Grafeman Dairy Co. v. Northwestern Bank

• Decision Date: 30 November 1921
• Citation: 235 S.W. 435,290 Mo. 311
• Parties: GRAFEMAN DAIRY COMPANY, Appellant, v. NORTHWESTERN BANK et al
• Court: Missouri Supreme Court

235 S.W. 435

290 Mo. 311

GRAFEMAN DAIRY COMPANY, Appellant, v. NORTHWESTERN BANK et al

Supreme Court of Missouri

November 30, 1921

Appeal from St. Louis City Circuit Court. -- Hon. Victor H Falkenhainer, Judge.

Reversed and remanded.

Jeffries and Corum for appellants.

(1) A mortgage by a corporation must be authorized by its board of directors. Fletcher's Cyc. Corp., sec. 1299, p. 2274; Union National Bank v. State Nat. Bank, 155 Mo. 95; Leggett v. New Jersey Mfg. & Banking Co., 1 N.J.Eq 541; Gashwiler v. Willis, 33 Cal. 11, 20; State ex rel. Grimm v. Manhattan Rubber Co., 149 Mo. 181; McKeag v. Collins, 87 Mo. 164; State ex rel Schroeder v. Perkins, 90 Mo.App. 603; Frederick v. Lettney, 214 Mass. 46; El Fresnal Irrigating Land Co. v. Bank of Washington, 182 S.W. (Tex. Civ. App.) 703; Temple v. Dodge, 89 Tex. 68, 32 S.W. 514, 33 S.W. 222; Citizens Security Co. v. Hammel, 112 P. 731, 14 Cal.App. 564; In re St. Helen Mill Co., 3 Sawy. 88; Alta Silver Mining Co. v. Alta Placer Mining Co., 78 Cal. 629. (2) A corporation is not liable for acts within the apparent authority of its officers or agents where the person dealing with such officers or agents has notice of facts sufficient to put him on inquiry as to the latter's authority. Fletcher Cyc. Corp., sec. 1928; Louisiana State Bank v. Orleans Navigation Co., 3 La. Ann. 294; Western Railroad v. Bayne, 11 Hun, 166; Kelsey v. New England Railroad Co., 60 N.J.Eq. 230; Continental Insurance Co. v. Schulman, 205 S.W. 315; Franco-Texas Land Co. v. McCormick, 85 Tex. 416, 422; Stanley v. Franco-American Ferment Co., 97 N.Y. Misc. 401; Bank of Commerce v. Mining Co., 13 N.M. 424, 429. (3) Declarations made by William Grafeman, deceased, against his pecuniary interest were admissible in evidance. Jones on Evidence, p. 405; Friberg v. Donovan, 23 Ill.App. 58; Wynn et al. v. Cory, 48 Mo. 346, 348; 22 C. J. 231, 232, 233. (4) There is no estoppel against plaintiff. (a) Where estoppel is relied upon, it must be specially pleaded. Bray v. Marshall, 75 Mo. 327; Noble v. Blount, 77 Mo. 235; Tyler v. Tyler, 78 Mo.App. 240; Hunt v. Searcy, 167 Mo. 158; Golden v. Tyler, 180 Mo. 196; Rieschick v. Klingelhoefer, 91 Mo.App. 430; Western R. R. Co. v. Musser, 97 Mo.App. 114; Carthage v. Light Co., 97 Mo.App. 20; Chance v. Jennings, 159 Mo. 544; Sanders v. Chartrand, 158 Mo. 352; Osborne v. Court of Honor, 152 Mo.App. 652; Babler Lbr. Co. v. Muhlbach, 109 Mo.App. 646; Turner v. Edmonston, 210 Mo. 411; Swainhart v. St. Louis Suburban Railroad, 207 Mo. 423; Union Biscuit Co. v. Springfield Gro. Co., 143 Mo.App. 300; Gulf Red Cedar Co. v. Crenshaw, 169 Ala. 606; McQueen v. Bank of Edgemont, 20 S.D. 378; Sutton v. Consolidated Apex Mining Co., 15 S.D. 410, 89 N.W. 1020. (b) In order to create an estoppel the person relying upon the estoppel must have been misled into such action that he would suffer injury if an estoppel be not declared. Barnett v. Kamp, 258 Mo. 139, 157; Ford v. Fellows, 34 Mo.App. 630, 633; Rogers v. Marsh, 73 Mo. 64; Noble v. Blount, 77 Mo. 235; Spurlock v. Sproule, 72 Mo. 503; Rosencranz v. Swofford Dry Goods Co., 175 Mo. 518; Conrad v. Fisher, 37 Mo.App. 352; Eitelgeorge v. Building Assn., 69 Mo. 52; Acton v. Dooley, 74 Mo. 63; Hydraulic Press Brick Co. v. Newmeister, 15 Mo.App. 592; Garesche v. Levering Inv. Co., 146 Mo. 436.

Geo. W. Lubke, Geo. W. Lubke, Jr., and Walther, Muench & Hecker for respondents.

