Seigle v. First Nat. Co.

• Decision Date: 07 February 1936
• Docket Number: 34521-34525
• Citation: 90 S.W.2d 776,338 Mo. 417
• Parties: M. Lazarus Seigle and Sarah Seigle, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. M. Lazarus Seigle and Cecelia Seigle, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. M. Herman and R. Sidney Herman, Trustees for Marcus Herman, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. Hallie Herman and M. Herman, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. Clara Schnepf and New Era Shirt Company, a Corporation, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee
• Court: Missouri Supreme Court

90 S.W.2d 776

338 Mo. 417

M. Lazarus Seigle and Sarah Seigle, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. M. Lazarus Seigle and Cecelia Seigle, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. M. Herman and R. Sidney Herman, Trustees for Marcus Herman, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. Hallie Herman and M. Herman, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee. Clara Schnepf and New Era Shirt Company, a Corporation, Appellants, v. First National Co., a Corporation; First National Bank in St. Louis, Trustee, and Henry S. Caulfield, Cotrustee

Nos. 34521-34525

Supreme Court of Missouri

February 7, 1936

Motion for Rehearing Overruled February 7, 1936.

Appeal from Circuit Court of City of St. Louis; Hon. M. G Baron, Judge.

Reversed and remanded (with directions to the trial court to modify its decree).

Hyman G. Stein for M. Lazarus, Sarah and Cecelia Seigle Samuel I. Sievers for M. Herman, R. Sidney Herman and Hallie Herman; Greensfelder & Grand for Clara Schnepf and New Era Shirt Company.

(1) The order, judgment and decree of May 2, 1935, and from which these appeals are taken, is in conflict with, and in contravention of, and attempts to set aside and vacate parts of, and to amend and nullify, the prior judgment and decree entered in the same cause, at a prior term, on July 24, 1933 and therefore, was and is, void, and in excess of the jurisdiction of the court below. State ex rel. Maple v Mulloy, 15 S.W.2d 813. (2) The trust indenture of January 3, 1922, under which the securities in question were deposited with, and are held by First National Bank of St. Louis, as trustee, provides for the sale of such securities in the event of the default by First National Company, of its obligation to pay interest on, or repurchase participation certificates, and no power is conferred on the trustee to pledge or mortgage such securities, and, therefore, the trustee and cotrustee are without power to do so. A court can no more authorize the pledge or mortgage of trust funds, or assets, when the same is in excess of the powers conferred by the trust indenture, than can the trustees therein, do such act. Loud v. Union Trust Co., 313 Mo. 596; First Natl. Bank v. Natl. Broadway Bank, 156 N.Y. 471; Perry on Trusts, sec. 768; Tuttle v. First Natl. Bank of Greenfield, 187 Mass. 535; Price v. Courtney, 87 Mo. 387; Drake v. Crane, 127 Mo. 102; Jamison v. McWhorter, 31 A. 518. (3) The power to pledge or mortgage a trust estate, is not included in a power conferred by the trust indenture upon trustees therein named, to sell the assets of the trust estate. Authorities under point 2. (4) The provision in the trust indenture that the securities held by the bank should not be sold for less than the par value thereof, plus accrued interest, if the bank should decide to sell the same at private sale, rather than at public sale, is an express restriction against, and forbiddance of, the pledge of such securities, which have a face value in excess of $ 9,000,000 as collateral security for a loan of $ 4,403,075.82. (5) The order, judgment and decree of May 2, 1935, in providing that reconstruction finance corporation shall have absolute power and authority to liquidate the securities without order or approval of court or other authority, as fully as though it were the owner of such securities and to compromise, realize or surrender, all or any part thereof, is an attempt by the court below to confer upon Reconstruction Finance Corporation, powers and authority which are not conferred or authorized by the trust indenture, and is, therefore, in violation of, and contrary to, such trust indenture, which is a part of the contracts held and owned by appellants and other participation holders, and is in excess of the court's jurisdiction. While a court may, under certain circumstances, construe a trust indenture, or define the powers of the trustee, it has no authority, or jurisdiction to change the trust indenture, or to confer upon the trustee, or any other person, powers which are not conferred, or authorized by the trust indenture. Drake v. Crane, 127 Mo. 102. (6) The securities were deposited with, and are held by, First National Bank in St. Louis, as trustee, for the express purpose of protecting and securing participation certificate holders, in the event of any default by First National Company, in its obligation to pay interest on, and repurchase such certificates. The trust indenture expressly provides that in the event of any such default, the securities shall be sold at public sale, or providing the price obtained is not less than par, plus accrued interest, at private sale. First National Company has defaulted in its said obligations, and yet the order, judgment and decree appealed from, authorizes and directs that the securities shall be pledged for a loan to be obtained by first national company. Therefore, the court below was without right, authority or jurisdiction to direct and authorize that such securities be pledged in order to assist First National Company, the defaulting obligator and debtor, to obtain a loan. Particularly is this true since the purpose of such loan is to pay to the participation holders, only a part of the amount due them. (7) The trust indenture of January 3, 1922, is part and parcel of the contracts held and owned by appellants and other participation holders, and the participation certificates expressly so provide. Accordingly, the participation certificates, together with said trust indenture, constitute the whole contract between the participation certificate holders, First National Bank in St. Louis, and First National Company. There is no wide discretion vested in the chancellor which permits him to disturb contract rights -- rights of property. Coriell v. Morris White, Inc., 54 F.2d 260; Kneeland v. Am. Loan Co., 136 U.S. 89; Gay v. Hudson Elec. Co., 184 F. 689; Odell v. Batterman, 223 F. 292; Merchants Loan & Trust Co. v. Chicago Rys. Co., 158 F. 927. (8) The order, judgment and decree of May 2, 1935, operates to compel the participation holders to suspend the filing of any action upon their participations, until the Statute of Limitations may have run, and to permit the pledge of the securities in question, and to subject the participation holders to the danger of such securities being sold at foreclosure to their great loss and damage. The participation certificates owned by these appellants are their private property, and private property cannot, without the owners' consent, be taken for private use, by any majority, however great, nor by the payment of any price, however large. Doe Run Lead Company v. Maynard, 283 Mo. 679; Muhlker v. Harlem Railroad Co., 197 U.S. 570; In re Flukes, 157 Mo. 131; Natl. Bank of Commerce v. Francis, 296 Mo. 200; Trust Co. v. Stormfeltz Lovely Co., 257 Mich. 664; Gilfillan v. Union Canal Co., 109 U.S. 404; Coriell v. Morris White, Inc., 54 F.2d 258; Merchants Loan & Trust Co. v. Rys. Co., 158 F. 927; Fidelity B. & L. Assn. v. Thompson, 45 S.W.2d 170; Fidelity B. & L. Assn. v. Thompson, 51 S.W. (2) 578.

