Reynolds v. Whittemore

• Decision Date: 01 December 1916
• Docket Number: No. 18179.,18179.
• Citation: 190 S.W. 594
• Parties: REYNOLDS v. WHITTEMORE.
• Court: Missouri Supreme Court

190 S.W. 594

REYNOLDS v. WHITTEMORE.

No. 18179.

Supreme Court of Missouri, Division No. 1.

December 1, 1916.

Motion for Rehearing Overruled December 20, 1916.

Appeal from St. Louis Circuit Court; Leo S. Rassieur, Judge.

Suit by Matt G. Reynolds, receiver, against F. Churchill Whittemore. From judgment for plaintiff, defendant appeals. Affirmed.

This is a suit by the receiver of the Continental Assurance Company to recover certain payments alleged to have been made from the funds of the company. The petition is in the ordinary form for money had and received, and is in three counts. The first is to recover money paid on a check for $138.25, dated December 27, 1909, in favor of the defendant and signed Harry B. Gardner, secretary; the second for $93.17, paid on a similar check dated October 18, 1909; and the third for $10,000, the amount of a cashier's check of the Third National Bank of St. Louis, dated November 17, 1909, in favor of the Continental Assurance Company, which was purchased and paid for by a check for that amount dated November 17, 1909, payable to cash, and signed the same as the others. The three checks signed by Gardner, secretary, were drawn against the funds of the assurance company on deposit in the Third National Bank. The two small ones described in the first and second counts were delivered to defendant, cleared through the usual channels, and paid; the defendant receiving the funds for which they called. The cashier's check was indorsed to defendant by the payee, Gardner signing its name as secretary, and was duly presented and collected from the bank issuing it.

These payments to the defendant were made under the following circumstances: A number of gentlemen, including Mr. Harry M. Coudrey, Harry B. Gardner, and W. W. Steele, associated themselves together, as provided in article 2, c. 61, of the Revised Statutes of Missouri, 1909, to organize a life insurance company. The gentlemen named had all been in the life insurance business, and as corporators took the steps required by section 6898, and on April 24, 1909, received the certificate of incorporation authorized by section 6900. The capital stock of the company was fixed at 50,000 shares of the par value of $10 per share, in addition to which it was proposed that it should be issued at a price which would provide a substantial surplus.

At the first meeting of the corporators, held March 31, 1909, Coudrey was elected president and Gardner secretary, and a resolution was introduced appointing the latter fiscal agent of the company, and authorizing him to "sell" the entire issue of stock at certain prices named, and to receive as compensation therefor a commission of 24 percent. based on the selling price. For this compensation he was to pay all the expenses of every kind and nature incurred in the "sale" of the stock. Mr. Gardner employed Mr. Coudrey and Mr. Steele to assist him in making these sales. Both these gentlemen owed insurance companies for whom they had been working for premiums collected by them and not yet turned over, and those companies employed the defendant to collect these sums as trustee for the companies interested. None of them had any claim against the Continental Assurance Company other than the amount to be paid them by Gardner from the proceeds of the arrangement embodied in the resolution referred to. Mr. Gardner testified for the defendant that the company owed him on no other account, and that he only got money under that contract, and understood that he was working for nothing if that contract was not any good. He agreed to accept Coudrey's order in favor of defendant for $17,500, and did so, and the $10,000 paid upon this cashier's check was in part payment of that order. The checks described in the first and second counts of the petition were payments of a small indebtedness of Steele assumed by Gardner.

Mr. Gardner had, prior to the issue of the preliminary certificate, advanced nearly $17,000 "for promotion expenses," which does not appear to have been credited to him on the books of the company. At the date of the payments to defendant he had a credit of $31,000 on the books on account of the sales of stock.

Other facts appearing in the record will be noticed, if necessary, in this opinion.

Nagel & Kirby, of St. Louis, for appellant. John S. Leahy and Chase Morsey, both of St. Louis, for respondent.

BROWN, C. (after stating the facts as above).

1. The principal points involved in this controversy have been settled to our complete satisfaction in Ellerbe v. National Bank, 109 Mo. 445, 19 S. W. 241, and Taylor v. Insurance Company, 266 Mo. 283, 181 S. W. 8, in both of which the powers which the embryo life insurance company possess during the tentative stage, attained under the provisions of section 6900 of the Revised Statutes of 1909, do not include the power to pay commission for the sale of its stock out of the amounts paid by subscribers as capital to be used in the transaction of its insurance business when all the stock shall have been subscribed. The only business they are authorized to transact is to accumulate that fund subject to the correlative duty to preserve it intact for the purpose to which it is appropriated by...