BancoKentucky Co. v. Weil

• Citation: 79 S.W.2d 977,258 Ky. 243
• Parties: BANCOKENTUCKY CO. v. WEIL et al.
• Decision Date: 05 March 1935
• Court: Kentucky Court of Appeals

79 S.W.2d 977

258 Ky. 243

BANCOKENTUCKY CO. v. WEIL et al.

Court of Appeals of Kentucky

March 5, 1935

Appeal from Circuit Court, McCracken County.

Suit by Jesse Weil and wife, against BancoKentucky Company and others. From an adverse judgment, named defendant appeals.

Reversed and remanded.

David R. Castleman, of Louisville, and J. D. Mocquot, of Paducah for appellant.

Wheeler Wheeler & Shelbourne, of Paducah, for appellees.

RATLIFF Justice.

In May 1930, the appellees, Jesse Weil and his wife, Vivien Weil, were the owners of 528 shares of the capital stock in the Mechanics' Trust & Savings Bank of Paducah, Ky.

Jesse Weil, acting for himself and as agent of his wife, in May, 1930, entered into negotiations with the appellant, BancoKentucky, a banking institution of Louisville, Ky. for an exchange of the stock owned by him and his wife in the Mechanics' Bank, for stock in BancoKentucky.

The trade was finally consummated in September, 1930. The ratio of exchange of stock was nine to one, and Weil received 4,252 shares of Banco stock for the 528 shares of stock in the Mechanics' Bank, and an exchange of stock certificates were made between the parties and the BancoKentucky stock was transferred on its books to Weil, but the Mechanics' Bank stock owned by Weil had not been transferred on the books of the Mechanics' Bank to BancoKentucky.

Soon thereafter, BancoKentucky suspended business on November 17, 1930, and on November 24, 1930, a receiver for the institution was appointed by the Jefferson circuit court, and all of its assets were placed in the hands of the court's receiver.

On the same day, November 24, 1930, Weil and his wife filed this suit in the McCracken circuit court, seeking a rescission of the trade by which they had disposed of their bank stock in exchange for stock in BancoKentucky.

For their cause of action against BancoKentucky, they alleged that they had been induced to make the exchange of stock by false and fraudulent representations as to BancoKentucky's relation to, and business connections with, Caldwell & Co., an investment house located at Nashville, Tenn.

Weil stated that he had heard rumors to the effect that BancoKentucky had acquired or was negotiating for an interest in Caldwell & Co.; that he had some knowledge of the business affairs of Caldwell & Co. and did not approve of the holdings of that company in certain localities and institutions, and was not favorably impressed with the idea of BancoKentucky acquiring any interest in Caldwell & Co., and so advised James B. Brown, president of BancoKentucky, and Brown told him that no trade had been consummated between his bank and Caldwell & Co., and that the negotiations pending between them would not be consummated until and when an audit of Caldwell & Co. had been made and it was ascertained that it was in good standing. Later, an announcement appeared in the press in the early part of June, to the effect that an agreement had been reached between BancoKentucky and Caldwell & Co., but he assumed that such transaction was subject to an audit as he had been informed by Mr. Brown. Later, from time to time, and before the trade was consummated, Weil had various conversations with Mr. Brown and Mr. Jones, vice president of BancoKentucky, and they both reaffirmed their previous statements made to Weil to the effect that no deal had been closed with Caldwell & Co., nor would be until a satisfactory audit was made. He alleged that as a matter of fact the trade between BancoKentucky and Caldwell & Co. had been finally consummated on May 29, 1930, and BancoKentucky had acquired several hundred thousand dollars interest in Caldwell & Co., and that Mr. Brown and Mr. Jones, president and vice president, respectively, of BancoKentucky, had concealed and misrepresented the relations between BancoKentucky and Caldwell & Co. for the fraudulent purpose of inducing him to exchange his stock in the Mechanics' Bank for stock in BancoKentucky; that the relations between BancoKentucky and Caldwell & Co. were the cause of the collapse of BancoKentucky resulting in rendering its stock worthless, which he had received in turn for his stock in the Mechanics' Bank, which was very valuable. Because of the alleged fraud, he asked that the transaction and said exchange of stock be adjudged void, and that he be restored his stock in the Mechanics' Bank, and the parties placed in status quo.

