Fuller v. Tootle-Campbell Dry Goods Co.

• Decision Date: 24 May 1915
• Docket Number: No. 11251.,11251.
• Citation: 189 Mo. App. 514,176 S.W. 1091
• Parties: FULLER v. TOOTLE-CAMPBELL DRY GOODS CO.
• Court: Missouri Court of Appeals

176 S.W. 1091

189 Mo. App. 514

FULLER v. TOOTLE-CAMPBELL DRY GOODS CO.

No. 11251.

Kansas City Court of Appeals. Missouri.

May 24, 1915.

Appeal from Circuit Court, Buchanan County; W. D. Rusk, Judge.

Action by George W. Fuller against the Tootle-Campbell Dry Goods Company. Judgment for defendant, and plaintiff appeals. Reversed, and cause remanded.

Bowersock, Hall & Hook, of Kansas City, John E. Dolman, of St. Joseph, and Robert B. Fizzell, of Kansas City, for appellant. R. A. Brown, of St. Joseph, for respondent.

JOHNSON, J.

This is an action to recover the purchase price of certain shares of the capital stock of a mercantile corporation which plaintiff alleges defendant bought at their par value of $7,000, under the terms of a written contract dated December 27, 1910. Defendant is a corporation engaged in the wholesale dry goods business at St. Joseph, and its name was signed to the contract by C. R. Bernard, as secretary. The answer denies that defendant "or any one authorized to act for it ever executed or delivered to plaintiff the alleged contract, * * * avers that said contract was wholly without consideration to this defendant, * * * and that plaintiff knew, or had reason to know, that the alleged contracts referred to in the petition were not executed by the defendant or any one authorized to execute the same in its behalf." The petition alleges that the contract was an integral part of a single transaction whereby, in consideration of defendant's agreement to purchase the stock, certain benefits (the nature of which we shall disclose) were secured to defendant under the terms of a separate written contract dated December 12, 1910, to which plaintiff and defendant were parties. A trial of the issues rased by the pleadings resulted in a verdict and judgment for defendant, and plaintiff appealed.

Defendant was incorporated and embarked in the wholesale dry goods business at St. Joseph in 1909. Its principal officers were Milton Tootle, Jr., president, T. B. Campbell, vice president, and C. R. Bernard, secretary and creditman. Tootle and Campbell organized the company and were its principal shareholders. Tootle had other important business interests, and did not participate in the active management of the business until after the death of Campbell, which occurred in September, 1911. The latter was the active manager until the malady (Bright's disease) which ended his life impaired his activity and caused him to rely more and more upon Bernard, the secretary, who, the evidence of plaintiff tends to show, performed duties and assumed authority on behalf of the corporation during the lingering illness of Campbell that are not usually exercised by such officer. Bernard had been secretary and creditman of the John S. Brittain Dry Goods Company, another wholesale merchant of St. Joseph, had extended credit on behalf of that company to W. H. Fuller, a retail dry goods dealer at McAlester, Okl., and, when defendant began business, induced Fuller to transfer his trade from the Brittain Company to defendant on the understanding that the latter would fill his orders and wait for payment until after he had paid off his indebtedness to the Brittain Company, which exceeded $11,000.

It appears from the evidence of plaintiff that defendant, having abundant capital, was willing to extend credit to desirable customers beyond that usually granted by wholesale dry goods merchants, and that this arrangement for securing the business of Fuller was disclosed by Bernard to Campbell, and was approved by him. At different times Fuller had been required to make financial statements to the Brittain Company, and on and after transferring his trade made such statements to defendant. In none of them was the fact disclosed that he owed his father (the plaintiff) $28,500, and his wife $22,500, for borrowed money. It is clear that Bernard knew of these debts. It is not certain that he told Campbell about them, and it is certain that Tootle knew nothing about the arrangement with Fuller, since, at the time the account was opened, he was not participating in the active management of the business, and was not consuited about such matters. Fuller bought heavily of defendant, the orders being supervised and approved by Bernard, and paid but little on the account thus made, and in the autumn of 1910 it had grown to about $30,000, and had been closed, with the exception of a comparatively small amount, into unsecured promissory notes which he executed and delivered to defendant.

