Schmidt v. Stortz

• Decision Date: 09 January 1922
• Docket Number: No. 13982.,No. 13983.,13982.,13983.
• Citation: 208 Mo. App. 439,236 S.W. 694
• Parties: SCHMIDT v. STORTZ (two cases).
• Court: Missouri Court of Appeals

236 S.W. 694

208 Mo. App. 439

SCHMIDT v. STORTZ (two cases).

No. 13982.

No. 13983.

Kansas City Court of Appeals. Missouri.

January 9, 1922.

Appeal from Circuit Court, Gasconade County; R. A. Breuer, Judge.

Action and suit for attachment by Otto Schmidt against John A. Stortz. From a judgment dissolving the attachment, plaintiff appeals; and from a judgment for plaintiff in the action on the merits, defendant appeals. Judgment dissolving attachment reversed, and case remanded, with directions, and judgment on the merits affirmed.

Robert Walker, of Hermann, and Jesse H. Schaper, of Washington, Mo., for plaintiff.

A. E. Elliott, of Nevada, Mo., August Meyer, of Hermann, and W. W. Spencer, of Indianapolis, Ind., for defendant.

TRIMBLE, P. J.

The main case herein, the one on the merits, is an action for money had and received, brought by Schmidt against Stortz to recover the sum of $1,000 paid by the former to the latter for stock, as he claims, in a company gotten up by Stortz for the purpose of developing certain oil leases on land in Vernon county, Mo., and more especially to solicit investment in, and to sell, shares of stock in said company.. The case ancillary to the aforesaid main case is an attachment suit instituted on the same day, July 24, 1919, and levied upon defendant's interest in a lot in Hermann, Mo., in aid of the recovery of the money sought in said main case.

Defendant filed a plea in abatement, and also an answer to the merits, which last consisted of a general denial. A jury was waived in both cases, and the court, sitting as a jury, heard the evidence on both issues, and found for defendant on the plea in abatement, and dissolved the attachment, but in the case on the merits found for plaintiff, and rendered judgment in his favor for $1,000 with 6 per cent, interest per annum from date of institution of suit. Each party appealed; plaintiff from the judgment on the plea in abatement, and defendant from the judgment against him on the merits.

Plaintiff is a farmer living in Franklin county, Mo. He had known defendant when the latter was a young man, living at home with his father, some 10 or 15 years prior to the occurrences hereinafter related. Defendant lived in Gasconade county, where he was in the automobile business; but about a year prior to the trial, which was in October, 1919, he had left Gasconade county, and had gone to Vernon county, and in June, 1919, seems to have been "dabbling in oil," or engaged in selling oil investments. At that time he appears to have had, and doubtless did have (at least there is no evidence to the contrary), certain oil leases on 640 acres in Vernon county, Mo., and on 40 acres in Washington county, Okl., and was preparing to organize a company for the purpose of selling "shares" (in reality, stock) therein and possibly, if enough "shares" were sold, to develop, or attempt to develop, the leases into oil producing properties. He was intending to form, not a corporation, which would be subject to state laws and regulations, but a "common-law company" by having the property conveyed to "trustees," who would in a "declaration of trust" agree to manage the property as masters thereof, but for the benefit of the persons to whom "shares" should be issued by said trustees.

In the course of his business of selling oil investments, defendant called on plaintiff, and after numerous interviews he, on June 30, 1919, succeeded in obtaining from plaintiff the sum of $1,000, for which plaintiff was to receive from defendant, when the company should be formed, "stock in said company at the rate of four to one, with a capital not to exceed $203,000." The company to be so formed was to be known as the "Missouri Oil & Gas Company," and, as stated, was to' be a "common-law company," operating under a declaration of trust by three trustees, of whom plaintiff was to be one. The organization proceeded as far as the conveyance to the trustees of the oil leases and the execution of the declaration of trust by the trustees. By the terms of this declaration of trust neither the trustees nor the shareholders could be held individually liable for the debts of the concern, only its property being liable therefor. The company so formed was an unincorporated association organized for the purpose of selling shares of stock therein as investments in the oil business.

Manifestly it was within the terms of section 11,919, art. 7, c. 108, a. S. 1019, known as the "Blue Sky Law." Plaintiff had doubts as to the validity of the organization; he at all times preferring and urging that the company be regularly incorporated in the ordinary way. He was not uneasy lest the company could not convey to him the shares he bought; he was fearful lest the shareholders would not be exempt from individual liability under the association, formed as it was. But, upon defendant's repeated assurances that he had had the matter thoroughly investigated by the most competent legal authority, and that the law was complied with in every way, and that there could be no trouble, plaintiff paid his $1,000 and agreed to become one of the trustees.

However, his fears continued, and he was so urgent about it that defendant agreed to go with him to Jefferson City and there consult the authorities as to the legality of the organization; and defendant promised plaintiff that if it was not found to be lawful, he would repay plaintiff his money. They went, and were there informed that the proposed scheme was not lawful; that no application had been made for permission to sell stock in said organization, and that none would be granted. Plaintiff thereupon demanded his money back, and defendant agreed to repay him shortly, but afterwards failed to do so, saying he had spent the money for some of his other obligations, and finally refused to repay it, intimating that, as plaintiff was in pari delicto with him, he could not recover. After formal...