Holland Banking Co. v. Republic Nat. Bank

• Decision Date: 05 September 1931
• Parties: Holland Banking Company, In Course of Liquidation, by S. L. Cantley, Commissioner of Finance, Appellant, v. Republic National Bank
• Court: Missouri Supreme Court

41 S.W.2d 815

328 Mo. 577

Holland Banking Company, In Course of Liquidation, by S. L. Cantley, Commissioner of Finance, Appellant, v. Republic National Bank

Supreme Court of Missouri

September 5, 1931

Appeal from Boone Circuit Court; Hon. David H. Harris Judge.

Affirmed.

Roscoe C. Patterson, Orin Patterson, Harris & Price, Ruby M Hulen and Farrington & Curtis for appellant.

(1) Conversion is a distinct act or dominion wrongfully exerted over another's personal property in the denial of or inconsistent with his rights therein. Mercantile Co. v Fitch, 23 L. R. A. (N. S.) 573; Hootin v. County, 178 S.W. 310. (2) The foundation for the action of conversion rests neither in the knowledge nor the intention of the defendant. It rests upon the unwarranted interference of the defendant with the dominion over the property of the plaintiff from which injury to the latter results. Therefore neither good nor bad faith, neither negligence nor care, neither knowledge nor ignorance, are the gist of the action. Poggi v. Scott, 51 L. R. A. (N. S.) 925; Mfg. Co. v. Bank (Ill.), 137 N.E. 793. (3) The person receiving the corporation's money in payment of an individual debt of an officer who knows it is the corporation's money cannot rely on the actual knowledge provision of the Act of 1917 with reference to authorization, unless the instrument by which the money is paid and upon which he makes the collection falls within the class of instruments designated in Sec. 996, R. S. 1919, that is, a check, draft or order such as is contemplated in the act. Prior to enactment of same the reception of a check, draft or order under the facts of this case is taken at the payer's peril. McCullam v. Hotel Co., 198 Mo.App. 107, 199 S.W. 417; Kitchen v. Teasdale Co., 105 Mo.App. 463; St. Charles Coal Co. v. Lewis, 154 Mo.App. 548; Coleman v. Stocks, 159 Mo.App. 43; Reynolds v. Gerdelman, 185 Mo.App. 176, 170 S.W. 1153; Reynolds v. Title Co., 189 S.W. 33; Blake v. Bank, 219 Mo. 644; Napoleon Hill Cotton Co. v. Stix, Baer & Fuller D. G. Co., 217 S.W. 323; St. Charles Bank v. Edwards, 243 Mo. 553; Reynolds v. Whittemore, 190 S.W. 594; Lee v. Smith, 84 Mo. 304; McCullam v. Jewelry Co., 218 S.W. 345; McCullam v. Bank, 237 S.W. 1051; Bidderman v. Jewelry Co., 242 S.W. 127, 268 Mo. 64; O'Bannon v. Moerschel, 222 S.W. 1035; Cook on Corporation (7 Ed.), sec. 774, p. 293; 14A C. J. 337. (4) The letter of April 7, 1922, which is the sole authority upon which defendant acted when it charged the plaintiff's account in its bank on April 8, 1922, is not such an order as requires the plaintiff to establish actual knowledge in order to recover, and if that is true then as to the letter the rule in Missouri as to this case is the same as it was before the 1917 Act was passed. (5) The common law of Missouri was changed by the Act of 1917 only as to those who receive in payment and collect (a) "check, draft or order." The section was passed as an amendment to the Negotiable Instruments Law under which title it will be found as Sec. 996, R. S. 1919, and from the title to the bill found in Laws 1917, pp. 143 and 144, it is apparent from its language that it was not intended to cover all directions or orders given where a corporation's money is used to pay one of its officer's debts, such as orders that might be given in letters or oral orders, but only in cases where the payment was made in a class of instruments mentioned in the Negotiable Instrument statute, to-wit, "check, draft or order." (6) We concede that there is evidence in this case upon which the trial court could find that the defendant did not have actual knowledge that the letter of April 7 was written without authority of the corporation, if the letter is an order within Sec. 996, R. S. 1919, and there is evidence upon which the court could make the same finding as to the defendant on the payment of July 10, 1922. But we further contend that there is substantial testimony upon which a contrary finding could be made. This necessarily drives appellant to the point of showing error in the trial of the cause by the trial court in reaching the judgment he did as to declarations of law, finding of facts, admission or exclusion of testimony. (7) A finding of facts when requested should embrace all the material facts bearing on the issues involved, and not merely state conclusions or inferences therefrom. Karneman v. Davis, 281 Mo. 234, 219 S.W. 908; Buschow Lbr. Co. v. Ry. Co., 220 Mo.App. 743, 276 S.W. 413; Pemiscot Co. Bk. v. Tower Grove Bank, 204 Mo.App. 441, 223 S.W. 115; Downing v. Bourlier, 21 Mo. 149. (8) It is beyond the powers of a director or of a board of directors to give away the assets of a corporation, either by resolution, inaction, negligence, fraud, ratification or estoppel. Nothing short of the unanimous consent of the stockholders can do that. Holland Banking Co. v. Continental National Bank, 22 S.W.2d 821; Brinkerhoff v. Boyd, 192 Mo. 597. (9) Randall did not purport to represent the plaintiff in borrowing the money and the trial court so found, and the defendant did not treat Sanford as the sole representative of Holland Banking Company for it demanded a letter signed by some other officer, therefore knowledge of the wrongdoing on the part of Sanford and Randall is not imputable to the plaintiff. Kegan v. Park Bank, 8 S.W.2d 858; Bartlett v. McAllister, 289 S.W. 814.

