Berger v. Mercantile Trust Co., 48567

• Decision Date: 11 December 1961
• Docket Number: No. 1,No. 48567,48567,1
• Citation: 352 S.W.2d 644
• Parties: Alex BERGER, Jr. et al., Plaintiffs-Appellants, v. MERCANTILE TRUST COMPANY, a Corporation et al., Defendants-Respondents
• Court: Missouri Supreme Court

Page 644

352 S.W.2d 644

Alex BERGER, Jr. et al., Plaintiffs-Appellants, v. MERCANTILE TRUST COMPANY, a Corporation et al Defendants-Respondents.

No. 48567.

Supreme Court of Missouri, Division No. 1.

Dec. 11, 1961.

Motion for Rehearing or to Transfer to Court en Banc Denied

Jan. 8, 1962.

J. Marvin Krause, St. Louis, Nouss, Bamburg & Gaebe and Harold B. Bamburg, Clayton, for appellants.

Thompson, Mitchell, Douglas & Neill, James M. Douglas, Robert Neill, William G. Guerri, St. Louis, for respondents.

HOLMAN, Commissioner.

In this class action plaintiffs, as owners of certificates of beneficial interest in a certain trust, sought (in the first count of their petition) to recover all of the stock of Mercantile-Commerce National Bank in St. Louis (hereinafter referred to as 'National Bank'). In the second count they alternatively sought to recover damages for breach of trust in the sum of $3,638,323.57 from certain individual trustees of a 1934 trust. A third count of the petition will not be further referred to as, for the purposes of this appeal, we regard it substantially the same as Count I. A trial resulted in a judgment for defendants upon all counts. Plaintiffs have duly appealed.

This is the second case to reach this court involving the rights of owners of certificates of beneficial interest in the trust hereinafter described. The main controversy in the first case related to the amount required to be paid by Mercantile-Commerce Bank & Trust Company, now Mercantile Trust Company (each hereinafter referred to as 'Trust Company'), to the trustees as the purchase price of the stock of National Bank upon the exercise of the option to purchase said stock which was contained in the trust agreement dated June 11, 1934. In disposing of the appeal in that case we held that said trust company should have paid the trustees $76,132.67 more than had been paid. Moser v. Keller, Mo.Sup., 303 S.W.2d 135.

The individual plaintiffs in the first case were Byron Moser and Rosa Cerf Berger. They sued for themselves and in behalf of all other persons holding certificates of beneficial interest in the trust estate. The plaintiffs in the present case are Byron Moser and Alex Berger, Jr. (the son of Rosa Cerf Berger). They also sue for themselves and as representatives of the other beneficiaries of the said trust estate.

The factual background which formed the basis of the plaintiffs' claims in each case is stated in the opinion of this court in the first case as follows (303 S.W.2d 136, 137, 139):

'In 1929 two St. Louis banks consolidated. The Mercantile Trust Company and the National Bank of Commerce formed the Mercantile-Commerce Bank and Trust Company. The charter of the National Bank of Commerce was retained to facilitate the transfer of fiduciary duties to the new bank. The capital of the National Bank of Commerce was reduced to $350,000, consisting of 3,500 shares of $100 par value stock and a surplus of $75,000. The Mercantile-Commerce Bank and Trust Company owned all of that stock. In August 1930, the Mercantile-Commerce Bank and Trust Company opened a subsidiary bank in midtown St. Louis under the retained charter of the National Bank of Commerce and changed the name of the new bank to the Mercantile-Commerce National Bank in St. Louis (hereinafter referred to as 'National Bank').

'In 1933 the board of governors of the Federal Reserve System directed Mercantile-Commerce Bank and Trust Company (that bank and its successor, Mercantile Trust Company, will be hereinafter referred to as 'Trust Company') to divest itself of the ownership of the shares of stock of National Bank. As a result, and contrary to the contention of Trust Company as to the legality of its ownership of the stock of, and the operation of, National Bank, Trust Company complied with that order to the extent herein described. On June 11, 1934, Trust Company entered into a trust agreement whereby it transferred title to the 3,500 shares of National Bank's stock to five trustees. Those five trustees were directors of the Trust Company. They continued as such trustees until the termination of the trust. They are named in the caption hereof, although, since this appeal, two of them died and their respective executors were substituted.

