Mitchell v. Newton County Bank

• Decision Date: 22 April 1926
• Citation: 282 S.W. 729,220 Mo.App. 223
• Parties: MARY L. MITCHELL, APPELLANT, v. NEWTON COUNTY BANK, ET AL., RESPONDENTS.
• Court: Missouri Court of Appeals

282 S.W. 729

220 Mo.App. 223

MARY L. MITCHELL, APPELLANT, v. NEWTON COUNTY BANK, ET AL., RESPONDENTS.

Court of Appeals of Missouri, Springfield

April 22, 1926

Appeal from the Circuit Court of Newton County.--Hon. Charles L Henson, Judge.

REVERSED AND REMANDED (with directions).

Judgment reversed and remanded.

Leo H Johnson and John T. Sturgis for appellant.

L. D Rice and Horace Ruark for respondents.

DAILEY, J. Cox, P. J., and Bradley, J., concur.

OPINION

DAILEY, J.--

This is an action to have plaintiff adjudged to be the owner of certain shares of stock of the Newton County Bank at Neosho, Missouri, and that said bank be required to issue new stock in exchange for and on surrender of the original certificates assigned and endorsed to her. The answer sets up an equitable defense of estoppel, alleging among other things that said stock had been seized and attached under a writ of attachment issued in a suit instituted by defendant bank against one L. E. Mitchell, on certain past due promissory notes executed by said Mitchell to defendant bank; that said bank had loaned to L. E. Mitchell on the faith of his apparent ownership of said stock which had been issued to him at the organization of the bank in September, 1915, which stock was registered on the books in his name; that Mitchell exercised and claimed entire ownership of said stock from the time of the organization until shortly after the attachment suit was brought in July, 1924; "that during all that time plaintiff failed to have the said shares of stock registered in her name and failed to request to have the said shares of stock so registered, neither did she in any way or manner notify the defendant bank or any officer in charge of the same, that she had any right or claim thereto or interest therein." The answer further charged that plaintiff knew of the conduct of L. E. Mitchell in relation to said stock and that all his acts were "done with the knowledge of his plaintiff and her sister, Maria J. Mitchell, with a preconceived design and intent to give him, the said L. E. Mitchell, a false credit and standing with the defendant bank and thus enable him to procure credit therefrom and with and under the arrangement, understanding and conspiracy between them to cheat and defraud such bank out of its money, etc." The reply was a general denial. The cause was tried before the court resulting in a judgment in favor of defendants, from which plaintiff has appealed. The issues in this case sound in equity; therefore, this case is here for review on the whole evidence as well as the law. [Lacks v. Butler Co. Bank, 204 Mo. 455, 102 S.W. 1007.] The trial court, however, made a most comprehensive finding of facts clearly justified by the evidence which we have adopted, although we have not been able to agree with the conclusions of law of the learned trial judge. The finding of facts is as follows:

"During the months of July and August, 1913, the defendant, Newton County Bank, was in the process of organization. To that end the Articles of Incorporation were drawn and signed by seven purported shareholders in which Lee Mitchell subscribed to 60 shares, Armstrong, 53 shares, and Hattler, 122 shares, with the ostensible purpose of keeping and retaining said shares. The remaining stock was subscribed W. A. Phipps, 42 shares, and W. E. Sims, M. T. Rice and L. D. Rice, 41 shares each. The capital stock was 400 shares of the par value of $ 100 each.

It was the intention of the four persons last named to only hold 10 shares each, and to assign the remaining shares above 10 shares each subscribed, to others who might desire to associate with them in the enterprise.

The said Lee Mitchell's 60 shares were paid for by his check for one thousand dollars and two notes of a Hazeltine, one for four thousand and one for one thousand dollars. The thousand dollar check was the check of Lee Mitchell's.

The Hazeltine notes were in the name of Mariah J. Mitchell but was the property of Mariah J. Mitchell and Mary L. Mitchell, were held half and half. The notes, when used to lift the stock bore the endorsement of the payee, Mariah J. Mitchell, in blank, and were endorsed in blank by said Lee Mitchell and delivered to the bank.

Sixty-five dollars was refunded to Lee Mitchell by the defendant bank, in October. This sixty-five dollars represents accrued interest on said notes, but possibly depleted by the difference in the discount of six per cent note and an eight per cent note.