W. D. Tatlow and John M. Atkinson for respondent.

(1) Sanford's letter of April 7, 1922, directing the defendant to charge the account of the Holland Banking Company $ 50,000, and credit amount on note of C. E. Randall and J. L. Hine, is an "order" within the express terms of the statute, Sec. 996, R. S. 1919. 46 C. J. 1131; Finnigan v. Railroad Co., 261 Mo. 481; Dennett v. Kirk, 59 N.H. 10. There is nothing in the terms or subject-matter of Sec. 996, R. S. 1919, to indicate that the word "order" is used therein in any other sense than its ordinary well-understood meaning. Sec. 7058, R. S. 1919; Roxford Knitting Co. v. Moore and Tierney, 265 F. 177, 253 U.S. 498, 64 L.Ed. 1031; Hopkins v. State, 11 Ga. 92, 102. (2) Sanford's letter must be judged by its contents and not by its name. Whether this letter is a negotiable or a non-negotiable instrument, it is a direction to apply a fund of $ 50,000, which was in defendant's hands, as a payment on the note of Hine and Randall due the defendant. Judged by its contents, as it must be, it is just as appropriate and effectual an instrument therefor as a negotiable or non-negotiable instrument would have been, if not more so. It was not intended to be negotiated, assigned or transferred. In addition to the authorities, supra, expressly holding that a letter is an order within the meaning of such a statute, there is nothing in the statute or the subject-matter of the statute to suggest or require an instrument that is negotiable or non-negotiable could be assigned and transferred, as it was not intended for that purpose. "Drafts, as used in the collection of debts, are not usually negotiable." Ben v. English, 84 Ga. 406. "The word 'draft' does not necessarily, or even usually, imply negotiability." Calif. etc., Co. v. Phoenix etc. Bk., 177 N.Y.S. 41; Brennan's Neg. Inst. L. (4 Ed.), sec. 126. Instruments much less formal than Sanford's letter have been held by this court to be a non-negotiable note. McGowan v. West, 7 Mo. 569; Brady v. Chandler, 31 Mo. 28; Locher v. Kuechenmeister, 120 Mo.App. 701; Kessler v. Clayes, 147 Mo.App. 88; Reyborn v. Casey, 29 Mo. 129. (3) Under the express terms of the statute, the actual knowledge that the defendant must have had "is that the said check, draft or order was issued without authority of" the said Holland Banking Company. If Sanford had, in fact, paid the Holland Banking Company $ 50,000, he would have had as undoubted authority to have issued the letter as he would to have sent a check or draft for the amount. The letter was as appropriate and effectual to accomplish that purpose as a check or draft would have been. Downs v. Horton, 287 Mo. 414, 230 S.W. 106; Mayes v. Robinson, 93 Mo. 114. (4) No actual knowledge on the part of the defendant that Sanford did not have authority to write the letter directing the first payment is shown. The court could not find, and did not find, under the testimony that the original transaction by which the money was loaned was a fraudulent or illegal pledging of the funds of the Holland Banking Company to pay the individual debt of Hine and Randall. Holland Banking Co. v. Continental National Bank, 22 S.W.2d 821. (5) Holland Bank's standing is no better than Hine's and Randall's was. Holland Banking Co. v. Continental National Bank, 22 S.W.2d 821. (6) To authorize a reversal there must not only be error, but the error must be prejudicial to the appellant. Bellisimme v. McCoy, 1 Mo. 318. This rule has been announced over and over again. (7) None of the errors alleged by appellant were prejudicial. (8) There is no substantial evidence of actual knowledge. Troll v. St. Louis, 257 Mo. 626.

OPINION

Frank, J.

This case comes to the writer on reassignment. It is an action in conversion, and was instituted in the Circuit Court of Greene County on August 19, 1926, by C. E. French then Commissioner of Finance of the State of Missouri in charge of the business and property of the Holland Banking Company of Springfield, Missouri, hereinafter called Holland Bank, against the Republic National Bank of St. Louis, Missouri, hereinafter called National Bank and one E. L. Sanford. The cause was dismissed as to defendant Sanford, and later the venue of said cause was changed to the Circuit Court of Boone County, where, by agreement, S. L. Cantley who succeeded C. E. French as Commissioner of Finance, was substituted for said French as party...