Reynolds v. Title Guaranty Trust Co.

• Decision Date: 24 October 1916
• Docket Number: No. 14435.,14435.
• Parties: REYNOLDS v. TITLE GUARANTY TRUST CO.
• Court: Missouri Court of Appeals

189 S.W. 33

REYNOLDS v. TITLE GUARANTY TRUST CO.

No. 14435.

St. Louis Court of Appeals. Missouri.

October 24, 1916.

Appeal from St. Louis Circuit Court; Rhodes E. Cave, Judge.

Action by Matt G. Reynolds, receiver of the Continental Assurance Company of America, against the Title Guaranty Trust Company. Judgment for plaintiff, and defendant appeals. Reversed.

Wilfley, McIntyre & Nardin and H. W. Allen, all of St. Louis, for appellant. John S. Leahy and Chase Morsey, both of St. Louis, for respondent.

ALLEN, J.

This is an action prosecuted by the receiver of the Continental Assurance Company of America as for money had and received. The first count of the petition is predicated upon the theory that the defendant is liable for the return of the proceeds of a check for the sum of $5,445.18, executed in the name of the Continental Assurance Company of America, and which is said to have been received by the defendant trust company in payment of a private debt of one Harry B. Gardner, a promoter of the Assurance Company. The second count of the petition is predicated upon a like theory, involving the proceeds of a check for $250. The trial, before the court without the intervention of a jury, resulted in a judgment for plaintiff on the first count of the petition, and a judgment for defendant on the second count thereof, and the case is here on defendant's appeal.

The evidence discloses that prior to March, 1909, one Harry B. Gardner borrowed certain moneys from the defendant trust company, giving the latter as security therefor a second deed of trust upon his home in the city of St. Louis. He was unable to pay this debt at maturity, and the defendant trust company caused the property to be sold under the deed of trust held by it, and purchased the same at the trustee's sale subject to a first deed of trust thereon of $10,000. It was thereafter agreed, however, between defendant and Gardner, that the latter might redeem the property by fully reimbursing defendant, the amount to be so paid amounting in all to $6,445.18; and Gardner paid defendant $1,000, leaving a balance of $5,445.18 due the trust company at the time of the transactions with which we are here concerned.

Early in 1909 Gardner was engaged in promoting the organization of an insurance company under the laws of this state, to wit, section 6895 et seq., Rev. Stat. 1909; and in furtherance of this design he and certain other persons whom he had associated with him caused to be published in a newspaper in the city of St. Louis a declaration of their intention to incorporate an insurance company to be known as the Continental Assurance Company of America, publishing therewith a copy of the proposed charter of the company sought to be organized. This publication first appeared on February 17, 1909, and was repeated on February 24th, March 3d, and March 10th, of the same year. However, a defect, or supposed defect, was discovered in the matter so published, and the same was amended and republished for four consecutive weeks beginning March 27 and ending April 17, 1909. Thereafter the declaration and the copy of the proposed charter so published were filed in the office of the superintendent of the insurance department of the state; and thereafter, to wit, on April 24, 1909, a certificate of incorporation was issued to the company, as provided by section 6900, Rev. Stat. 1909. It appears that thereafter a large number of subscriptions were procured to the capital stock of the company, but that all of its capital stock was never fully subscribed; and it consequently never obtained a certificate of authority to transact business under section 6902, Rev. Stat. 1909. Its career was terminated by plaintiff's appointment as receiver on June 10, 1910.

Prior to the issuance of the certificate of incorporation of April 24, 1909, above referred to, to wit, on February 29, 1909, Gardner opened a bank account with the Third National Bank of St. Louis, in the name of the proposed company, viz. "Continental Assurance Company of America," which account he made use of in promoting the proposed company. On March 26, 1909, nearly one month prior to the issuance of the certificate of incorporation above mentioned, Gardner drew a check upon this account, executed in the name of the Continental Assurance Company of America, "by Harry B. Gardner, Secretary," payable to the defendant trust company, for the sum of $5,445.18, and caused it to be tendered to defendant in payment of said amount necessary to redeem his property. The evidence is that defendant refused to accept this check and notified Gardner that it would accept only cash or a cashier's check. It appears, however, that the indorsement of defendant was placed upon the check by one of its officers. It was subsequently presented to the Third National Bank, and was utilized to procure a cashier's check for a like amount, payable to the defendant, which check the defendant accepted. Defendant thereupon deeded the property—i. e., Gardner's home— to one W. H. Douglas, subject to the first mortgage thereon, in conformity to an understanding and agreement had between the parties in the premises. The connection of Douglas with the matter will more fully appear from the evidence presently to be stated respecting the source from which the money used to redeem the Gardner property was derived.

