Central Bank of Kansas City v. Thayer

• Decision Date: 16 July 1904
• Citation: 82 S.W. 142,184 Mo. 61
• Parties: CENTRAL BANK OF KANSAS CITY et al. v. THAYER, Appellant
• Court: Missouri Supreme Court

82 S.W. 142

184 Mo. 61

CENTRAL BANK OF KANSAS CITY et al. v. THAYER, Appellant

Supreme Court of Missouri, Second Division

July 16, 1904

Appeal from Jackson Circuit Court. -- Hon. Edward P. Gates, Judge.

Affirmed.

L. C Boyle, I. N. Watson and W. W. Woods for appellant.

(1) "The rule appears to be well settled in the United States that a corporation may, unless prohibited by statute purchase its own stock, or take it in pledge or mortgage." Cook on Corporations, secs. 312, 314, 282; St. Louis Rawhide Co. v. Hill, 72 Mo.App. 148; Chitland v. Ins. Co., 86 Ill. 220; State v Smith, 48 Vt. 266; Williams v. Savage Mfg. Co., 3 Md. Ch. 418; Bank v. Bruce, 17 N.Y. 507; Bank v. Fox, 3 Blatchf. 431; Vail v. Hamilton, 85 N.Y. 453; Company v. Haven, 101 Mass. 398; Ralston v. Bank, 112 Cal. 218; Bank v. Wickarsham, 99 Cal. 635; Taylor v. Exporting Co., 6 Ohio 176; Clapp v. Peterson, 104 Ill. 26; Dupee v. Water Power Co., 114 Mass. 37; New England Tr. Co. v. Abbott, 162 Mass. 148; Railroad v. Marseilles, 84 Ill. 145; Bank v. Burch, 141 Ill. 519; Ins. Co. v. Swigart, 135 Ill. 150; Roan v. Winn, 93 Mo. 503; Morgan v. Lewis, 46 Ohio St. 1; Thompson v. Moxey, 47 N.J.Eq. 538; Blalock v. Mfg. Co., 64 Minn. 307; Cook on Corporations (4 Ed.), secs. 309-311; Thompson, Commentaries on Law of Corporations, secs. 2056 and 2068. (2) There was no evidence to support the finding by the referee that defendant abstracted the sum of $ 5,100 from the funds of the bank without the knowledge of the managing officers of the bank. The president of the bank was the only managing officer who denied knowledge of this transaction, and this, in the face of his sworn statements made to the Secretary of State, in which this stock is shown as an asset of the bank. (3) The transaction having occurred more than five years before the institution of any suit, is barred by the statutes of limitations, because the transaction was open, visible and unconcealed, and was put upon the books of the bank at the time the transaction occurred, and the books were open to the inspection of the officers and stockholders of the bank. Under these facts there was no concealment which would arrest the running of the statute of limitations. "It is an invariable rule that the fraud must have been one which was concealed from the plaintiffs by the defendant, or which was of such a character as necessarily implied concealment." 2 Wood on Limitations (2 Ed.), sec. 276, p. 712; Norris v. Haggin, 136 U.S. 386; Martin v. Smith, 1 Dillon 97; Black v. Black, 68 P. 666; 19 Am. and Eng. Ency. of Law, 251; Carr v. Hilton, 1 Curt. 230; S. C., 1 Curt. 399; Troup v. Smith, 20 Ill. 47; Loomis v. Railroad, 165 Mo. 469; Bent v. Priest, 86 Mo. 486. (4) The directors and officers of a bank are not trustees of an express trust, but an implied trust, or, more strictly speaking, they occupy the relation of principal and agent. Kane v. Bloodgood, 7 Johns. Ch. 90; Landis v. Saxton, 105 Mo. 486; Williams v. Hilliard, 38 N.J.Eq. 1; Cooper v. Hill, 94 F. 590; Hayden v. Thompson, 36 U. S. App. 362, 71 F. 69; Briggs v. Spalding, 141 U.S. 147; Spering's Appeal, 71 Pa. St. 11; Wallace v. Bank, 89 Tenn. 630 (15 S.W. 448); Hughes v. Brown, 88 Tenn. 578 (13 S.W. 286); Allen v. Curtis, 26 Conn. 456; Ryan v. Railroad, 21 Kan. 365; Commissioners v. Reynolds, 44 Ind. 509; Company v. Gibbs, L. R. 5 H. L. 480. (5) The statute of limitations runs against all implied trusts. Smith v. Records, 52 Mo. 581; Smith v. Watkins, 56 Mo. 564; Buren v. Buren, 79 Mo. 542; Bent v. Priest, 86 Mo. 486; Saxton v. Landis, 105 Mo. 486; Loomis v. Railroad, 165 Mo. 469; Callan v. Callan, 74 S.W. 968. (6) It has been ruled a number of times that the directors and officers of a corporation may interpose the statute of limitations when sued by the corporation to compel them to account for assets misappropriated by them, or to hold them liable for losses caused by their wrongful or unauthorized acts or by their negligence. Clark & Marshall on Corporations, sec. 755; Saxton v. Landis, 105 Mo. 486; Williams v. Hilliard, 38 N.J.Eq. 373; Hughes v. Brown, 88 Tenn. 590; Bank v. Wallace, 89 Tenn. 630; Cooper v. Hill, 94 F. 584; Priest v. Bentley, 86 Mo. 486; Spering's Appeal, 71 Pa. St. 11; Kane v. Bloodgood, 7 Johns. Ch. 90; Haydon v. Thompson, 71 F. 69; Watts' Appeal, 78 Pa. St. (7) The burden of proof rests upon the plaintiff to establish the exception pleaded in order to escape the defense of the statute of limitations. Mason v. Henry, 152 N.Y. 529; 2 Wood on Lim. (2 Ed.), 712; Woods v. Carpenter, 101 U.S. 140; Stearns v. Hague, 7 How. (U.S.) 819; Buckner & Stanton v. Calcote, 28 Miss. 432; Nutt v. Hamlin, 8 Allen 130; Darnold v. Simpson, 114 F. 368; School District v. Deweese, 93 F. 602; Shelby County v. Bragg, 135 Mo. 291; Callan v. Callan, 74 S.W. 968. (8) There was no evidence of any concealment in this case, and there were no facts found by the referee showing any concealment on the part of the defendant, but, on the contrary, the plaintiff's evidence itself shows that there was no concealment whatever of the transaction. (9) What amounts to discovery of fraud under our statute is fully stated in Martin v. Smith, 1 Dillon 98. See, also, Kitchen v. Railroad, 69 Mo. 224; Shelby County v. Bragg, 135 Mo. 291; Callan v. Callan, supra; Wood v. Carpenter, supra. (10) The court erred in refusing to permit Thayer to testify under what arrangements he purchased this stock in 1888, because the plaintiff had introduced his testimony taken in another case covering the very transaction in question, and having introduced that testimony waived the right to object to Thayer's testifying on the ground that Hamilton, the cashier, was dead. Tomlinson v. Ellison, 104 Mo. 105; Ess v. Griffith, 139 Mo. 329; In re Soulard, 141 Mo. 642; Borgess Inv. Co. v. Vette, 142 Mo. 571, 168 Mo. 99; Tierney v. Hannon, 81 Mo.App. 491. (11) The court erred in excluding the deposition of P. C. Cowling, taken in another case, because the exclusion was by the referee, and not by the court, and therefore was sufficient notice before the close of the case to allow plaintiff to meet the same if they desired.

