National Bank of Commerce in St. Louis v. Francis
| Decision Date | 20 December 1922 |
| Citation | 246 S.W. 326,296 Mo. 169 |
| Parties | NATIONAL BANK OF COMMERCE IN ST. LOUIS, Appellant, v. DAVID R. FRANCIS et al |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. J. Hugo Grimm Judge.
Affirmed.
George L. Edwards for appellant.
(1) The first count of the petition states a cause of action on the notes of the Allegheny Improvement Company. The bondholders of the St. Louis & Northern Arkansas Railroad Company were and are principals or partners in acquiring and extending that property. 1 Romley on Modern Law Partnership, sec. 160; 30 Cyc. 397-398; Martin v. Fewell, 79 Mo. 401; Bank v. Altheimer, 91 Mo. 195; Torbert v Jeffrey, 161 Mo. 645; Nugent v. Armour Packing Co., 208 Mo. 481; Beauregard v. Case, 91 U.S 134; Meehan v. Valentine, 145 U.S. 611; Cleveland Paper Co. v. Courier Co., 67 Mich. 162. (2) The notes of the Allegheny Improvement Company are, in fact, what the principals represented them to be "notes." Indeed, they are negotiable promissory notes, and, of course, there must be a maker liable for their payment. If there were no maker liable for their payment they would not be notes -- not even non-negotiable, much less negotiable promissory notes. Every note, whether negotiable or non-negotiable, must have a maker, without which it is not a note, negotiable or non-negotiable. Secs. 788, 970, 980, 846, R.S. 1919; Story on Promissory Notes (7 Ed.) p. 2; 1 Daniel on Negotiable Instruments (6 Ed.), sec. 28; 8 Corpus Juris, Secs. 80, 93; Bouvier's Law Dictionary, p. 2744; 3 Words & Phrases (Second Series) p. 1261; Bick v. Clark, 134 Mo.App. 544. (3) If it is not clear from their face that the bondholder-principals are liable on the notes of the Allegheny Improvement Company, then at least there is doubt about who is liable on these notes. On their face they exempt the Allegheny Improvement Company, its stockholders and the agents. Since the signer, the Allegheny Improvement Company, is exempt from liability, it is clear that the real maker for whom the Allegheny Company acted, or was used, may be shown by parol evidence. In other words, it is permissible to show who were acting under the assumed name of the Allegheny Company. Sec. 805, R.S. 1919; Sparks v. Dispatch Transfer Co., 104 Mo. 531; Bank v. Lead Co., 173 Mo.App. 634. (4) The principals expressly authorized the agents to extend the property of the St. Louis & North Arkansas Railroad Company and to borrow the necessary money for that purpose on notes of the Allegheny Improvement Company. Subdivisions (d), (e), (f), (h), (i), third paragraph, Principals' Agreement. (5) Where parties put forward a corporation, whether real or pretended, to act as their agent in the conduct of their business from which they are to derive the profits and the benefits, the courts will look right through the corporation to the principals and hold the principals liable for the engagements of the corporation contracted in the conduct of their business. This is an elementary rule of the Law of Agency. Phillips v. Frisco Railroad, 211 Mo. 419. (6) The principal who has accepted and appropriated the fruits and benefits of the action of an agent cannot hold on to such fruits and benefits and repudiate the agent. It is an elementary proposition that a party cannot grasp the benefits of a contract with one eager hand, while thrusting aside its burdens with the other. The burden and the benefit must go hand in hand. 31 Cyc. 1267; Kirkpatrick v. Pease, 202 Mo. 471, 489. (7) The great majority of the bondholder-principals, if not all, were subscribers to the agents' agreement, and, through it, loaned moneys to the partnership, taking therefor the notes of the Allegheny Improvement Company. If there was any doubt about the authority of the agents to borrow money on these notes for the bond-holder-principals and give their promise to pay the same, to be used in the conduct of the partnership enterprise, the power of the agents to do so was ratified and approved, at least, by all of the bondholder-principals who were subscribers to the agents' agreement. (8) The second count in the petition states a cause of action unless the bondholder-principals are liable for the payment of the notes of the Allegheny Improvement Company. Because in the event they are not liable for their payment, then no one is liable for their payment, and these notes represent in fact only a participation in a speculative railroad enterprise. That is, they are not notes at all, mere certificates of participation in or beneficial interest in a speculative railroad enterprise. The plaintiff, a national bank, had no power to loan and the bondholder-principals no power to borrow its money for use in such enterprise. If this is the correct interpretation of these contracts and the notes issued pursuant thereto, it was an ultra vires transaction in so far as the bank is concerned, and it follows the bank is entitled to recover its moneys from those who obtained and appropriated them through such transaction. Sec. 9661, 9 U.S. Complied Statutes (1916); Rev. Stats. U. S. sec. 5136; Bank v. Mathews, 98 U.S. 621; Bank v. Kennedy, 167 U.S. 362; Bank v. Hawkins, 174 U.S. 364; Bank v. Converse, 200 U.S. 425; Bank v. Wehrmann, 202 U.S. 295; Rankin v. Emigh, 218 U.S. 27; 7 Corpus Juris, sec. 798; Day v. Spiral Springs Buggy Co., 57 Mich. 146; Bank v. Bank, 173 Mo. 153.