Weil joined as local defendants in his action the Mechanics' Bank and its officers, W. J. Pierce, president, and Eugene E. Bell, cashier, and, for his cause of action against these local defendants, he alleged that his stock in the Mechanics' Bank had not been transferred on the books to BancoKentucky, and that, unless enjoined and restrained by the court, the local defendants would complete the transaction by transferring plaintiffs' stock on the books of the Mechanics' Bank to BancoKentucky.

Immediately after the filing of the suit in the McCracken circuit court, summons was issued to Jefferson county for BancoKentucky, which was served on it on November 25, 1930, and at the same time a notice was served on BancoKentucky that on November 29th a motion for a temporary injunction would be made in McCracken circuit court. Counsel for BancoKentucky appeared at that hearing and made a special appearance protesting against the jurisdiction of the McCracken circuit court, and moved the court to quash the serving of the summons on BancoKentucky in Jefferson county. Its special plea to the jurisdiction of the court was as follows:

"Comes the defendant, The BancoKentucky Company, and enters its special appearance herein for the sole purpose of denying this Court's jurisdiction over it in this action and moves the Court to quash the service of the summons and notice upon it made in Jefferson County, Kentucky, on November 25, 1930, because:

"'1. This defendant's chief office and principal place of business in Kentucky is now and has been continuously since before the institution of this action in Jefferson County, Kentucky. It has had no office or place of business and has transacted no business at any time in McCracken County, Kentucky, and all its officers have at all of said times resided in said Jefferson County, Kentucky.

"'2. The alleged cause of action set up in the petition against this defendant is improperly joined with the alleged cause or causes of action set up against the other defendants herein and said other defendants are not proper or necessary parties to the determination of the alleged cause of action set up against this defendant and they are not affected by and have no real interest in the determination of the alleged rights of the plaintiffs set up against this defendant."'

The court overruled the motion and plea to the jurisdiction of the court, and by subsequent pleadings the issues were made and the proof taken, and the court entered judgment granting appellees the relief sought. Hence this appeal.

It is the contention of the appellant, Banco Kentucky, that this action is controlled by section 72 of the Civil Code of Practice, and that the Jefferson circuit court only was the proper venue of the action, and that the Mechancis' Bank and its officers were unnecessary parties to the action and were joined therein as local defendants in an attempt to give the McCracken circuit court jurisdiction.

It is the contention of Weil that the contract had not been performed and could not be performed without the transfer on the books of his stock in the Mechanics' Bank, and that the local (McCracken county) defendants were necessary parties to the action to forestall the consummation of the contract.

Section 72 of the Civil Code of Practice is cumulative to section 71, and the two sections must be read together. The latter part of section 71 provides: "*** Or, if it [action] arise out of a transaction with an agent of such corporation, it may be brought in the county in which such transaction took place." The latter part of section 72 provides: "*** Or, if it be upon a contract, in the above-named county, or in the county in which the contract is made or to be performed. ***" (Our italics.)

Weil relies upon the quoted provisions of the Civil Code of Practice, supra, and contends that the contract was to be finally consummated in McCracken county.

The questions to be determined are: (a) Whether or not the contract for the sale or exchange of stock had been consummated, or whether it was only in process of consummation, and whether the transfer upon the books of Weil's stock in the Mechanics' Bank was necessary to complete the contract; and (b) the county in which the contract was made and performed, or, if not performed, where to be performed.

(a) Sections 545 and 546, Kentucky Statutes, prescribes how shares of stock may be transferred on the books of a corporation, but the statute is only for...