The 60 shares subscribed by Lee Mitchell were evidenced by stock issued to him in which 5 certificates represented 10 shares each and two certificates represented five shares each, making the 60 shares. The 60 shares, as stated, were issued to Lee Mitchell with his name therein as owner and holder. These shares were all issued on the 29th day of August, 1913, and bore that date and were shortly thereafter delivered to Lee Mitchell.

On the 18th day of September, Mitchell, without the knowledge of his associates or the defendant bank, endorsed four of these 10 shares certificates and two five share certificates, on the back thereof, ostensibly transferring them so as to transfer Mariah J. Mitchell 25 shares and Mary L. Mitchell 25 shares of this capital stock. The plaintiffs, Mary L. and Mariah J. Mitchell, held this stock, from that time forward, without the knowledge of the defendant bank and its officers connected therewith, from that time until a short time before this suit was filed when the first knowledge come to the defendant and its officers of the claim they had to such ownership. The delivery of this stock was made promptly upon such endorsement, to Mariah J. Mitchell, at Brighton, Colorado, and such delivery was likewise without the knowledge of the defendant and its officers.

It was the secret understanding between Mary L. Mitchell and Mariah J. Mitchell and their brother, Lee Mitchell, that he should buy this stock for themselves, but this purpose was not disclosed to the defendant or its officers or the men organizing the defendant bank, and Lee Mitchell complied with this understanding by making the said endorsement and delivery of the stock, the stock was not surrendered back to the bank for re-issue in their name, nor was it ever disclosed to the organizers of the bank, or the bank or its officers that such was the arrangement or that it had been carried out to that extent.

The plaintiffs, Mariah J. Mitchell and Mary L. Mitchell, never tendered this 25 shares each back to the bank and offer to surrender it for re-issue of stock in their names until July 26, 1924, a few days prior to the filing of this suit.

On September 7, 1913, the bank opened for business and the Hazeltine notes were taken over by the bank on September the 11th, 1913, which was the date of the delivery of the 60 shares of the stock to Lee Mitchell.

The said Lee Mitchell was a member of the first board of directors of the bank duly elected as such by his associates and by re-election remained a member of the Board until September, 1923.

On September the 12th, 1913, the said Lee Mitchell borrowed and gave his note to the bank for the sum of $ 800, and on September the 15th, 1913, $ 3000, and on September 24, 1913, gave the note of the Mitchell-Crittenden Tie Company and himself for $ 6,990. This credit was extended by his associates on the faith of his apparent ownership in the said 60 shares of stock, and such indebtedness was renewed from time to time in amounts varying around ten to twelve thousand dollars and from that time forward and until the time this suit was filed such indebtedness aggregated around sixteen thousand dollars.

The officers of the bank permitted the renewals upon the same apparent ownership, placing no reliance upon the Mitchell-Crittenden Tie Company, and at all times without knowledge that any part of the said 60 shares was held by the plaintiffs, Mary L. Mitchell and Mariah J. Mitchell.

On all occasions, when asked by the bank examiners and by his associates on the board of directors regarding his holding of such shares of stock, the said Lee Mitchell always asserted his ownership thereof, at one time such holding being augmented by 11 additional shares so that at one time he apparently held 71 shares of such stock.

During the whole of this time the said Lee Mitchell continued to vote all of these shares of stock at the annual shareholders meeting, drawing and collecting the dividends thereon in his own name, which was done with the knowledge of the plaintiffs, who refrained from giving to the defendant any notice of their claim or ownership thereto.

There is no testimony that Mariah J. Mitchell and Mary L. Mitchell knew of the assertions of ownership made by Lee Mitchell.

The defendant bank has instituted suit against said L. E. Mitchell and the Mitchell-Crittenden Tie Company for such indebtedness, which suit was instituted July 2, 1924, in aid of which this stock was attached as the property of the said L. E. Mitchell, but at that time the stock was not in the hands or possession of the said L. E. Mitchell.

The court concludes, as a matter of law that the plaintiffs Mariah J. Mitchell and Mary L. Mitchell, in holding these shares of stock in secret for something over ten years without disclosing their ownership thereof, thereby invested the said L. E. Mitchell with false credit and left him apparently the owner of the bank stock so far as the bank was concerned in extending a line of credit, are now...