Becker v. Tower Nat. Life Inv. Co.
| Decision Date | 12 September 1966 |
| Docket Number | No. 51213,No. 2,51213,2 |
| Citation | 406 S.W.2d 553 |
| Parties | Floyd BECKER, J. R. Baker, and St. Francois County, Missouri, Plaintiffs- Appellants, v. TOWER NATIONAL LIFE INVESTMENT COMPANY, a Corporation, Defendant-Respondent |
| Court | Missouri Supreme Court |
Roberts & Roberts, by Raymond R. Roberts, Farmington, for appellant, Floyd Becker.
Daniel, Clampett, Ellis, Rittershouse & Dalton, William A. R. Dalton, Springfield, for respondent, Tower Nat. Life Investment Co.
Plaintiff Becker brought suit in two counts based on a subscription agreement for the purchase by him of 2,000 shares of stock in defendant Tower National Life Investment Company, herein referred to as Tower Investment. The suit alternatively sought issuance of 2,000 shares of stock or $40,000, the alleged value thereof. The case was tried without a jury. The trial court held that the subscription agreement submitted by Becker was rejected by Tower Investment and denied recovery to Becker on either count. The court's decree provided for return of the original payment made by Becker at the time he submitted the subscription agreement, but directed that it be paid to plaintiff Baker who had been brought in by the interpleader proceeding. 1 Only Becker filed a motion for new trial and he appealed after it was overruled.
The primary question for determination is whether the subscription agreement for 2,000 shares was accepted by Tower Investment, as Becker contends, or whether it was rejected, as the trial court held. In a jury-waived case we review de novo and reach our own conclusion. Schmitt v. Pierce, Mo., 344 S.W.2d 120.
Tower Investment was organized as a Missouri corporation on April 12, 1963. Thereafter it caused to be organized on September 23, 1963, a Missouri insurance company named Tower National Life Insurance Company, herein sometimes referred to as Insurance Company. Tower Investment issued a prospectus offering for sale to residents of Missouri 950,000 shares of its stock at $2.00 per share. After payment of specified commissions and expenses, the funds were to be used by Tower Investment for the purchase of all the stock in Insurance Company. Attached to the prospectus was a printed form of subscription agreement to be used by prospective purchasers. The signed subscription agreement, accompanied by a remittance for the stock sought to be purchased, was to be submitted to Tower Investment. The subscription agreement included a provision reciting that it and the prospectus 'contain the entire agreement between the subscriber and the corporation.'
On December 20, 1963, at Farmington, Missouri, Becker executed and delivered to Frank Wolf, an authorized agent of Tower Investment, a subscription agreement for 2,000 shares of Tower Investment stock for $4,000. 2 A check for $4,000 was delivered to Agent Wolf by Becker. Wolf signed the subscription agreement as licensed agent of the company and transmitted it and the $4,000 check to the Home Office of Tower Investment at Springfield, Missouri. Subsequently, Becker's check was deposited by Tower Investment in an escrow account in the Citizens Bank at Springfield, and the check was paid on presentation to the bank on which drawn.
Tower Investment issued no stock to Becker and it contends that the subscription agreement submitted by Becker was rejected by a letter to Becker dated January 31, 1964. That letter read as follows:
'We have your subscription request for 2,000 shares of Tower National Life Investment stock. We had a letter from the Attorney General of Missouri asking that we not issue this stock. A copy of his letter is enclosed.
'As you have been informed the stock issue was completed and since the Attorney General had requested that we not issue said stock to you, it was necessary that we not accept your subscription so that the stock offering could be completed in full. Therefore, your $4,000 is being held by the Citizens Bank of Springfield in a suspense account waiting for the Attorney General or the court. This matter is being handled by our law firm, Walker, Daniel, Clampett, Rittershouse & Ellis.
Yours very truly,
TOWER NATIONAL LIFE
INSURANCE CO.
(Signed) Paul H. Power
Chief Executive Officer.' 3
No evidence was offered of any earlier communication, either written or oral, from Tower Investment to Becker.