(1) The president of a business corporation, who has full control and management of its affairs, and who, without objection on the part of the board of directors, borrows money, pays dividends and buys real and personal property for the corporation, has implied authority to execute and deliver a deed of trust conveying its real estate as security for money borrowed for and received by the corporation. P. R. Sinclair Coal Co. v. Missouri Hydraulic Mining Co., 207 S.W. 266; Strother v. Barrow, 246 Mo. 241; Tyler Estate v. Hoffmann, 146 Mo.App. 520; Danglade Co. v. Land Co., 190 S.W. 35. And even though he had no authority to execute a deed of trust to secure the payment of money borrowed for the corporation, if the corporation retains the money received by it through his unauthorized act, it fully ratifies the same and cannot repudiate the deed of trust. Mining Co. v. Taylor, 247 Mo. 1; Smith v. Richardson, 77 Mo. App., 430; Campbell v. Pope, 96 Mo. 472; Chouteau v. Allen, 70 Mo. 290; Darst v. Gale, 83 Ill. 136; Love v. Metropolitan Church Assn., 184 Ill.App. 102; Doerr v. Fandango Lumber Co., 31 Cal. 318; Shafer v. Spruks, 225 F. 480; Weathersby v. Lumber Co., 107 Tex. 474; Clark v. Elmendorf, 78 S.W. 538; Bank v. Clark, 138 Ga. 798; Witter v. Grand Rapids Flouring Mill Co., 78 Wis. 543; Bullen v. Milwaukee Co., 109 Wis. 41; Chestnut Co. v. Record Pub. Co., 227 Pa. St. 235; Sherman v. Morris, 43 Kan. 282; Henry v. Colorado & C. Co., 10 Colo.App. 14; Cook on Corporations, pp. 2489; Jones on Mortgages, secs. 124, 127; Annotation to Weathersby v. Lumber Co., 7 A. L. R. 1446, 1477. (2) The declarations of William Grafeman, excluded by the court made in the absence of the representatives of the defendant, were statements in favor of his principal. As such they were neither competent nor relevant and were properly excluded. Proctor v. Loomis, 35 Mo.App. 482; Sira v. Railroad Co., 115 Mo. 127; Hall v. Hall, 34 Ind. 314; Havens v. Gilmour, 82 N.Y.S. 511. (3) The plaintiff seeks equitable relief. It must, therefore, do equity, and the court must consider any facts disclosed by the record, which tend to show that plaintiff's complaint is not well founded. Ess v. Griffith, 139 Mo. 322, 332; Bremen Bank v. Branch, 104 Mo. 440; 16 Cyc. 809. If it becomes apparent from the evidence that the plaintiff cannot recover for want of equity, it is not necessary that the facts showing this want of equity be expressly pleaded. Ess v. Griffith, 139 Mo. 322, 332; Curtis v. Moore, 162 Mo. 442; Young v. Glascock, 79 Mo. 576; Price v. Hallett, 138 Mo. 561; McDonnell v. Bedgasso, 175 Mo. 275; 16 Cyc., 675 to 785.

BROWN, C. Ragland and Small, CC., concur. James T. Blair, C. J., and Graves, David E. Blair and Walker, JJ., concur; Elder, J., concurs in the result; Woodson, J., dissents; Higbee, J., concurs in reversing the judgment and remanding the cause, but is of opinion that a judgment for appellant should be directed.

OPINION

In Banc.

BROWN C.

-- This suit was instituted in the Circuit Court for the City of St. Louis on October 1, 1918. Its general purpose was to cancel and set aside certain promissory notes purporting to be executed by the plaintiff corporation to one Oonk, a teller of the defendant bank, on April 19, 1917, as collateral security for alleged indebtedness of plaintiff to said bank of an equal amount; and also to set aside and cancel a deed of trust to one Schulte, as trustee, to secure the payment of said notes. These notes consisted of a principal note for the sum of $ 50,000 and for semi-annual interest notes for the sum of $ 1375 each. The property which the deed of trust purported to convey was real estate in the city of St. Louis alleged to be worth the amount of the principal note or more.

These instruments appear to be signed with the name of the plaintiff corporation by William Grafeman, its president.

At the time of the institution of the suit the trustee, Schulte, had already instituted proceedings to foreclose the deed of trust for the defendant bank, to which the collateral notes had been transferred by Oonk, and had advertised the land for sale pursuant to its terms.

The petition, in addition to the foregoing facts, alleged: "That said notes and said deed of trust were never executed by the plaintiff; that said purported notes and deed of trust were never authorized by the board of directors, nor by the stockholders of the plaintiff; that plaintiff never received any money or other thing of value from the said William H. Oonk or any other person, on account of said purported notes and deed of trust; that plaintiff never received the consideration alleged in said purported notes and deed of trust, and that if the said William Grafeman executed said purported notes and deed of trust he did so on his own account and responsibility, and without the authority, knowledge or consent of plaintiff, and that the defendants well knew all such facts, and at the time of acquiring their alleged interest and ownership in and of said purported notes and deed of trust well knew and understood such facts; that if the negotiation and transfer of said purported notes is not restrained and the notes canceled, and if the sale of said real estate under said purported deed of trust is not restrained, plaintiff will suffer irreparable injury; and that plaintiff has no adequate remedy at law in the premises."

The court awarded a preliminary injunction upon these statements and the prayer of the petition.

The defendant bank filed an answer, upon which all the issues stand. It made the conventional admissions as to the corporate character of parties, the acquisition and ownership of the notes and deed of trust securing them, the proceedings taken for foreclosure, and denied all other allegations.

By way of counterclaim it stated that on April 19, 1917, the plaintiff owned in fee and occupied and used the land described in the collateral deed of trust in carrying on the dairy business for which it had been incorporated, and that on May 17, 1917, said notes, duly indorsed by Oonk without recourse, were delivered to it by plaintiff, with a contract in writing pledging them to the defendant bank as security for the payment at maturity of another promissory note executed and delivered by plaintiff to the bank on that day for fifty thousand dollars, payable three months after date, with...