At this time Bernard began to exhibit concern over the situation, and endeavored to have Fuller put the demand in better shape. He visited Kansas City where plaintiff, who is a man of large means, resides, and had an interview with plaintiff and his son in which he vainly tried to induce plaintiff to guarantee the payment of his son's debt to defendant. Bernard then invoked the assistance of John C. Landis, Jr., an attorney at St. Joseph, whom he bad employed to represent defendant in legal matters pertaining to the credit department, and gave him plenary authority to make the best settlement he could with Fuller. At that time Fuller's indebtedness amounted in all to about $100,000, consisting of $28,500 to his father, $22,500 to his wife, $30,000 to defendant, $7,000 to the Fidelity Trust Company of Kansas City, and about $12,000 to various mercantile creditors. His assets consisted of a stock of merchandise at McAlester of the estimated value of $25,000 to $30,000, accounts and bills receivable appraised at $10,000, the good will of the business, which was thought to be of material value, and, in addition, the expectations he had as an heir of his father. In any view of his financial affairs he was insolvent, and the only hope Landis and Bernard had for escaping heavy loss on the demand was to induce or coerce plaintiff into securing its payment. They threatened bankruptcy proceedings, and intimated pointedly that Fuller had incurred a criminal liability on account of not mentioning his debts to his father and wife in his financial statements to defendant which would prevent him from obtaining his discharge as a bankrupt. Plaintiff was not moved by these considerations, but declared the purpose of himself and his son's wife to prove up their demands against the estate of his son should he be adjudged a bankrupt, and further convinced Landis that, as his heir, his son had no expectations, having already received advancements in excess of what he would be entitled to receive from plaintiff's post modem estate. Moreover, plaintiff, who was vice president of the Fidelity Trust Company, was liable to that company as an indorser upon his son's note of $7,000, and would agree to no settlement of his son's affairs which did not provide for the payment in full of that debt. There is evidence to the effect that W. H. Fuller had assured Bernard that his father and wife were willing to subordinate their demands to the claims of his mercantile creditors, and therefore that, as to such creditors, they might be treated as nonexistent, and that Bernard, accepting this assurance, had consented to receive the financial statements made to the Brittain Company, and afterward to defendant, which, as stated, omitted reference to those debts, and there is some evidence tending to show that Bernard had not been thus innocently actuated, but with knowledge of these family debts, and without any representation that they would be subordinated to claims of mercantile creditors, had allowed Fuller to omit them from his statements. There is no evidence that Bernard had any assurance from plaintiff or the wife of Fuller that they were willing to postpone the payment of their claims, or forego any of their rights as creditors.

Landis, who proceeded alone in the final negotiations with the Fullers, found himself confronted with a most difficult situation. His argument addressed to plaintiff as the father of an unfortunate, if not erring son, was coldly rejected, and he had no ground upon which he might hope to force a preference of his client's demand over those of plaintiff and the wife of Fuller. With the latter demands allowed against the estate, bankruptcy proceedings would not realize a dividend of more than 10 per cent. to creditors. Landis attempted (we think honestly, though there is some evidence to the contrary) to achieve a better result than this for his client. After an investigation into the tangled facts of the case, and rather prolonged negotiations with plaintiff, W. H. Fuller and another mercantile creditor, conducted chiefly with the plaintiff at Kansas City, it was finally agreed to incorporate the business in Oklahoma under the name of the W. H. Fuller Dry Goods Company, with a capital stock of $40,000, fully paid up by the transfer to the corporation of all the assets of W. H. Fuller, including the good will of the business. To this end a written contract was entered into under date of December 12, 1910, by defendant, whose tame was signed thereto by Landis, as attorney by Bradley-Metcalf Company, the mercantile creditor we have mentioned, whose name was also signed by Landis, as attorney, and by plaintiff, and W. H. Fuller and his wife, who respectively signed their own names. This contract provided that plaintiff and Mrs. Fuller would release their claims of $28,500 and $22,500, respectively, so far as the property turned over to the corporation was concerned, and would not demand payment from W. H. Fuller or his estate until after all other demands against him had been satisfied; that defendant would accept $28,000 par value of the capital stock of the new corporation "in full settlement of an equal amount of their said indebtedness against W. H. Fuller"; that Bradley-Metcalf Company would accept $2,500 of the capital stock in full release and payment of an equal amount of indebtedness against W. H. Fuller; that plaintiff would accept $7,000 of the stock in...