Jourdan, Rassieur & Pierce for respondents.
(1) The bondholders depositing their bonds under the terms of the Re-organization Agreement did not thereby become partners. (a) They cannot be held liable as partners by estoppel, because the petition does not charge an estoppel, and because, under the facts pleaded, there is no estoppel. 1 Rowley on Modern Law of Partnership, sec. 91, pp. 98 and 99, and sec. 95, pp. 101 and 102; Mock v. Stoddard, 177 F. 611, 616. (b) They cannot be held to be partners by agreement, because there is no such agreement. 1 Rowley on Modern Law of Partnership, sec. 103, pp. 109 and 110; Elliott on Contracts, sec. 474; Mackie v. Mott, 146 Mo. 230. (c) The Re-organization Agreement expressly, or at least by fair implication, discloses an intention on the part of the depositing bondholders not to become partners. Re-organization Agreement, par. 3, sec. b. (2) The depositing bondholders never authorized the committee to pledge their personal credit in raising the money to construct the extensions. Re-organization Agreement, par. 3, sec. b. (3) The committee did not in fact borrow money on the personal credit of the bondholders or anyone else. They never assumed any such power. The sole security which they gave or agreed to give was the property described in the pledge agreement. See subscription agreement. (4) The notes of the Allegheny Improvement Company subscribed for by appellant contained no promise of the depositing bondholders, express or implied, for their payment. See Allegheny Improvement Company notes. (5) The notes are either non-negotiable notes or valid contracts evidencing a debt. 8 Corp. Jur. 41; McGee v. Larramore, 50 Mo. 425. (6) In either event they were within the power of a national bank to purchase by discount. 9 U. S. Complied Statutes 1916, sec. 9661; National Bank of Nashville v. Stahlman, 178 S.W. 942, syl. 3; Germania National Bank v. Cates, 99 U.S. 628, 633, 25 L.Ed. 448; McBoyle v. Union National Bank, 122 P. 458; First National Bank v. National Exchange Bank, 39 Md. 600; Westminster National Bank v. New England Electrical Works, 3 L. R. A. (N. S.) 551. (7) The transaction whereby the bank acquired these notes was "discounting" within the meaning of the National Bank Act. Bank v. Johnson, 104 U.S. 271, 26 L.Ed. 742, 744; 3 Words and Phrases, 2089. (8) Where a national bank buys notes and pays for them, it cannot rescind the contract thus fully performed and executed, and by pleading its own wrong, seek to recover the purchase price. 3 Michie on Banks and Banking, sec. 262, pp. 2009-2012; 14a Corp. Jur. p. 319; Attleborough National Bank v. Rogers, 125 Mass. 339; Chapin v. Merchants National Bank, 47 Hun, 637; Schlitz Brewing Co. v. Mo. Poultry & Game Co., 287 Mo. 400.
Jeffries & Corum for other respondents.
(1) Suit cannot ordinarily be maintained against a person whose name does not appear on the note as obligated to pay it. R.S 1919, sec. 805; Sparks v. Dispatch Transfer Co., 104 Mo. 541; Bank v. Lead Co., 173 Mo.App. 642. (2) Plaintiff seeks to avoid the application of the above rule by asserting the existence of a partnership. But defendant and other subscribers to the reorganization or depositing agreement are shown by the petition not to be partners. 2 Corpus Juris, p. 425; Mackie v. Brady, 208 S.W. 151; Hughes v. Ewing, 162 Mo. 261; Mackie v. Mott, 146 Mo. 230; McDonald v. Matney, 82 Mo. 365; Kellogg v. Farrell, 88 Mo. 594. (3) The underwriting agreement signed by plaintiff, by its terms, takes full cognizance of the provisions of the depositing agreement. Plaintiff, therefore, stands charged with full notice of all the provisions of the latter agreement and is bound by the inter sese contract therein presented. (4) Defendants, as bondholders who subscribed to the agreement of February 15, 1906, did not thereby give the committee or any other person authority to bind them personally for the payment of any loan made to secure funds to extend the railroad. The notes held by plaintiff being for extension purposes, plaintiff cannot under the provisions of the agreement look to defendants personally for payment. (5) Plaintiff is bound by the terms of an express contract wherein the committee did not borrow the money on the personal credit of the bondholders or anyone else, and the fact that the construction company was without capital will not relieve plaintiff. Being advised of all the frailties of its...
To continue reading
Request your trial