Bryan, Williams, Cave & McPheeters for First National Company.

(1) Each of the original actions was instituted as a class suit that is to say, that each of the consolidated actions was professedly begun by the respective plaintiffs for the benefit of all holders of participations who were so numerous as to make it impracticable to make them all parties. Each of the consolidated actions proceeded against the bank as the holder of the trust assets, alleging that the plaintiffs were representatives of the participation holders as a class, and asked the court to take jurisdiction of the trust assets for the benefit of all holders of participations. The interest of the participation holders was and is common and the consolidated cause was and is a proper class suit, and the decree of July 24, 1933, became binding upon all holders of participations in the same way that it would have if all such holders were in fact before the court. 47 C. J., p. 40, sec. 79; Smith v. Swormstedt, 16 How. 303; Richmond v. Irons, 121 U.S. 52; Wallace v. Adams, 204 U.S. 425; Hartford Life Ins. Co. v. Ibs, 237 U.S. 672; Hartford Life Ins. Co. v. Barber, 245 U.S. 149; McClelland v. Rose, 247 F. 723; Wabash Ry. Co. v. Koenig, 274 F. 911; Wheelock v. First Presbyterian Church, 51 P. 842; Whiting v. Elmira Industrial Assn., 61 N.Y.S. 27; Harvey v. Lord, 10 F. 236; Gamble v. San Diego, 79 F. 499; Shepherd v. Towgood, Turner & Russell 379, 37 Eng. Reprint 1152; Dukeman v. Beisley, 250 Ill.App. 537; Powell v. Joplin, 73 S.W.2d 408. (2) The First National Company was, according to the evidence, insolvent and the assets forming the trust estate cannot be sold, according to the findings of the decree below, either at public or private sale, as provided in the trust agreement, without unthinkable sacrifices. The provisions of the agreement of January 3, 1922, cannot, therefore, be carried out without great detriment to the beneficiaries. Now, while it is unquestionably true that a court may not relieve a solvent party from the full obligations of his contract, or in anywise change such contract, nevertheless when a court of equity has taken charge of the assets of an insolvent corporation it not only may, but will, if the equities of the parties require, refuse to sell those assets -- where such a sale would sacrifice their value -- and may and will give, or offer, to the creditors or other...