First Nat'l Bank of Hannibal v. North Missouri Coal & Mining Co.

• Decision Date: 30 April 1885
• Citation: 86 Mo. 125
• Parties: THE FIRST NATIONAL BANK OF HANNIBAL v. THE NORTH MISSOURI COAL AND MINING COMPANY, Plaintiff in Error.
• Court: Missouri Supreme Court

86 Mo. 125

THE FIRST NATIONAL BANK OF HANNIBAL

v.THE NORTH MISSOURI COAL AND MINING COMPANY, Plaintiff in Error.

Supreme Court of Missouri.

April Term, 1885.

Error to Hannibal Court of Common Pleas.--HON J. T. REDD, Judge.

AFFIRMED.

James Carr for plaintiff in error.

(1) The defendant corporation had no authority to issue the notes sued on. Such act on its part was ultra vires. Laws of Mo. 1863-4, 20; McCullough v. Moss, 5 Den. 569. (2) Only the directors of the defendant could make the notes, if they could be made at all. Godfrey stood in a fiduciary relation to each company and this totally disqualified him from acting for either. He could not deal with himself. Gamble v. Gibson, 59 Mo. 585; Flint & Pere Marquette Ry. Co. v. Dewey, 14 Mich. 477; People v. Township Board, 11 Id. 222; Aberdeen Ry. Co. v. Blaikie, 1 McQueen, 461; Wilbur v. Lind & Hough, 49 Cal. 290; San Diego v. S. D. & L. A. R. R. Co., 44 Id. 106. For the same reason he could not settle his account with the North Missouri Coal and Mining Company for money loaned, advanced or laid out and expended for it. Price, as secretary, had no authority to settle with Godfrey. Godfrey could not perform the two-fold and inconsistent character of creditor and debtor. (3) There was no consideration for the notes; the defendant was not indebted to the Central Coal and Mining Company. (4) The facts sought to be proved by the witness, Hayward, were competent as evidence, and the court erred in excluding the same. (5) All the equities between the original parties are open and subject to be inquired into. Goodman v. Simonds, 19 Mo. 106; Caddington v. Bay, 21 John. 637; Craighead v. Wells, 8 Baxt. 38. (6) The bank took the notes with notice that they were given without consideration, and the court erred in refusing to permit defendant to show that the bank or its president had such notice. Munroe v. Cooper, 5 Pick. 412; Daniel on Neg. Ins., sec. 813. (7) When it is shown by the defendant that the note originated in fraud, then the burden of proof is shifted to the plaintiff to show that he came by the note in due course of business and paid value for it without notice. Smith v. Sac. Co., 10 Wall.; Munroe v. Cooper, 5 Pick. 412.

C. A. Winslow for defendant in error.

(1) The court committed no error in giving or refusing instructions. (2) Instruction number five did not contain the law. A by-law or resolution of the board was not necessary to show authority to make the notes. The acts and acquiescence of defendant's officers was competent to show the authority and its proper exercise. Preston v. Missouri & P. L. Co., 51 Mo. 43; Turner v. Chillicothe, etc., Ry. Co., 51 Mo. 501; Washington M. F. I. Co. v. St. Mary's Sem., 52 Mo. 480; Kiley v. Forsee, 57 Mo. 390; Southgate v. A. & P. R. Co., 61 Mo. 89; Southern Hotel Co. v. Newman, 30 Mo. 118; Kitchen v. Ry. Co., 59 Mo. 514. (3.) The three defences are, want of power to make accommodation paper, want of consideration and payment; and it is alleged that plaintiff took with notice and without value. The first instruction asked by defendant and given by the court, and all the other instructions asked by it, except the fifth, expressly concede that the notes were properly issued, and that, by an agreement with Cartlidge, they could be taken by the Central Company in payment of Godfrey's debt, and be by Cartlidge indorsed to plaintiff as collateral for the debt of that company. The fifth instruction enunciates the proposition, that authority to make the notes could only be proven by the statute, the articles of association, the by-laws, or a resolution of the board. The point now made is an apparent afterthought, and has no standing in this court. The defendant must stand on the record as made below. The judgment cannot be reversed on a theory not tried below; much less, on a theory not set up in the answer, or contained in the instructions asked and refused, even if there are facts seeming to justify it, which is not this case. Stix v. Matthews, 75 Mo. 96; Clements v. Yates, 69 Mo. 623. On the case, as made by the pleadings and evidence, the court committed no error in excluding the testimony offered to be given by the witness, Hayward. It would be an anomalous proceeding to permit a readjustment and settlement of the affairs of defendant in this suit, without other parties and a more suitable foundation in the pleadings. The settlements must be set aside, the accounts readjusted, and a new one taken, before defendant can reach the relief sought. This statement of the question ought to be conclusive. All the parties interested are necessary parties in equity, and the code preserves this rule. The charge is that the books and settlements are false. Burke v. Flurnoy, 4 Mo., loc. cit., 117; State ex rel. v. Sanderson, 54 Mo. 203; Alexander v. Homer, 1 McCrary, loc. cit., 42-3; Bliss Code Plead., secs. 72, 96, 97; Sto. Eq. Pl. (9 Ed.) secs. 136, 138.