Peak & Strother and Trimble & Braley for respondents.

(1) A bank, in the insolvent condition that this evidently was, had no authority in law to buy its own stock except for the purpose of realizing on a debt which could not otherwise be collected, or for the purpose of protecting itself against some such loss. 1 Thompson on Corporations, sec. 1107; 2 Thompson on Corporations, secs. 2054-2057; 3 Thompson on Corporations, sec. 3276. (2) The agency or trusteeship of the appellant was a general and a continuing one. No reports or settlements were made, demanded or expected during the continuance of his agency. The other officers of the bank were under no obligation to the appellant to examine the books of the bank to ascertain whether or not he, the appellant, had been perpetrating frauds upon the estate in his charge. The evidence shows, and the referee found, that the fraud was not known to the other officers of the bank and that no knowledge of any fact which would put them upon inquiry was brought home to them, and that the facts constituting the fraud were not discovered until after the appointment of the receiver. Under these circumstances the cause of action did not accrue and the statute of limitations did not begin to run until the receiver discovered the fraud. R. S. 1899, secs. 4271-4273; Hopkins v. Hopkins, 4 Strobhart's Eq. (S. C.) 213; Parris v. Cable, 5 Rich., Eq. (S. C.) 470; Patterson v. Lilly, 90 N.C. 82; Northcote v. Caspur, 6 Ired. Eq. (N. C.) 317; Davis v. Boydin, 123 N.C. 283 (31 S.E. 492); Ryan v. Railroad, 21 Kan. 404; Perry v. Smith, 31 Kan. 423; Guernsey v. Davis, 73 P. 101; Mechem on Agency, sec. 533; Moore v. Waco Bldg. Assn., 45 S.W. 977; Riddel v. Whitehill, 135 U.S. 621; Lawrence v. Sterns, 79 F. 884; Bank v. Wade, 84 F. 10; Morgan v. King, 63 P. 416; Ellis v. Ward, 25 N.E. 530; Foley v. Jones, 52 Mo. 67; Jones v. Bank, 76 N.W. 324. The Kansas statute is like ours. G. S. Kansas (Dassler), sec. 4446. (3) Under the Missouri statute of limitations it is not necessary that the plaintiff should prove a concealment of the fraud to prevent the statute from running, but it is necessary that the defendant should prove a discovery of the fraud in order to start the statute to running. R. S. 1899, secs. 4271, 4273. (4) The trial court did not err in refusing to permit Thayer to testify as to the arrangements that he claimed to have made with the bank at the time that he and Sponable paid the $ 5,100 into the bank, inasmuch as whatever arrangements he made, if any, were made with one Hamilton, the then cashier of the bank, who was dead at the time of the trial. It is well established that a party to a suit can not testify as to any contract or arrangement that he may have made with the opposite party who is dead, or, if the opposite party be a corporation, as in this case, he can not testify as to any arrangement or contract that he claims to have made with an agent or officer of such corporation who is dead at the time of the trial. Williams v. Edwards, 94 Mo. 447; McCormick Harvesting Machine Co. v. Heath, 65 Mo.App. 461; Nelson v. Railroad, 66 Mo.App. 647. (5) The respondents did nothing to waive the incompetency of the appellant as a witness to testify to an alleged arrangement or transaction had between him and one Hamilton, then cashier of the bank, but who was dead at the time that the appellant tried to testify as to such alleged transaction. (a) Respondents never took the deposition of the appellant in this case nor in any way called him as a witness. What the respondents did is this: They proved upon the trial certain declarations of the appellant made by him some nine years...