Kirrane v. Boone

• Decision Date: 22 December 1933
• Docket Number: No. 31234.,31234.
• Citation: 66 S.W.2d 861
• Parties: MIKE KIRRANE, Appellant, v. R.E. BOONE ET AL.
• Court: Missouri Supreme Court

66 S.W.2d 861

MIKE KIRRANE, Appellant, v. R.E. BOONE ET AL.

No. 31234.

Supreme Court of Missouri.

Division One, December 22, 1933.

Appeal from Saline Circuit Court. — Hon. R.M. Reynolds, Judge.

AFFIRMED.

Pendleton & Martin and George Brownfield for appellant.

(1) A minority stockholder has the right to bring an action against the directors of the corporation to recover, for the use and benefit of the corporation and stockholders, monies lost by the directors in the management of the affairs of the corporation and which losses resulted from mismanagement, negligence, carelessness, and breach of trust of the directors, where the stockholder has no means of redress within the corporation itself, or where the affairs of the corporation are in the hands of a receiver, or as in this case in the hands of Commissioner of Finance of the State of Missouri for liquidation, where after request to sue the receiver or the Finance Commissioner refuses to bring such suit. 14A C.J. 154; Pomeroy's Equity Jurisprudence, Student's Edition, 631; Hannerty v. Standard Theater Co., 109 Mo. 305; Bank v. Hill, 148 Mo. 394; Slattery v. Transportation Co., 91 Mo. 217; State ex rel. Sanitary Flushing Mach. Co. v. Garesche, 210 S.W. 900; Proctor v. Farrar, 213 S.W. 469; Caldwell v. Eubanks, 30 S.W. (2d) 976; Darrah v. Pemiscot County Bank, 256 S.W. 560; Ex parte Chetwood, 165 U.S. 443; Ellis v. Mercantile Co., 103 Miss. 560; Warren v. Robinson, 19 Utah, 289. (2) The exclusive right to bring this action is not vested in the Commissioner of Finance of the State of Missouri. Sec. 11724, R.S. 1919; Halse v. Argetsinger, 18 Fed. (2d) 944; Ex parte Chetwood, 165 U.S. 443; Caldwell v. Eubanks, 30 S.W. (2d) 976; Planter v. Natl. Nassau Bank, 160 N.Y. Supp. 297; 17 Ency. Pl. & Prac., 776-777; Bank v. Hill, 148 Mo. 394; 14 C.J. 933; 7 C.J. 569-570. (3) The suit is properly the subject matter of equitable jurisdiction. Pomeroy's Equity Jurisprudence (2 Ed.), sec. 1088, pp. 1616-1626; 14A C.J., secs. 1866, 1922-3; 21 C.J. 117; Fisher v. Parr, 92 Md. 245; Citizens Loan Assn. v. Lyon, 29 N.J. Eq. 110; Bowerman v. Hammer, 250 U.S. 504; Briggs v. Spalding, 141 U.S. 132. (4) The facts pleaded in petition state a good cause of action against the defendants, who were directors of the bank, and show negligence, carelessness, mismanagement and breach of trust. Lyons v. Corder, 253 Mo. 539; Bank v. Hill, 148 Mo. 380; Stone v. Rottman, 183 Mo. 580; Thompson v. Greeley, 107 Mo. 590; Green v. Officers of Knoxville Bank, 182 S.W. 244; Greenfield Savings Bank v. Abercombe, 97 N.E. 897; Martin v. Webb, 110 U.S. 15; Boulicant v. Oriel Glass Co., 283 Mo. 249; Dent v. Priest, 86 Mo. 482; Slattery v. Transportation Co., 91 Mo. 217; Ward v. Davidson, 89 Mo. 445; Louisville Natl. Bank v. Loving, 82 Ky. 370; Hunt v. Cary, 82 N.Y. 65. (5) The pleading of two causes of action in one count cannot be raised by demurrer. Wilson v. Ry. Co., 67 Mo. App. 443; Robert v. Anderson, 254 S.W. 725; State ex rel. Dehaven v. Davis, 35 Mo. 406; Jordan v. Transit Co., 202 Mo. 426. (6) Even though there was a misjoinder of some party defendant, the demurrer should not have been sustained. Alnutt v. Leper, 48 Mo. 319; Brown v. Woods, 48 Mo. 330. (7) The suit is not prematurely brought.

Redick O'Bryan and Roy D. Williams for respondents.