'Pursuant to the terms of the trust, the trustees issued to Trust Company 100,000 certificates of shares of beneficial interest in the trust estate. Trust Company in turn declared a dividend in kind on its 100,000 outstanding shares of stock whereby each of its shareholders received one such certificate for each share of stock. The trust instrument provided that the owners of certificates would, upon distribution of the trust estate, be entitled to one one-hundred-thousandth of the corpus for each certificate he held. The certificates as issued referred to the fact that the trust agreement was on file with Trust Company as agent for the trustees and to the fact that the trust agreement was made a part of the certificate. The certificates were negotiable and were traded in over-the-counter transactions so that at the trust's termination they were held by 2,205 persons residing in a widespread geographical area.

'By Article V of the trust agreement, the trustees gave Trust Company an irrevocable option to purchase from trustees all or any part of the stock of National Bank at any time prior to the termination of the trust which, except for such option termination, was to end on June 11, 1954. On June 6, 1951, Trust Company exercised its option and on that same date gave trustees the 30-days' notice thereof as provided for in the trust instrument. Pursuant to that notice, the trustees met on June 6 and entered into a written agreement for the sale of the stock to Trust Company.

'Article V of the trust agreement provided a method for determining the price which Trust Company was to pay for the National Bank stock in the event it exercised its purchase option. That provision with respect to price (which, as will appear, is the basis of the controversy in this case) was: 'The price to be paid by said Trust Company upon the exercise of such option shall be the took value of the shares of stock so purchased as of the date of the exercise of the option. * * *' * * *

'On June 22, 1951, the trustees voted to then distribute to the holders of the certificates for shares of beneficial interest $12 for each such share, to distribute any balance as soon as practicable after July 6, 1951 * * *.

'The trustees and the Trust Company accepted the adjusted book value approved by Price, Waterhouse & Company of $1,767,829.76 as the total price to be paid for the stock. The trustees, after approving expenses incurred in the sum of $6,422.90, voted to distribute the additional cash received, either by a first and final payment of $17.614 to the certificate holders who had not theretofore received the $12 partial distribution, or by a second and final payment of $5.614 per share to those who had received the $12 partial distribution.'

The day after the exercise of the option, Trust Company transferred the National Bank stock to Mercantile-Commerce Company, its wholly owned subsidiary. On June 14, 1951, Trust Company transferred all of the stock of Mercantile-Commerce Company to Hord Hardin et al. as trustees for the stockholders, from time to time, of Trust Company.

The defendants in the instant case are Mercantile Trust Company, Mercantile-Commerce Company, three of the trustees (or the executors of their estates) of the 1934 trust, and the various trustees of the stock of Mercantile-Commerce Company.

The first suit was filed on August 31, 1951, and was terminated with the entry of a final judgment on June 27, 1957, in accordance with our mandate. The present case was filed on June 4, 1956, while the first case was pending on appeal.

Upon this appeal plaintiffs contend that the trial court should have entered a judgment in their favor on the first count because the option contained in the 1934 trust agreement was void and Trust Company was not entitled to enforce it. Their main reasons for contending that the option was void are (1) that it violated the federal laws prohibiting the purchase of corporate stocks by banks (see 12 U.S.C.A. Secs. 24, 335); (2) violated Sec. 362.105(1), RSMo 1959, V.A.M.S., which provides that '* * * no bank shall maintain in this state a branch bank * * *'; and (3) because it was contrary to the public policy of the United States and the State of Missouri.

Defendants here contend that the option agreement was valid and that the reasons advanced by plaintiffs in asserting that it was void are all unsound. Primarily, however, defendants rely upon their pleaded affirmative defense that plaintiffs made an irrevocable election of remedies in suing for and recovering the book value of the stock pursuant to the option and therefore cannot maintain this inconsistent action seeking the return of the stock or damages for breach of the trust.

We are of the opinion that the defense of election of remedies is applicable in this case and that plaintiffs are therefore precluded from maintaining this action. 'Election is simply what the term imports--a choice shown by an overt act between two or more inconsistent rights, either of which may be asserted at the will of the chooser alone. * * * The doctrine is applicable where an aggrieved party has two remedies by which he may enforce inconsistent rights growing out of the same transaction and, being cognizant of his legal rights and of such facts as will enable him to make an intelligent choice, brings his action by one of the methods. Under such circumstances, the law says he shall not thereafter adopt the alternate remedy, for a suitor cannot pursue a remedy which predicates his case upon one theory of right and thereafter seek a remedy inconsistent with such prior proceeding.' 18 Am.Jur., Election of Remedies, Sec. 3, pp. 129, 130. 'Although mere institution...