Becker contends that the letter of January 31 was not effective as a rejection of the subscription agreement because (1) Tower Investment by its prior course of action already had accepted the subscription agreement, and (2) the alleged rejection asserted was not in accordance with the provisions of the subscription agreement in that the purported letter of rejection was not from Tower Investment (it was from Insurance Company, not a party to the agreement) and the monies paid by Becker were not refunded as required by the provisions of the subscription agreement in the event of rejection.
It is clear that Tower Investment expressly retained a right to reject a subscription agreement submitted to it. The subscription form provided that 'The company may reject this application by refunding all monies paid hereon.' Furthermore, the prospectus was clear that acceptance was necessary for the agreement to be complete. Under the heading 'Manner of Sale' it provided, 'Sale is effected by the execution of the form subscription agreement when accompanied by a check, draft or money order and accepted by the Company.' Prior to acceptance, the subscription agreement was merely an offer to buy stock. Consequently, our first question must be whether Tower Investment did in fact accept the subscription. If it did, a binding contract with necessary mutuality was created and the company could not reject the subscription at a later date without the consent of the subscriber.
We have concluded that the Becker subscription agreement was accepted by Tower Investment prior to its letter of rejection to Becker dated January 31, 1964. There was no express written acceptance communicated to Becker, but the course of conduct of Tower Investment, considered in the light of the provisions of the prospectus and the ancillary escrow agreement, shows an acceptance. The law recognizes that a proposal may be accepted in this manner. 'A subscription need not be accepted by the corporation in any particular way, unless this is required by the charter or statute, or expressly or impliedly by the subscription itself, but may be inferred by the conduct of the corporation in entering it in its books, retaining it, demanding payment, or otherwise acting upon it.' Fletcher, Cyc. Corp. (Perm.Ed.), Vol. 4, § 1406.
The prospectus provided for an 'escrow bank' which was to be the Citizens Bank of Springfield, Missouri. An escrow agreement dated September 24, 1963, was executed by Tower Investment, the Citizens Bank and the Commissioner of Securities for the State of Missouri. 4 The Citizens Bank did act as escrow agent in connection with the sale of stock pursuant to the prospectus and the Becker check was deposited in that account.
The prospectus, under the heading 'Duties of Escrow Agent,' provided that 'All funds received by the company as a result of the sale of shares under this offering shall be placed in escrow and handled in the manner hereinafter set forth.' It goes on to provide that 'When funds received from the sale of stock under this offering reach $1,000,000.00,' the escrow agent shall disburse specified sums to cover commissions and expenses, and, after the entire proceeds of the sale of stock have been deposited, complete the purchase of the stock of Insurance Company. These provisions refer only to proceeds from the sale of stock. There is no provision for deposit in this escrow account of subscribers' remittances pending acceptance, and no provision authorizing withdrawal of funds from the escrow account for the purpose of refunding to subscribers if their subscription is rejected. 5
This interpretation of the language of the prospectus is confirmed by language used in the escrow agreement entered into between Tower Investment, the Citizens Bank and the Commissioner of Securities. Paragraph 1 provides that funds received 'upon the execution of the sale of shares of stock' shall be deposited. Subparagraphs (a) and (b) relate solely to the handling of funds received from the sale of stock. Subparagraph (c) provides for temporary investment of funds in the hands of the escrow bank, a provision not likely to be intended for funds belonging to a subscriber whose offer to buy has not been accepted. Paragraph 2 provides that Tower Investment, simultaneously with acceptance of a subscriber's subscription agreement and the tender of funds, shall deliver those funds to the escrow bank along with certain other data for its records.
Tower Investment makes the point that the subscription agreement and the prospectus constituted the entire agreement between the company and Becker, and that the latter's rights thereunder may not be changed or enlarged by the escrow agreement, to which he was not a party. We agree. This does not mean, however, that we may not look to the provisions of the escrow agreement for assistance in construing the language of the prospectus and interpreting the conduct of Tower Investment in depositing the check in the escrow account. The provisions of the escrow agreement clearly indicate that Tower Investment and the Commissioner of Securities interpreted the language of the prospectus as contemplating that only proceeds from accepted subscriptions were to be deposited in the escrow bank, this to be done as and when the subscriptions were accepted. Consequently, we must conclude that Tower Investment knew when it deposited the Becker check in the escrow bank that the funds were committed to the uses and purposes specified in the prospectus, and that...
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