(1) The demurrer was properly sustained. It is conclusively presumed that the court sustained the demurrer upon all the grounds. Scott v. Taylor and Altmen, 231 Mo. 654, 132 S.W. 1149. (2) The commissioner, being a receiver, and no request being made to the circuit court to direct the receiver to bring suit, the demurrer was properly sustained. Coeur D'Alene & St. J. Trans. Co. v. Ferrell, 128 Pac. 565; Tiffany on Banks and Banking, p. 304; Caldwell v. Eubanks, 30 S.W. (2d) 976, 326 Mo. 185. (3) All remedies were not resorted to by the plaintiff before the suit was brought. Caldwell v. Eubanks, 30 S.W. (2d) 976, 326 Mo. 185. (4) Two causes of action were joined in one count of the petition and not of the same class. Merrian v. Star-Chronicle Publ. Co., 29 S.W. (2d) 201; Dorrance v. Dorrance, 165 S.W. 783, 257 Mo. 317; Watts v. Meyer, 189 S.W. 29; Darrow v. Briggs, 169 S.W. 118; Mulholland v. Rapp, 50 Mo. 42; Roberts v. Anderson, 254 S.W. 723. (5) There is a misjoinder of parties defendant. The Bank Commissioner was not a proper party.

STURGIS, C.

The trial court sustained a demurrer to plaintiff's petition, who refused to plead further, and final judgment was rendered for defendants and plaintiff has appealed. The sufficiency of the petition to state a cause of action in favor of plaintiff and against defendants is the sole point at issue.

The petition states that prior to September, 1926, the Franklin State Bank was legally incorporated and engaged in the general banking business at Franklin, Missouri, and on that date, being insolvent, by action of its board of directors, it voluntarily closed its bank and banking business and placed its assets and business in the hands of the State Commissioner of Finance, under the provisions of Section 5316, Revised Statutes 1929, who took charge of same and has proceeded to liquidate such bank under the applicable laws; the plaintiff was and is a stockholder in said bank owning three $100 shares of its capital stock of $10,000. The defendants are the directors of such insolvent bank, who were in charge of its business at and prior to its insolvency, and the plaintiff has joined as defendants the Franklin State Bank, the State Commissioner of Finance and his deputy who is in immediate charge of the liquidation of this bank. Plaintiff alleges that he brings this suit not only in his own behalf, but in behalf of the corporation and all the shareholders and creditors of the same. He alleges as a basis of his action that the defendant directors of the bank, while in charge of the same, negligently and carelessly failed and omitted to discharge their duties as directors imposed on them by law in that they failed to direct, inspect, manage, control and supervise the officers and business of the bank, but, on the contrary, permitted the cashier, F.A. Temple, to perform all the duties of all officers of the bank without supervision or examination of his transactions, and allowed him to borrow from the bank sums of money in excess of the amount the bank or its directors could so loan, and without taking any security therefor; that they negligently and carelessly permitted said Temple to loan the bank's money to insolvent persons whose insolvency was known to said directors; that said directors negligently allowed directors and officers of the bank to borrow money from the bank in excess of the amounts allowed by law to be loaned to them. Plaintiff further alleges that defendants as directors of said bank employed and put in charge of the affairs of the bank said F.A. Temple as cashier, knowing him to be young, inexperienced and incapable of managing said bank, and with such knowledge kept him in such position and allowed him complete control and management of the bank, and allowed him to loan money and extend credit to individuals without consulting the directors; that defendant directors failed to hold monthly meetings for the purpose of examining and inquiring into the condition of the finances and business of the bank; that no such meetings were held for long periods of time and when held were attended by only one or two of the directors; that no investigation was made as to the condition of the bank and the statement of said F.A. Temple as to all things was accepted without investigation; that said board of directors delegated to said Temple the right to create large obligations by the bank without ascertaining for what purpose the money so obtained was to be used or the necessity for creating such liabilities; that the directors negligently and carelessly fixed the amount of the bond of said Temple as cashier at $5000, which sum was wholly inadequate to protect the said bank, and that such fact was known to the board of directors. Plaintiff further alleged that for a long time prior to the closing of said bank the said Temple was engaged in playing the stock and grain markets and using the funds of the said bank with which to gamble in grain and stocks; that the defendant directors knew, or could have known by the exercise of ordinary care and diligence, of the gambling activities of the said F.A. Temple, and that he was misappropriating the funds of the bank, but that they continued to retain him in his position of trust and responsibility; that Temple forged numerous and sundry notes for large amounts and placed the same in the note files of the bank; at which time the said Temple took from the funds of the bank cash in amounts to correspond with said notes, and that had the directors exercised the diligence and care required by law, said notes would have been discovered to be forged and the losses to said bank could have been averted; that at the time said bank was closed said Temple was short in his accounts with the bank in the sum of $29,100, which said amount he had taken from the funds and assets of said bank and converted to his own use. The plaintiff then sets out in detail many specific acts of negligence on the part of defendants resulting in loss of the bank's assets and specifies in detail a large number of loans made by the bank through its cashier to named individuals and firms who are alleged to have been insolvent at the time the loans were made within the reasonable knowledge of the defendants had they given any attention or made any investigation. These alleged facts need not be here set out at greater length as defendants do not question the sufficiency of the petition in this respect. Plaintiff alleges that the losses of the bank due to and caused by defendants' neglect of their duties as directors of the insolvent bank amount to $32,188.07. The petition then closed with this declaration...