Farm & Home Sav. & Loan Ass'n of Missouri v. Armstrong

• Citation: 85 S.W.2d 461,337 Mo. 349
• Parties: Farm & Home Savings & Loan Association, a Corporation, Appellant, v. Mrs. F. W. Armstrong et al
• Decision Date: 10 July 1935
• Court: United States State Supreme Court of Missouri

85 S.W.2d 461

337 Mo. 349

Farm & Home Savings & Loan Association, a Corporation, Appellant, v. Mrs. F. W. Armstrong et al

Supreme Court of Missouri

July 10, 1935

Rehearing Denied July 10, 1935.

Appeal from Audrain Circuit Court; Hon. Wm. C. Hughes Judge.

Affirmed.

John T Barker, Rodgers & Buffington and Ewing, Ewing & Ewing for appellant.

(1) The defendants are members of a voluntary unincorporated association; they operated and had complete control of Hardin College, a corporation; they authorized and directed such college, as their agent, to borrow money from plaintiff and to execute a note therefor; each and every member of such voluntary unincorporated association, who participated therein, are individually liable for the payment of such note, and may be sued therefor. Murphy v. Holliway, 16 S.W.2d 107; Bushong v. Taylor, 82 Mo. 660; Ferris v. 5 Mo.App. 279; Richmond v. Judy, 6 Mo.App. 465; Riffe v. Proctor, 99 Mo.App. 601; Ray v. Powers, 134 Mass. 22; Wilcox v. Arnold, 162 Mass. 577, 39 N.E. 414; Davison v. Holden, 55 Conn. 103, 3 Am. St. Rep. 40; Evans v. Lily & Co., 95 Miss. 58, 48 So. 612; Ehrmanntrant v. Robinson, 52 Minn. 333, 54 N.W. 188; Clark v. O'Rourke, 111 Mich. 108, 69 N.W. 147; Thompson v. Garrison, 22 Kan. 765; Sizer v. Daniels, 55 Barb. 426; Lewis v. Tilton, 64 Iowa 220, 19 N.W. 911; Ash v. Guie, 97 Pa. 493; Burton v. Furniture Co., 10 Tex. Civ. App. 270, 31 S.W. 91; 23 R. C. L. 432; 25 R. C. L. 64; 5 C. J., pp. 1345, 1362. (2) The individual members of the voluntary unincorporated association who caused the corporate charter to be amended vesting control of the college in them, and who authorized the corporation to sign this note, are disclosed principals and are liable for the payment of such note; the corporation was the agent of such individuals and signed the note for their use and benefit. Gordon v. Andrews, 222 Mo.App. 609, 2 S.W.2d 809; Beckwith v. Rolling Mill Co., 190 Mo.App. 21, 175 S.W. 253; Nichols Co. v. Kern, 32 Mo.App. 1; Meyers v. Kilgen, 177 Mo.App. 724, 160 S.W. 569; Higgins v. Dellinger, 22 Mo. 397; Ferris v. Thaw, 72 Mo. 446; Donner v. Whitecotton, 201 Mo.App. 443, 212 S.W. 378; Weber v. Collins, 139 Mo. 501; 21 R. C. L. 846; 2 C. J. 647; Mechem on Agency, p. 1303; Story on Agency, p. 270. (3) The demurrer admits all the facts well pleaded and the legal conclusions which flow from the allegations. Public Serv. Comm. v. Kansas City P. & L. Co., 325 Mo. 1217, 31 S.W.2d 71; Fullington v. Ozark Poultry Supply Co., 327 Mo. 1167, 39 S.W.2d 782; State ex rel. Kaercher v. Roth, 49 S.W.2d 110; Selleck v. Hawley, 56 S.W.2d 392; Thompson v. Farmers' Exchange Bank, 62 S.W.2d 810.

Maurice H. Winger, Leland Hazard, George J. Winger, Albert L. Reeves, Jr., and Walter C. Goodson for respondents; Winger, Reeder, Barker & Hazard and Meservey, Michaels, Blackmar, Newkirk & Eager of counsel.

