Reynolds v. Third Nat. Bank

• Decision Date: 16 July 1920
• Docket Number: No. 20156.,20156.
• Citation: 225 S.W. 901
• Parties: REYNOLDS v. THIRD NAT. BANK OF ST. LOUIS.
• Court: Missouri Supreme Court

225 S.W. 901

REYNOLDS v. THIRD NAT. BANK OF ST. LOUIS.

No. 20156.

Supreme Court of Missouri, Division No. 2.

July 16, 1920.

Rehearing Denied December 1, 1920.

Appeal from St Louis Circuit Court; James E. Withrow, Judge.

Action by Matt. G. Reynolds, receiver of the Continental Assurance Company of America, against the Third National Bank of St. Louis. From judgment for defendant, plaintiff appeals. Affirmed.

This action was brought to the October term, 1914, of the circuit court of the city of St. Louis, by Matt. G. Reynolds, receiver of the Continental Assurance Company of America, appellant, against Third National Bank of St. Louis, respondent.

It is unnecessary to set out the pleadings in full, but they will be referred to when there is any occasion for so doing. The facts as stated by respondent and the referee are set forth in respondent's statement and brief as follows:

"This is an action by Matt. G. Reynolds, as receiver of the Continental Assurance Company of America, against the Third National Bank of St. Louis for money totaling $99,899.-18, alleged to have been deposited by said assurance company in said bank between February 26, 1909, and June 9, 1910.

"The case was tried below before Hon. Joseph H. Zumbalen, referee, who found the issues in favor of respondent and recommended judgment accordingly. The lower court sustained the finding of the referee and rendered its judgment thereon in accordance with said finding, and the receiver appealed to this court, February 28, 1916.

"The inception of the account with respondent's bank was thuswise: After the promoters of the proposed insurance company had executed its declaration of intention to organize said company as required by statute, but before any other steps had been taken toward the formation of said company or to secure subscriptions to its capital stock, a need of funds to pay expense arose. Thereupon two of the corporators who intended later to subscribe for capital stock in the company furnished to Harry B. Gardner, who was the moving spirit of the enterprise, $1,500 of their funds to be used in defraying said expenses. Gardner himself gave something more than $600 from his private funds and borrowed some 6,000 odd dollars by means of a mortgage on his house to be used for the same purpose. It was agreed among the incorporators that Gardner should deposit said funds in the bank for the purposes stated and that it should be disbursed therefor by means of checks authenticated by Gardner's signature. (Italics ours.)"

On or about February 5, 1909, said Gardner and 14 associates duly filed their declaration of intention to form a corporation for the purpose of making assurances upon the lives of individuals under the provisions of article 11, c. 119, R. S. 1909, and gave to the proposed corporation the high-blown name of Continental Assurance Company of America.

On February 26, 1909, Harry B. Gardner opened an account with defendant bank in the name of said assurance company. In accordance with the usual custom of the bank, Gardner was required to fill out a signature card which he did by inserting the words "Continental Assurance Company of America," 1309-10 Syndicate Trust Building, Olive and Tenth, and by writing his name with the word "secretary" under the following statement, "Below please find authorized signature which you will recognize in payment of funds or the transaction of other business on our account." Mr. Galbreath then introduced Gardner to the tellers of the bank, one of whom placed on the signature card the date of the opening of the account, thus, "2-26-09" and filed said card with a paying teller of the bank.

It appears that Gardner did not tell Galbreath or any other representative of the bank anything as to the status of the Continental Assurance Company of America, or the nature of its business; nor was inquiry made regarding these matters by the bank; and neither Galbreath or any other officer of the bank had any actual knowledge concerning said assurance company.

The bank had many accounts which belonged to individuals, but which were carried on its books in names that apparently were those of corporations.

Two of the corporators who signed the declaration and proposed articles of said assurance company had omitted to acknowledge same when the publication thereof was made in the St. Louis Times. This was not discovered until about March 27, 1909, on which said date said two corporators did acknowledge said instruments when they were again published in said St. Louis Times.

On April 24, 1019, the Secretary of State of Missouri issued to the corporators of said proposed company a certificate of incorporation, certifying that said association on said date became a body corporate, duly organized under the name of Continental Assurance Company of America, and was entitled to all of the rights and privileges granted to life and disability insurance companies under the laws of Missouri for a term of 999 years, and that the amount of the capital stock of said company was $500,000.

The proposed articles of association provided that the capital stock should be divided into 50,000 shares of $10 each, of which 40 per cent., or $200,000, should be fully paid up and 60 per cent. should be fully subscribed for and notes therefor taken from the subscribers, secured by good and sufficient security.

Said articles provided for a board of nine directors chosen from the stockholders, and C. Porter Johnson, Lee W. Grant, and William W. Steele were chosen to serve one year; Allen Hamilton, Grant Gillespie, and Wm. H. Douglass were chosen for two years; and Harry M. Coudry, F. M. Estes, and Harry B. Gardner were chosen for three years.

On March 31, 1909, and before the certificate of incorporation was issued by the Secretary of State, seven of the nine directors held a directors meeting, viz., Harry M. Coudry, F. M. Estes, Harry B. Gardner, Grant Gillespie, C. Porter Johnson, Wm. H. Douglass, and W. W. Steele, at the office of the company, ostensibly as the board of directors of said assurance company, and offered a resolution appointing Harry B. Gardner fiscal agent for the company, and authorizing him to sell 45,000 shares of the company's stock at $25 per share cash, or nine-month installments, and to sell the remaining 5,000 of the capital stock at $12.50 per share to "persons for influential and financial reasons." This stock was to be known as "trustee or charter member stock, and not more than 500 shares thereof were to be sold to one person. It further provided that Gardner should pay all expenses of every kind and nature incurred in the sale of said stock, and was to be allowed a commission of 24 per cent. upon the selling price of the stock. The minute book of the company states that said resolution was read by the secretary of the meeting, but does not show it was voted on or adopted.

On October 9, 1909, after due notice, majority of the board of directors held a meeting, and by-laws were adopted creating an executive board having all of the powers of the board of directors when the latter was not in session, and providing that salaries of $3,000 per annum should be paid to the president, secretary, and treasurer, during the time the company's stock was being sold, after which the salaries were to be increased. Harry M. Coudry resigned as president, and a number of the directors resigned, and an equal number were appointed to fill the vacant places, and on November 18, 1909, said executive board, consisting of the president, secretary, and treasurer, held a meeting and accepted Coudry's resignation and selected Walter J. Miller as president to serve out Coudry's term.

From March 1, 1909, to June 9, 1910, there...