OPINION
WILLIAMS,
C.
This is an action by Francis M. Hayward as
Receiver of the Commercial Savings Company against T. K.
Elliott, C. W. Scarritt and others. A judgment was rendered
for plaintiff, and defendant Scarritt has appealed to this
court.
No
attack was made upon the petition before the trial. However,
a vigorous attack is now made upon the petition, and
therefore we set out portions of the petition as they apply
to the objections here made.
"That
the Commercial Savings Company was incorporated under the
laws of Missouri on the 23rd day of March, 1922, with a
capital of $ 200,000
with 2000 shares of stock of the par value of $ 100 each;
that none of such stock has been paid up, that in July, 1922,
said company took a lease at a high monthly rental upon a
banking room in the Scarritt Building in Kansas City,
Missouri, and began to do a banking business at a great
expense and invited the public to become depositors therein;
that on the 2nd day of December, 1922, said company had
dissipated the deposits of the depositors and had become
hopelessly insolvent owing to its depositors and other
creditors over $ 13,000 and had less than $ 500 in cash when
said receiver was so appointed; that said receiver under the
order of the court has already allowed claims against said
company to the amount of $ 13,474.69 on which the wife of W.
L. Jones has paid $ 742.70 and said W. L. Jones has paid $
100 leaving still subsisting claims in the amount of $
12,631.99; that there are in said receiver's hands funds
not exceeding $ 250 of available assets with which to pay
such claims and costs of suit.
"That
defendant Charles W. Scarritt being a stockholder in the
company owning the Scarritt Building and for the purpose of
renting banking room in such building to the Commercial
Savings Co., on or about July 25, 1922, procured from said W.
L. Jones sixteen shares of stock in said company and
permitted his name to be used as vice-president and director
of said company for the purpose of attracting depositors to
said company and by reason thereof great numbers of
depositors were attracted to said company and intrusted their
savings to said company, and that said Charles W. Scarritt
knew (or by the exercise of ordinary care could have known)
that no part of such stock was paid up in said Commercial
Savings Company; that the par value of said stock so procured
by said Charles W. Scarritt was $ 100 per share; that at the
purchase of same said defendant promised to pay to said
company the par value, to-wit, $ 1600.
"That
there are no other solvent stockholders whose stock is unpaid
within the jurisdiction of this court and the plaintiff is
wholly without adequate remedy at law; that the officers of
the company put up on the windows of said banking room where
all the public could and did see the name of the company and
the statement that its capital was $ 200,000 which facts all
said defendants knew and permitted to be
done and by reasons whereof many persons who are now
creditors of said company believing said statements to be
true and that said company had a paid up capital of $ 200,000
deposited their money in said company which implied promise
said defendants ought in equity and good conscience be
compelled to make good."
In the
petition judgment is then asked for the value of the stock so
unpaid and which was issued to defendant C. W. Scarritt.
The
answer of defendant Charles W. Scarritt, was a general
denial.
The
evidence showed the appointment of the receiver and order
authorizing the institution of this suit.
As to
the claims and insolvency of the company there is no
question.
The
articles of incorporation of the defunct company were offered
in evidence. In these articles of incorporation it was
recited:
"That
the amount of the capital stock of the company is two hundred
thousand dollars ($ 200,000) divided into two thousand
(2,000) shares of the par value of one hundred dollars ($
100) each; that two hundred thousand dollars ($ 200,000)
thereof has been in good faith subscribed, and one hundred
thousand dollars ($ 100,000) thereof actually paid up in
lawful money of the United States and is in the custody of
the persons named as the first board of directors or
managers."
