Alexander v. Rollins

• Decision Date: 12 June 1883
• Citation: 14 Mo.App. 109
• Parties: A. E. ALEXANDER, RECEIVER, Appellant, v. JAMES S. ROLLINS ET AL., Respondents.
• Court: Missouri Court of Appeals

14 Mo.App. 109

A. E. ALEXANDER, RECEIVER, Appellant,

v.JAMES S. ROLLINS ET AL., Respondents.

St. Louis Court of Appeals, Missouri.

Jun. 12, 1883.

APPEAL from the St. Louis Circuit Court, THAYER, J.

Affirmed.

W. L. SCOTT and E. MCGINNIS, for the appellant: Stock notes of insurance companies are not negotiable.-- Stillwell v. Craig, 58 Mo. 24; Schultz v. Sutter, 3 Mo. App. 137; 1 Wag. Stats., p. 744, sects. 19, 20. And the indorsement of them by the corporation would be a nullity.-- Strauss v. Eagle Ins. Co., 5 Ohio St. 65; Story on Bills, sect. 79; Floyd's Acceptances, 7 Wall. 666. If such stock notes are negotiable, they are so only under statutory limitations.--1 Wag. Stats. p. 744, sects. 19, 20; Attorney-General v. Life and Fire Ins. Co., 9 Paige, 474; Smith v. Ale. Life Ins. Co., 4 Ala. 558; New York Fire Ins. Co. v. Ely, 2 Cow. 572; Strauss v. Eagle Ins. Co., 5 Ohio St. 65. A stockholder stands affected with notice of the proceedings of the board of directors of his company as they appear in the public records of the company.-- Bedford R. Co. v. Bowser, 48 Pa. St. 29; Kitchen v. St. L., K. & N. R. Co., 69 Mo. 226, 265; Whart. on Ev., sects. 661, 662, 1131. Payment of negotiable paper before maturity is out of the due course of business, and the payer is not protected by such payment to one who has wrongfully acquired the paper.--2 Ames on Bills and Notes, 823; Pars. on Notes and Bills, 212, 213; Chitty on Bills (11th ed.), 394 a; Story on Bills (7th ed.), sects. 417, 384, 386; Morley v. Culverwell, 7 Mees. & W. 174; Kingman v. Partee, 17 Mass. 274; Eckert v. Conmure, 43 Pa. St. 120; Griswold v. Davis, 31 Vt. 390; Goden v. Bank, etc., 6 Duer, 82.

J. B. HEISKELL, for the appellant.

OVERALL & JUDSON, for the respondent: “Stock notes” are negotiable in the hands of the corporation payee.-- Protection Ins. Co. v. Bibb, 31 Conn. 534; Ogdensburg R. Co. v. Wooley, 3 Abb. Dec. 398; Magee v. Badger, 30 Barb. 246; Clark v. Litcomb, 42 Barb. 122; White v. Haight, 16 N. Y. 310. “Unless expressly restrained by law a corporation may deal with its property in the same manner as an individual in prosecuting its legitimate business.”--Morawetz on Priv. Corp., sect. 164; Spear v. Ladd, 11 Mass. 95. In the total absence of proof of any wrongful combination between Rollins and Davis, or of any notice or ground of suspicion on part of Rollins, it is immaterial what was Davis' attitude to the company and it is unnecessary to discuss the several propositions of plaintiff with reference therto.-- Alexander v. Horner, 9 Cent. L. J. 111.

BAKEWELL, J., delivered the opinion of the court.

This was a bill in equity against James S. Rollins, George J. Davis, and the superintendent of the insurance department of Missouri in charge of the assets of the Life Association of America, to avoid a transaction by which Rollins obtained possession of certain stock notes and bonds, part of the assets of the Columbia Life Insurance Company. Judgment is asked against Rollins for the amount of the notes, which were made by him, and that he be required to deliver up the bonds.

The petition alleges that Davis acquired these assets by fraud, and fraudulently transferred them to Rollins, in furtherance of a conspiracy between Davis, the Life Association, and A. M. Britton, of which Rollins had notice, to release the stockholders of the Columbia (once called the St. Louis Life Association), and to effect a merger of that company with the Life Association of America by means of a transfer of all the stock of the former to the latter company, which was then to reorganize, directors of the Life Association being first chosen directors of the Columbia for that purpose.

Before any answers were filed, plaintiff dismissed as to the Life Association. Davis filed a general denial. Rollins, after a general denial, sets up that he sold his stock to Davis in good faith, and received his stock notes in part payment in good faith; that the St. Louis Life (afterwards Columbia), afterwards ratified this proceeding; that the receiver of the Columbia, with the full knowledge of all the facts, also ratified the transfer, and has placed it out of his power to rescind and place the parties in statu quo; that the stock of the Columbia was at par when Rollins sold, and is now worthless, etc.

