Lucas v. Murphy

Decision Date16 December 1941
Docket NumberNo. 37615.,37615.
Citation156 S.W.2d 686
PartiesRAY B. LUCAS, Superintendent of the Insurance Department of the State of Missouri, in charge of CENTRAL STATES LIFE INSURANCE COMPANY, a Corporation, ATLAS ENAMELING COMPANY, a Corporation, ALFRED FAIRBANK and EWING TAYLOR, Appellants, v. ANDREW J. MURPHY, SR., EDWARD C. CROW and HARRY P. DRISLER, as Commissioners of the UNEMPLOYMENT COMPENSATION COMMISSION OF MISSOURI.
CourtMissouri Supreme Court

Appeal from Circuit Court of City of St. Louis. Hon. Eugene L. Padberg, Judge.

REVERSED AND REMANDED.

Bryan, Williams, Cave & McPheeters for appellants.

(1) The provisions of Section 5075 of the Revised Statutes of Missouri 1939 are inapplicable to the contributions, interest and penalties provided for in the Unemployment Compensation Law for the reason that such contributions do not constitute "taxes or fees" within the meaning of Section 5075. R.S. 1939, sec. 5075; R.S. 1939, chap. 52, arts. 1 and 2, sec. 9396; In re Mosby Coal & Mining Co., 24 Fed. Supp. 1022; State ex rel. v. Board of Regents, 305 Mo. 57. (2) Section 5075 of the Revised Statutes of Missouri 1939 is not subject to the construction that it creates a lien prior to the lien of an earlier recorded bona fide deed of trust. R.S. 1939, sec. 5075; Vincent Realty Co. v. Brown, 344 Mo. 438, 126 S.W. (2d) 1162; Straus v. Tribout, 146 S.W. (2d) 617. (3) There was no evidence in the case to show that plaintiff Central States Life Insurance Company at any time controlled the business, affairs and activities of the Standard Stamping Corporation, and the court erred in so finding and in holding that plaintiffs, therefore, were estopped to deny that the lien claimed by defendants was prior to that of the deeds of trust described in plaintiffs' petition. 1 Fletcher, Cyclopedia of Corps., sec. 43, p. 157; 21 C.J., pp. 1126, 1133; Freeland v. Williamson, 220 Mo. 217; Powell v. Powell, 217 Mo. 571; State ex rel. St. Louis v. Pub. Serv. Comm., 73 S.W. (2d) 393; Kingston Dry Dock Co. v. Lake Champlain Transportation Co., 31 Fed. (2d) 265.

Harry G. Waltner, Jr., Chief Counsel, and Edward D. Summers, Assistant Counsel, for respondents.

(1) The exaction imposed under the provisions of the Unemployment Compensation Law of Missouri constitutes taxes due and owing to the State of Missouri. Murphy v. Hurlbut Undertaking & Embalming Co., 142 S.W. (2d) 449; Murphy v. Limpp, 147 S.W. (2d) 420; A.J. Meyer & Co. v. Unemployment Compensation Comm., 152 S.W. (2d) 184. (2) The lien for taxes, created in favor of the State by Section 5075, Revised Statutes 1939, is prior and superior to the lien of a mortgage on the land of the taxpayer, even though such mortgage antedates the accrual of the taxes. Sec. 5075, R.S. 1939; Vincent Realty Co. v. Brown, 344 Mo. 438, 126 S.W. (2d) 1162; Reynolds v. Stepanek, 339 Mo. 804, 99 S.W. (2d) 65; Lustenberger v. Hutchinson, 343 Mo. 51, 119 S.W. (2d) 921; Eurengy v. Equitable Real Estate Co., 341 Mo. 341, 107 S.W. (2d) 68; Sec. 655, R.S. 1939; 22 R.C.L., p. 83, sec. 65; 63 C.J., p. 780, sec. 4; Waterbury Savings Bank v. Lawler, 46 Conn. 243; 50 C.J., p. 324, sec. 2; 33 Words and Phrases (Perm. Ed.), p. 674; Morey Engineering & Const. Co. v. St. Louis Artificial Ice Rink Co., 242 Mo. 241, 146 S.W. 1142, 40 L.R.A. (N.S.) 119, Ann. Cas. 1913-C, 1200. (3) The failure on the part of the appellants in this case to call the court's attention to constitutional questions, assigned as error, in their motion for new trial precludes consideration of such questions in this court. Macon County Levee Dist. No. 1, Macon County, v. Goodson, 14 S.W. (2d) 561; Johnson v. Underwood, 324 Mo. 578, 24 S.W. (2d) 133; City of Ferguson to Use of United Const. Co. v. Steffen, 300 S.W. 1039; Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W. (2d) 1164. (4) Control of a corporation is vested in the board of directors. Murphy v. Doniphan Tel. Co., 147 S.W. (2d) 616. (5) Since the appellants had control of the corporation which incurred the tax liability to the State of Missouri at the time such tax liability was accruing and made no effort to see that such taxes were paid, they cannot now be heard to complain against the attachment of a lien superior to their mortgage lien. Bates v. Dana, 345 Mo. 311, 133 S.W. (2d) 326; Baade v. Cramer, 278 Mo. 516, 213 S.W. 121; Williams v. Butterfield, 214 Mo. 412, 114 S.W. 13; Leonard v. Shale, 266 Mo. 123, 181 S.W. 16; Edmonson v. Waterston, 342 Mo. 1082, 119 S.W. (2d) 318.