It appears that on March 23, 1909 (more than one month prior to the issuance of the certificate of incorporation to the Assurance Company) as the result of a loan of $6,250 procured by Gardner from the Citizens' Bank of Senath, Mo., or from one A. A. Caneer, its cashier, the account which Gardner had opened in the Third National Bank in the name of the Continental Assurance Company of America, was credited with the sum of $6,243.75, being the proceeds of a draft, less exchange. It appears that a draft for $6,250 was drawn in the name of the Continental Assurance Company by Gardner, as secretary, upon the Citizens' Bank of Senath, which was subsequently honored by the latter bank. It further appears that prior to this time there had been deposited in this account, in the Third National Bank, but the sum of $2,125, and that $1,625 had been checked out, leaving a balance in the account of $500. After the deposit of the $6,243.75 above mentioned, to wit, on March 26, 1909, Gardner's indebtedness to defendant was paid from this account in the manner above stated.

Douglas, who had formerly been president of the Citizens' Bank of Senath, had, shortly prior to the time of the transactions here in question, become connected with the promotion of the Assurance Company. He testified that after the sale of the Gardner house under foreclosure, Gardner, or one Gillespie for Gardner, asked him to assist in borrowing the money necessary to redeem the property and that in pursuance of such request he undertook to procure a loan for such purpose from the Citizens' Bank of Senath; that he was not then an officer of the bank, but a stockholder, and "looked after some affairs of the bank on request," because his father and brother were directors thereof and his family interested therein; that he took up the matter with Caneer, cashier of the bank, and advised him that the second deed of trust on the Gardner house would be safe security for a loan of $6,500; that the loan was thereafter made, and he (Douglas) received from Gardner a "check or draft" and redeemed the property, taking title in his own name for the protection of the Citizens' Bank of Senath, which he represented; and that after so acquiring title to the property he executed a deed of trust thereon for $6,500, and delivered it either to Gardner or Gillespie for the purpose of having it sold, and thus procure money to repay the Citizens' Bank of Senath; and that after the execution of this second deed of trust he (Douglas) conveyed the property to Gardner, subject to the two deeds of trust. He stated that the money in question was borrowed from the Citizens' Bank of Senath by Gardner personally, and not by the Assurance Company, "as all transactions up to that time were with Gardner personally"; but that the name "Continental Assurance Company of America" was used for the reason that Gardner was "in bankruptcy" and did not want to transact business in his own name.

Gardner testified that the fund placed to the credit of the account in the name of the Continental Assurance Company in the Third National Bank, to wit, $6,243.75, was the proceeds of a loan secured by him from A. A. Caneer, cashier of the Citizens' Bank of Senath; that it was a part of a loan for $10,000 which he (Gardner) had arranged to get from Caneer, the money to be used in promoting the Continental Assurance Company. According to his recollection the deposit so made was a personal check of A. A. Caneer. He testified that he entered into a written contract with A. A. Caneer on March 12, 1910, for the loan to him personally of $10,000. It appears that the original contract had been lost, but the witness identified a copy thereof, which was introduced in evidence, and which is as follows:

                               "St. Louis, Mo., March 12, 1909
                

"This contract, entered into by and between A. A. Caneer and H. B. Gardner, for and in consideration of a loan of ten thousand dollars ($10,000.00), to be made to H. B. Gardner by A. A. Caneer, and the services of Caneer in the office and officially, as may seem best for the interest of the Continental Assurance and the International Fire Assurance Companies now being organized in St. Louis, Missouri, the said loan or any part less than $10,000.00 loaned shall be paid back to said Caneer on or before January 1, 1910; and it is understood that A. A. Caneer shall devote his entire time and assistance toward the organization of the insurance companies up to January 1, 1910, and H. B. Gardner guarantees to pay the said loan as aforesaid and pay to A. A. Caneer the sum of ten thousand dollars...