proceeding against such estates; that plaintiff corporation does not and has not offered to return the benefits it derived from such sale or to reimburse said defendant or said Hermann for improvements on said property.

Said answer then alleged that the sale to Hermann occurred in 1914, and that the sale to said defendant occurred in 1917, and that plaintiff corporation stood by and failed to complain and permitted third and innocent parties to invest their money on the strength of said transactions, and that plaintiff corporation's complaint now comes too late.

The reply was a general denial. All defendants, except Modoc Realty Company, made default. The evidence was largely uncontradicted and, in a general way, sustained the allegations of the petition. The questions presented are mostly questions of proper application of the law to the facts.

It appears that very few meetings of the board of trustees of the hospital were held prior to the death of Dr. Lutz. Those meetings were held in the first nine years after the hospital was incorporated and during the lifetime of testatrix. No meetings whatever were held from 1904 until after the death of Dr. Lutz in 1916. Vacancies in the board caused by death had not been filled. After the death of Dr. Lutz, substantial citizens of St. Louis were elected to fill the full quota of trustees. They authorized the bringing of this suit.

Except possibly Dr. Stoffel, who was an active assistant of Dr. Lutz, trustees, other than Dr. Lutz, apparently took no part in the management of the hospital and left everything to Dr. Lutz. The execution of the deed to Hermann by' Dr. Lutz as president, and attested by Dr. Stoffel as secretary, was not authorized by the board of trustees. Nor does it appear that any of the other trustees, except possibly Dr. Stoffel, knew that Dr. Lutz had made such deed. Even Dr. Stoffel testified he did not know he had attested any deed as secretary. Dr. Stoffel was treasurer and not secretary. Neither he nor Dr. Lutz had been elected annually, as the articles of association provided for, but they and the other officers held over year after year without re-election. The hospital apparently never adopted a seal. The seal affixed to the deed to Hermann bore the inscription: "Training School for Nurses. Josephine Hospital, Incorporated 1895."

It is suggested in the evidence that testatrix conceived the organization of the hospital and her gifts to it largely to establish a hospital for Dr. Lutz, who had been her physician and close friend for many years. Such seems to have been the idea of the other surviving trustees from 1904 until 1916. Their actions and conduct indicate that they regarded the hospital as nothing more nor less than a Lutz institution. They were apparently satisfied to permit him...