RAY, J.

This was an action on four promissory notes, commenced in the Hannibal court of common pleas, April 18, 1874. Each of said notes was dated July 28, 1873, due sixty days after date with interest from date at ten per cent., payable to the Central Coal and Mining Company or order, executed by the North Missouri Coal and Mining Company, by C. O. Godfrey, president, and Edward Price, secretary, and endorsed before maturity to plaintiff by the Central Coal and Mining Company, one for $9,000, one for $2,963 and two for $10,000 each. There was no defence to the count on the first note, and the controversy arises over the last three. It appears that the North Missouri Coal and Mining Company and the Central Coal and Mining Company were Missouri corporations, organized under an act of the legislature, entitled “an act relating to incorporations for manufacturing and other purposes,” approved February 15, 1864, for the purpose of digging and mining for coal in certain counties in the state and buying and selling the same, as the directors of said companies should deem best calculated to promote the interest of the stockholders thereof, etc. Sess. Acts of Mo. 1863, p. 18.

It also appears that the directors of said North Missouri Coal and Mining Company, by its articles of association, had power to make and prescribe such by-laws, rules and regulations, respecting the management, control and disposition of the stock and property of said company as they might deem expedient and proper, not inconsistent with the constitution of the United States or of this state; and that the by-laws of said corporation, so made, contain no express authority empowering its officers to make accommodation or any other kinds of paper. Section fifty-seven, of the by-laws of said North Missouri Coal and Mining Company, is as follows:

“Sec. 57. All transfers and conveyances of real estate shall be made by the company and under the seal thereof, in accordance with the orders of the board, and shall be signed by the president and secretary. All coal lands bought by individual members of the company on the line of the North Missouri railroad, or its branches, shall be bought for the benefit of the association, and shall be deeded to the association at the original cost and expense of purchase; and no advance shall be claimed by the party purchasing, or paid by the association for time and trouble; and all leases taken on the line of the said North Missouri railroad, or any of its branches, shall be for the benefit of this company.”

Section ten of the act of the legislature, supra, provides that: “The corporations created and established by this act shall not, at any time, be engaged in banking, or suffered to do a banking business, or suffered to deal in bills of exchange, or notes, or make or utter the same, except when the same are given or received, bona fide, in the transaction of business connected with the object of their creation.”

It further appears that Cyrus O. Godfrey was, at and before the date of said notes sued on, a stockholder and director in, and president of, both of said corporations; that Price was secretary of defendant company, and Cartledge treasurer of the Central Coal & Mining Company. It also appears that Hunt was both president of the First National Bank of Hannibal, and a stockholder in the North Missouri Coal & Mining Company, and that Godfrey was likewise a director in said national bank.

The answer of the defendant contains six several counts, in which the matters of defence are variously stated, but they need not be here set out in full. The defence is, in substance, that the notes were made for the accommodation of Godfrey, without any consideration, as between the two companies, and without power in the defendant company to make such paper, or authority in its officers to issue it; that Godfrey procured them to be issued by fraud and undue influence for his own accommodation; that the defendant company did not owe the Central Company anything, and the notes were without consideration; that Godfrey made it appear, by procuring false entries in the books of defendant, that defendant was indebted to him more than the amount of said notes for which he caused them to be executed, as stated, and indorsed to plaintiff for his own benefit, when, in fact, he was indebted to defendant in large sums on account of certain frauds and breaches of duty specified in the answer; that, for the several reasons stated, the notes were not the notes of defendant, and were obtained by fraud and without consideration; that they had been paid by another note; and that defendant took them without value and with notice of the matters charged. These matters are set up in the six several counts of the answer and are denied by the reply, which also sets up that plaintiff took the notes for value, in good faith, and without notice of the matters alleged against them.

At the trial before the jury there was evidence tending to show that the defendant owed Godfrey, at the date of these notes, more than the...