BARRETT, C.

This is a suit to quiet the title to a lot in the City of St. Louis and involves the application of parts of the Missouri Unemployment Compensation Law (Secs. 9421-9445, R.S. Mo. 1939, 7 Mo. Stat. Ann., p. 4770, amended, Laws Mo. 1941, pp. 566-643) to Section 5075, R.S. Mo. 1939, 3 Mo. Stat. Ann., p. 2039, Laws Mo. 1937, pp. 208-209, relating to taxes and fees owed by corporations to the State of Missouri and its political subdivisions.

On December 31, 1928, the Central States Life Insurance Company was the owner of a note and deed of trust on which there was then due approximately $350,000. They were given by Standard Stamping Company and duly recorded.

In 1935 Standard Stamping Company was reorganized under Section 77(b) of the National Bankruptcy Act by the United States District Court for the Eastern District of Missouri and thereafter was known as Standard Stamping Corporation. The reorganization plan provided that the deed of trust should be foreclosed and that the secured creditor should bid the full amount of its note for the property and if it became the successful bidder would convey the lot to the company and receive in return a new note and deed of trust on the lot and, in addition, a further note secured by a chattel mortgage on the company's personal property. The reorganization plan contemplated and provided for trustees, with a pledge of common stock, and a voting trust agreement under which representatives of Central States Life Insurance Company had the power to vote the stock. The plan regulated the salaries of the company officials and provided for the real estate taxes then due. In short it was such a scheme as is generally used in reorganizations under Section 77(b) of the bankruptcy act and was fully carried out.

The Central States Life Insurance Company was the successful bidder for the lot and conveyed it to Standard Stamping Corporation receiving, in return for the purchase price, a note in the sum of $341,774.99 secured by a deed of trust, dated July 26, 1935, which it recorded. In addition the life insurance company was given a note and chattel mortgage on the personal property of the company and the common stock was transferred to the three trustees, two of whom were directors of the life insurance company.

The Standard Stamping Corporation continued in business as reorganized until August 16, 1939, when the life insurance company foreclosed its mortgages and took possession of substantially all the assets and property of the company, including, of course, the lot in question.

During the years 1938 and 1939 Standard Stamping Corporation became indebted to the Missouri Unemployment Compensation Commission for the contributions imposed by that law in the sum of $4,660.76 and a judgment was rendered in favor of the commission for the amount due on November 24, 1939. Previously, September 19, 1939, the commission filed a notice of its lien for the sum due in the office of the recorder of deeds of St. Louis.

The appellant Atlas Enameling Company purchased a part of the lot, after the second foreclosure, from the life insurance company and gave its note and deed of trust with appellant Alfred Fairbank as trustee to secure the payment. The remainder of the lot was conveyed to appellant Ewing Taylor, an employee of the life insurance company. Ray B. Lucas, Superintendent of the Insurance Department of the State of Missouri, has been substituted for the insurance company.

The appellants instituted this suit, alleging that the notice of lien filed by the Unemployment Compensation Commission constituted a cloud on their titles and interests and asked to have the title quieted and the interests of the appellants and respondents declared. The trial court found that Standard Stamping Company was the owner of the lot in 1938 and 1939 and owed the contributions due the commission for those two years and that they constituted a lien on the land superior to any interest of the appellants. The trial court also found that by reason of the voting trust and the fact that two of the trustees were directors and employees of the life insurance company, as well as directors of Standard Stamping Corporation that they controlled the company, knew of the existence of the contributions and were, therefore, estopped to deny their superiority as a lien.

Sec. 5075, R.S. Mo. 1939, 3 Mo. Stat. Ann., p. 2040, was approved June 20, 1937 and became effective ninety days thereafter (Laws Mo. 1937, pp. 204-211). In so far as the statute is pertinent to this case it is as follows:

"All taxes, or fees, of every character and description, due or owing to the state of Missouri, or any political subdivision thereof, by any foreign or domestic corporation, association, or company are hereby declared to constitute a prior lien and a preferred claim against the assets of such corporation, association, or company, and said lien shall not be lost on said assets by any transfer thereof. The payment of all taxes which are due and owed by any corporation, ... is hereby declared to be a condition precedent to the right ... to sell, ... or transfer the whole or major portion of its assets ... without all taxes levied and assessed against same having been paid in full prior to the sale, ... or transfer of such assets, is hereby declared to be null and void."

[1] The appellants' first assignment is that the trial court was in error when it held the "contributions"...

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