On hearing, plaintiff's petition was dismissed. The matters in controversy have been repeatedly before this court in the progress of the complicated litigations growing out of these transactions. Especially the matters in evidence in this case were before this court in Alexander v. Relfe (9 Mo. App. 133), and in Alexander v. Supe et al. (11 Mo. App. 597). Besides a great deal of viva voce testimony, the whole record of this court and of the supreme court in Alexander v. Relfe ( supra), was put in evidence on this trial. The testimony is, of course, very voluminous. The sum of it, so far as it is material for the purpose of this appeal, is as follows:--

The St. Louis Life Insurance Company was first called the Mound City Mutual Life Insurance Company; it changed its name repeatedly. Its last name was the Columbia, and by that name, to avoid confusion, it will be called in this opinion.

It appears that defendant, Rollins, whose residence was throughout at Columbia, Missouri, subscribed, in December, 1873, for one hundred shares of the capital stock of the Columbia, of the par of $100. At the same time, Rollins borrowed of the Columbia $10,000, for which he delivered his two notes, one for $1,500 at one year, and the other for $8,500 at three years, and delivered as collateral, eleven Missouri State bonds of $1,000 each. Rollins paid for his stock with the money thus borrowed. The notes remained in the possession of the Columbia until December 10,1875, and were unpaid, except as to $1,000 credited in April, 1875, on the $1,500 note.

On November 23, 1875, the Life Association of America entered into an agreement with defendant Davis to purchase from him nine thousand four hundred shares of the capital stock of the Columbia, and as many more shares as Davis could deliver within thirty days. With the stock, Davis was to deliver stocks and securities owned by the Columbia, of which a list was attached to the contract. For the nine thousand four hundred shares and the securities, Davis was to receive $1,215,000, and for all other shares, he was to receive par. Ninety per cent of this was to be paid to Davis by a draft of Hough, its president, on the Life Association, accepted by it at one day's sight. The remainder was to be paid cash, on delivery of the stock and securities. This agreement was made in pursuance of a resolution of the directors of the Life Association, of date November 13, 1875. The assets to be transferred were largely stock notes and capital investment notes secured, as the insurance law required, by collaterals and real estate. The Rollins notes were amongst them. Davis, Britton, and Lomax were then directors of the Columbia; Lomax was its secretary; Britton was its vice-president, acting as president; Davis was the regular salaried attorney of the Columbia. The company had a lien on the stock for any indebtedness due it by the stockholders. Davis was to deliver the stock free from lien. Davis tendered his resignation as director on November 26th. It was accepted four days afterwards. Lomax and Britton retained their positions until the transactions were accomplished. Having made the above contract with the Life Association and resigned as director of the Columbia, Davis made a proposition to the Columbia to buy of it the property mentioned in his contract with the Life Association, at the price he had proposed. The minutes of the board of directors of the Columbia, show these proceedings on November 30, 1875.

Mr. Davis then submitted a list of securities belonging to the company which he desired to purchase, the price being satisfactory, and for payment of which he would give the draft of H. W. Hough, president, on the Life Association to the order of Davis at one day's sight and accepted by said Life Association. After an examination of the list and full discussion thereof, the following resolution, offered by Mr. Bogy, was adopted:--

“ Resolved, That the vice-president be authorized to sell and deliver to George J. Davis the following securities, or any one or all of said securities, at the price named in the list hereto appended, and that the vice-president be authorized to receive in payment for said securities, so sold and delivered, the draft of W. H. Hough, president, drawn at one day's sight to the order of George J. Davis and by him indorsed to the Life Association of America and by said Association accepted.”

The list of securities mentioned in the contract, with prices aggregating $1,111,898.34, follows. The notes of Rollins are included, and they were afterwards duly indorsed by the Columbia and delivered to Davis. Davis complied with his contract, and received in payment, on December 10, 1875, from Britton, as acting president of the Columbia, the draft of the Life Association for $1,111,898.34 to Davis' order. This draft Davis indorsed without recourse and delivered to the Columbia on December 10th, on which day the minutes of that company show that the president informed the board that Davis had tendered to him the draft as specified in the resolutions on the 30th, and that, in accordance with those resolutions, he had sold and delivered the securities. The directory of the Columbia then resigned, and the Life Association, holding all its stock, elected a directory composed of persons who had been directors of the Columbia. Besides the Rollins notes, there were, amongst the assets transferred, notes of the firm of which Davis was a member, of Lomax, and of Britton. These persons all got back their notes from Davis in exchange for their stock, as did the other stockholders of the Columbia. As soon as Davis had possession of the assets of the Columbia, he set...