Donnelly v. Missourilincoln Trust Company

• Decision Date: 06 February 1912
• Citation: 144 S.W. 388,239 Mo. 370
• Parties: JOHN C. DONNELLY, Appellant, v. MISSOURILINCOLN TRUST COMPANY, Appellant
• Court: Missouri Supreme Court

144 S.W. 388

239 Mo. 370

JOHN C. DONNELLY, Appellant, v. MISSOURILINCOLN TRUST COMPANY, Appellant

Supreme Court of Missouri, Second Division

February 6, 1912

Appeal from St. Louis City Circuit Court. -- Hon. George H. Shields Judge.

Reversed and remanded (with directions).

Willis Baldwin, E. O. Grosvenor and Eliot, Chaplin, Blayney & Bedal for plaintiff appellant.

(1) The contract of June 15 was fraudulent as to prospective purchasers. This contract contemplated turning over property to the corporation by the promoters, at a sum of two or three times its actual cost, without disclosing its real cost to the purchasers of bonds and stock. Cook on Corp. (4 Ed.) sec. 651; Line Co. v. Case, 104 Mo. 572; Melendy v. Keen, 89 Ill. 395; Zang v. Adams, 23 Col 408; Tyler v. Savage, 143 U.S. 79; Vreeland v. Stove Co., 29 N.J.Eq. 195; Ramsey v. Manufacturing Co., 116 Mo 330; Hornblower v. Crandall, 78 Mo. 581. (2) The Baryta Company was the agent of the Trust Company in selling plaintiff his bonds; and the Trust Company is personally liable for the false statements of its agents. Cook on Corp. (5 Ed.), sec. 143; Phipps v. Commission Co., 105 Mo.App. 67; Railroad v. Mathews, 77 Ala. 365; Dunn v. White, 63 Mo. 185; Clinkerbaum v. Weatherman, 157 Mo. 112. (3) Plaintiff's subscription contract constituted an equitable mortgage in his favor. Both the contracts of June 15, between Robinson and the Trust Company, and the subscription contract of June 17, were contracts to give a mortgage in the future to secure present payments. An agreement to give a mortgage in the future is given effect in a court of equity as an equitable mortgage. Canal Co. v. Vallette, 21 Howe, 422; Elevator Co. v. Meader, 72 F. 115; Howard v. Delgardo & Co., 121 F. 26; Hackett v. Watts, 138 Mo. 592; Carter v. Holman, 60 Mo. 498; Blackburn v. Tweedie, 60 Mo. 505; Martin v. Nixon, 92 Mo. 26; Sprague v. Cochrane, 114 N.Y. 104; Walker v. Brown, 165 U.S. 606; Carter v. Hollman, 60 Mo. 498; McQuie v. Peap, 58 Mo. 58. (4) The Trust Company is not entitled to participate in the equitable mortgage for two reasons: 1. Because it should be held personally liable, as pointed out in point two; 2. Because it has voluntarily released any rights it may have had in an equitable mortgage by taking a different mortgage than the one contracted to be given. Coyle v. Dairs, 20 Wis. 564; Campbell v. Carter, 14 Ill. 289; Dingman v. Randall, 13 Cal. 512.

Carter, Collins, Jones & Barker and M. P. Murray for defendant appellant.

(1) A decree or judgment in a cause must be within the scope of the pleadings and the issues raised by them. Tanner v. Railroad, 180 Mo. 26; Waldheier v. Railroad, 71 Mo. 516; Spoors v. Coen, 44 Oh. St. 497; Phillips, Code Pleading, sec. 466; Munday v. Vail, 34 N. J. L. 418; Smith v. Fordyce, 190 Mo. 16. (2) An action to foreclose a mortgage, or whereby the title to real estate is sought to be affected must be brought in the county within which such real estate or some part thereof is situate. R. S. 1909, secs. 1753, 2809; Ensworth v. Holly, 33 Mo. 370; Truesdale v. Brennan, 153 Mo. 600. (3) Equity will affix an equitable mortgage only on property at the time owned by the contractor or thereafter acquired by him, and it is enforcible only against the owner and his heirs and representatives and purchasers or encumbrancers with notice. 19 Am. & Eng. Ency. Law, p. 15; 25 Cyc., p. 665. (4) A written contract is the highest evidence of the terms of an agreement between the parties and one who signs such is bound by its provisions although he failed to read it or inform himself of its provisions. 9 Cyc., p. 388; Gwin v. Wagner, 93 Mo. 327; McNealy v. Baldridge, 106 Mo.App. 18; Paris & Co. v. Carle, 116 Mo.App. 581; International Text Book Co. v. Lewis, 130 Mo.App. 158. (5) The adoption of one of two or more inconsistent remedies amounts to an election and is conclusive and a bar to the resort to an alternative remedy. 7 Ency. Pl., p. 364; Com. Co. v. Railroad, 52 Mo.App. 408; Frowein v. Heysler, 87 Mo.App. 315.