(1) Liability is never fixed upon individuals who participate in the creation of a debt for the purposes of an unincorporated association, except where there is no entity to incur the liability. The reason for this rule cannot apply in the case at bar because the indebtedness was actually created in the name of and by the act of Hardin College, a corporation. Hardin College, as an entity, could incur and did incur the liability. Murphy v. Holliway, 16 S.W.2d 107; Ferris v. Thaw, 5 Mo.App. 279, affirmed 72 Mo. 446; Riffe v. Proctor, 99 Mo.App. 601, 74 S.W. 409; Heath v. Goslin, 80 Mo. 310, 50 Am. St. Rep. 505; Clark v. O'Rourke, 111 Mich. 108, 69 N.W. 147; Thompson v. Garrison, 22 Kan. 765; Lewis v. Tilton, 64 Iowa 220, 19 N.W. 911; Burton v. Grand Rapids School Furniture Co., 10 Tex. Civ. App. 270, 31 S.W. 91; Kemp v. New Mexico Annual Conference of the M. E. Church, South, 184 P. 484. (2) The petition herein is insufficient to establish an agency on the part of Hardin College, a corporation, for the respondents which would render them liable to the appellant upon any theory. (a) The allegations of agency are conclusions not admitted by the demurrer. 49 C. J. 119, sec. 111; Anderson v. Drainage & Levee District, 309 Mo. 189, 274 S.W. 448; Munsey v. Packet Co., 50 S.W.2d 754; Massey-Harris Co. v. Fed. Reserve Bank, 226 Mo.App. 916, 48 S.W.2d 158; Dick v. Puritan Co., 46 S.W.2d 941; Everett v. Drew, 129 Mass. 150; 2 C. J. 905, sec. 611. (b) But even upon appellant's own theory that Hardin College was an agent of these respondents as disclosed principals, there can be no recovery. 2 C. J. 836, sec. 518; Realty Co. v. Markham, 163 Mo.App. 324, 143 S.W. 1107; Mechem on Agency (2 Ed.), sec. 1717, p. 1306; Ames Packing & Provision Co. v. Tucker, 8 Mo.App. 95; Schepflin v. Dessar, 20 Mo.App. 569; Hughey v. Truitt, 196 S.W. 1065; Diacomis v. Wright, 20 S.W.2d 139; Waggoner v. Petroleum Co., 252 S.W. 865; Chapman v. Ross, 277 P. 854; Merrell v. Witherby, 120 Ala. 418, 74 Am. St. Rep. 39; Paige v. Stone, 10 Metc. 160, 43 Am. Dec. 420. (3) The relationship of the individual respondents to Hardin College corporation was, if anything, that of members of said corporation; and the nonliability of respondents for the debt herein sued on is established by Section 5001, Revised Statutes 1929. Sec. 5001, R. S. 1929.

OPINION

Hays, J.

This case has recently come to the writer on reassignment. It is an action upon a promissory note executed by Hardin College. It appears that Hardin College was duly incorporated and for many years operated a school for girls and young women at Mexico, Missouri. It was founded by former-Governor Charles H. Hardin, who brought about its incorporation in 1873 and endowed it, and became its first president. The charter was amended in 1926 in a manner presently to be stated.

On May 29, 1929, the college borrowed from the Farm & Home Savings & Loan Association of Nevada, Missouri, over $ 300,000 and by its proper officers executed promissory notes therefor and a mortgage to secure the same on the property of the college. Default was made in the payment of interest on the largest note and the principal and interest of the other four. The original petition, framed in five counts, sought judgment against the college and the then acting receiver thereof and also against these individual defendants-respondents for the recovery of some $ 50,000 interest accrued on the large note and for the principal and accrued interest of the smaller notes, all of which were in default. A decree was also sought foreclosing said mortgage. Subsequently the plaintiff filed its voluntary amended petition by which the college and the receiver were eliminated from the case and also all said notes save one, on which slightly less than $ 10,000 was due. Thereupon the action proceeded against these defendants-respondents with a view only to obtaining judgment against them jointly and severally on the one note. Thus it appears this suit is evidently a test case seeking to fix personal liability upon these respondents -- more than 100 in number.

The respondents filed a general demurrer to the plaintiff's amended petition. The demurrer was sustained by the trial court and, plaintiff declining to plead further, judgment was rendered dismissing the cause. Plaintiff has appealed and the ultimate question for determination on this appeal is whether the petition stated a cause of action against these respondents. On the situation sketched above this proceeding was on motion of appellant advanced on the docket of this court as our files disclose.

The amended petition alleged that the note in suit was executed by "Hardin College, at all times herein mentioned a corporation duly organized and existing under the laws of Missouri." The note is pleaded in haec verba and appears to have been executed by Hardin College alone and in appropriate corporate manner thus: "Hardin College by W. G. Letterman, President of the Board: Attest, B. T. Williams, Secretary." It is alleged that certain shares of the capital stock of the loan company, taken out by the college and pledged as additional security for said note, have been applied as a credit thereon.

The amended petition is very lengthy. A general statement of its substance will probably aid in a readier grasp of the summary we shall give which may unavoidably itself be lengthy. By way of inducement the petition sets out the policy of the Baptist Church denomination, the nature and formation of the Missouri Baptist General Association, a voluntary unincorporated religious society, and pleads in full the amended charter of Hardin College referred to above. And upon these matters of inducement the petition bases its further allegations upon a course of conduct on the part of said association, pursued under alleged charter rights and powers, which conduct, it is said, rendered these respondents liable for such course as members of the association and acting therefor. From all of which the petition deduces and alleges that the relationship of principal and agent obtained as between the respondents and the college corporation in the borrowing of the money and the execution of said note by the college, and that it was so executed for the use and benefit of the association and these respondents as participating members of that body. The matters of inducement as specifically alleged are as follows:

The Baptist denomination in the State consists of various churches of the Baptist faith, each of which is a separate and distinct body having its own government, congregational in form; the members composing each local church determining all its policies and operating, managing and controlling its affairs. These individual churches with a view to co-operation in promoting, extending and disseminating the Baptist principles in this State have organized said General Association and the same is composed of such...