The
record shows: "Although the articles of incorporation of
the Commercial Savings Company recited that $ 100,000 of the
capital stock of said company was actually paid up in lawful
money of the United States and was in the custody of the
persons named as the first board of directors or managers, as
a matter of fact no cash had been paid and no money in any
amount had been paid by the subscribers for said stock and
there was no money in the hands of the directors named in
said articles, at the time of the signing of said articles or
at the time of the issuance of the certificate of
incorporation of said company. The directors of the
Commercial Savings Company at the time of its incorporation
held a certificate of deposit for $ 110,000 issued by the
Central Trust Company but the Central Trust Company was
merely a paper corporation and the certificate of deposit so
issued by it did not represent or evidence the deposit of any
money with the Central Trust Company by the new company or
its directors. The Commercial Savings Company began its
business in the Scarritt Building shortly after the issuance
of its certificate of incorporation."
The
stock book showed: "Sixteen shares issued to C. W.
Scarritt; dated July 25, 1922; transferred from W. L.
Jones."
The
stock certificate which was introduced in evidence
corroborates the entry in the stock book.
The
defendant did not sign any subscription for stock.
W. L.
Jones seems to have been the moving spirit in the enterprises
and testified that he had no money or property with which to
pay the claims or creditors of the company.
Witness Jones testified that he had never
discussed with any one of the persons who acquired stock the
manner of incorporation nor informed them that the stock had
not been paid for.
It
seems that at a meeting of the Executive Committee, Mr. C. W.
Scarritt was elected a director in the Commercial Savings
Company but was never notified of this election. The evidence
shows that W. L. Jones received a letter from C. W. Scarritt,
the letter having been lost the witness gave the contents as:
"He
agreed to act as vice-president of the company if elected,
provided the business was handled according to law, the way
he worded it. I am not sure just what it was, but something
along that line."
This
letter was written about the time Mr. Scarritt took the
stock.
The
Commercial Savings Company was
the successor to the Central Trust Company. The change of
name being by reason of the fact that the name of
"Central Trust Company" was not available.
A
contract was offered in evidence between C. W. Scarritt, W.
L. Jones and Commercial Savings Company which is as follows:
"In
consideration of the execution by Second Parties of a lease
on the banking room in the Scarritt Building in the said
city, owned by The Scarritt Estate Company, in which First
Party is interested, which lease has this day been executed,
said Scarritt has agreed to purchase and has this day
purchased from said Jones sixteen (16) shares, of the par
value of $ 100 per share, of the capital stock of said
Commercial Savings Company, which stock has this day been
delivered to First Party, and First Party hereby agrees to
pay for same the sum of $ 1600 payable at the rate of $ 200
per month, beginning July first, 1922; provided, however,
that said monthly payments shall be made only in the event
the terms of said lease have been complied with by the
lessees therein; and that in the event said terms have not
been complied with, First Party shall not be required to
continue payment, but shall return to said Jones an amount of
said stock equal to the unpaid balance of said $ 1600 and in
such event First Party shall no longer be liable on his
contract of purchase.
"In
consideration of the premises, Second Parties agree that on
July first, 1924, they will, repurchase the stock in said
Commercial Savings Company so bought and paid for by First
Party, and will pay therefor to First Party or assigns the
sum paid by First Party for said stock, or will procure and
produce a purchaser for said stock who will pay said First
Party or his assigns the amount so paid for said stock by
First Party; and said First Party hereby agrees to sell,
transfer and deliver said stock upon receipt of such payment.
Until the repurchase of said stock, First Party or assigns
shall be entitled absolutely to any and all dividends that
will be declared or paid on said stock, if
the dividends paid do not amount to a sum equal to six per
cent per annum of the said sum of $ 1600 from July 1, 1922,
to the date of said repurchase of said stock then Second
Parties are to pay First Party said interest as part of the
repurchase price of said stock.
"Witness
Our Hands this 21st day of July, 1922.
"(Signed)
CHARLES W. SCARRITT
"W.
L. JONES
"COMMERCIAL
SAVINGS COMPANY
"By
W. L. JONES, President."
Bearing
the same date the Scarritt Estate Company made a lease with
W. L. Jones and the Commercial Savings Company, beginning on
July 1, 1922, and extending until the 30th day of June, 1927....