FERRISS, J. Kennish, P. J., and Brown, J., concur.

OPINION

FERRISS, J.

Cross appeals. In 1901 several promoters, represented by one O. E. Robinson in the transactions hereinafter detailed, formulated a plan to organize a corporation to acquire and operate properties described in the contract set out below, on all of which properties Robinson claimed to hold options. The mineral lands had been examined by experts, who reported favorably and endorsed a prospectus issued by the promoters which showed the properties to have sufficient actual and potential value to justify the enterprise and the proposed capitalization of the company. Mr. Robinson interested the Missouri Trust Company (whose name was subsequently changed to Missouri-Lincoln Trust Company, and which will be spoken of herein as the Trust Company) to advance money by way of loan to acquire the properties for the corporation to be created, and also to act as trustee in a mortgage to be given to secure a proposed bond issue. On June 15, 1901, a written agreement was entered into between the Trust Company and Robinson, as follows:

Memoranda of agreement between Orlando E. Robinson, of Baltimore, Maryland, and the Missouri Trust Company of St Louis, Missouri,

Witnesseth: The said Robinson owns and has contracts to purchase approximately thirty-three thousand (33,000) acres of land in Washington county, Missouri, consisting of the Baryta, Lead, Zink, Iron and Timber lands known as the "McArthur," "Shibboleth," "White" and "Old Mines," and other properties, including stores, smelters, residences, town lots and buildings in and near Potosi, Cadet, Mineral Point and Old Mines, Missouri. Said Robinson also holds a contract to purchase a manufacturing plant at St. Louis, Missouri, the Gilman property, at Kansas City, Kansas, consisting of a brick building containing a complete Baryta grinding and pulverizing plant and six town lots; one thousand acres of Baryta land, in Miller county, Missouri; all the property and assets of the National Mining and Milling Company, of Baltimore, Maryland, and a branch manufactory at Highlands, New York; Baryta lands in North and South Carolina, including also all the patents and applications for patents which said National Mining and Milling Company is now using in the production of a pigment for paint manufacturers and by-products. Titles to all of said property to be made satisfactory to said Missouri Trust Company of St. Louis.

Said Trust Company has agreed to loan said Robinson several sums of money in the aggregate, if desired by said Robinson, but not to exceed the sum of $ 500,000, for the purpose of purchasing said properties as preliminary to the acquisition of said properties by the American Lead & Baryta Company, a corporation hereafter to be formed.

Said moneys are to be advanced from time to time as needed, not, however, more rapidly or in greater amounts than as follows:

One hundred thousand dollars at the date of this memorandum;

. . . . Dollars on or about . . . . 1901.

. . . . Dollars on or about . . . . 1901.

. . . . Dollars on or about . . . . 1901.

Each amount to bear interest from the date of advancement at the rate of five per cent per annum.

Said O. E. Robinson to give his promissory notes for all sums advanced, each note to be accompanied by collateral security satisfactory to the Trust Company to at least the face value of the note.

All the said properties are to be conveyed to the said Missouri Trust Company of St. Louis as additional security, and are to be hereafter conveyed by the said Missouri Trust Company to the said American Lead & Baryta Company, or to some one for it.

Bonds of the said American Lead & Baryta Company, to the amount of the par value thereof of one million, five hundred thousand dollars, secured by a first mortgage upon the above properties and such other properties as said company may acquire before the execution of such mortgage, and to be a first lien thereon, are to be issued.

The capital stock of said Company to be ten million dollars. The Missouri Trust Company of St. Louis to be the trustee in the mortgage securing said bonds.

Of said bonds, one million, two hundred and fifty thousand dollars, and an equal amount of said stock, are to be delivered to the said Missouri Trust Company of St. Louis in lieu of said properties, and simultaneously therewith said properties are to be conveyed to the said American Lead & Baryta Company.

Bonds to the amount of two hundred and fifty thousand dollars to be reserved by the said Robinson to be used as part of the consideration to be paid Robinson to be used as part of the consideration to be paid in the purchase of certain of the properties above mentioned; but said bonds to be held by said Missouri Trust Company of St. Louis, until paid out by it for such purpose and are during the continuance of this loan not to be used for any other purpose, and unless and until needed for such purpose to be held by said Trust Company as additional security in the same manner as the remainder of said bonds are held. Said bonds and stock shall be held by the said Missouri Trust Company as additional security for the payment of said loans in the same manner as said properties were held until said loans are paid. Said bonds may be sold by said American Lead & Baryta Company from time to time for not less than par, but all proceeds derived therefrom shall be applied to the payment of said loan and interest thereon and proper fees and charges.

After the payment of said loans and interest, the balance of said bonds and stock, less the commission and charges to be paid said Trust Company, are to be delivered by the said Trust Company to said Robinson.

The incorporation and organization of said Company and

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