Shultz v. Christman

• Decision Date: 17 December 1878
• Parties: CHAUNCEY F. SHULTZ ET AL., Respondents, v. BERNARD CHRISTMAN, Appellant.
• Court: Missouri Court of Appeals

6 Mo.App. 338

CHAUNCEY F. SHULTZ ET AL., Respondents,

v.BERNARD CHRISTMAN, Appellant.

St. Louis Court of Appeals, Missouri.

Dec. 17, 1878.

1. The assignees of an insolvent banking corporation may maintain an action against a director for damages for loss to the bank occasioned by the fraudulent sale to the bank of its own stock by such director.

2. The right of action being essentially one of property, as distinguished from a personal tort, passes by the assignment, and does not involve the setting aside of the conveyance as in fraud of creditors. The action may be brought by those representing the bank.

3. Where the action is grounded upon fraudulent acts, and seeks merely to recover damages for the loss suffered, no rescission is necessary; and the measure of damages is the difference between the value of the article as represented and its actual value.

4. Where a rescission is claimed, this must appear by the petition; and the evidence must show an offer to return the property on the part of the rescinding party, unless the property is shown to be worthless.

APPEAL from St. Louis Circuit Court.

Reversed and remanded.

HITCHCOCK, LUBKE & PLAYER, for appellant: The creditors of the bank were the parties defrauded, and these assignees, the plaintiffs, do not represent them, and cannot object on their behalf.-- Hurlbut v. Carter, 21 Barb. 223; Estabrook v. Messersmith, 18 Wis. 545. An assignee cannot avoid fraudulent transfers made by his assignor, nor take the rights of the creditors of the assignor in his charge or control. In this respect he is like an administrator.-- Brown v. Finley, 18 Mo. 375; George v. Williamson, 26 Mo. 190; Merry v. Fremon, 44 Mo. 578. Plaintiffs should have alleged rescission and tender.-- Kimball v. Cunningham, 4 Mass. 502; Conner v. Henderson, 15 Mass. 320; Cook v. Gilman, 34 N. H. 560; Evans v. Gale, 21 N. H. 240. In the absence of prohibition by statute, a corporation may purchase its own stock, hold it unextinguished, and reissue the same.-- Bank v. Bruce, 17 N. Y. 507; Taylor v. Miami Ex. Co., 6 Ohio, 219; State Bank v. Fox, 3 Blatchf. 433; Williams v. Savage, 3 Md. Ch. 452.

MASON & GORDON, for respondents: The bank had no power to purchase its own stock.-- Gillett v. Moody, 2 N. Y. 479; Talmage v. Pell, 7 N. Y. 328; 1 Edw. Ch. 558; 4 Ala. 558; 15 Johns. 388; 2 Cow. 678; 5 Conn. 650; 3 N. Y. 430; 17 Barb. 397. Tender is not necessary to a recovery on a rescission, where the article is worthless.-- Kneedler v. Sternbergh, 10 How. 67.

HAYDEN, J., delivered the opinion of the court.

The plaintiffs are assignees, by virtue of a voluntary assignment under the statute, of the West St. Louis Savings Bank, a corporation created according to the laws of this State. The petition alleges that on February 12, 1876, the bank, being insolvent, made the assignment; that the defendant was a director of the bank; and that in December, 1875, with intent to cheat and defraud the bank, he wrongfully obtained from it $1,500 of its moneys by a sale to the bank of fifteen shares of its capital stock, to the damage of the bank of $500, etc. In similar language another fraudulent sale is charged, by which the defendant, with intent to cheat, etc., obtained $500. There was a general denial; and upon the hearing it appeared that in November, 1875, the bank was obliged to make re-discounts and borrow money to meet depositors' demands, and was then, or shortly thereafter, insolvent; that the defendant was a director and vice-president of the bank, and had twenty shares of its stock, which he was trying to sell. The plaintiffs' evidence tended to show that this stock was put in the hands of a broker, who was unable to sell it at any price, but that Holle, the cashier of the bank, who had at first refused to buy it, bought ten shares of the defendant for $480; that the defendant then sold the other ten shares to one Margenau, a book-keeper of the bank, taking the latter's note for $480; that the next day the defendant, while bebind the bank counter, offered this note for discount; that Holle, the cashier, made out a deposit-ticket for $450, which the defendant said he would take for the note, credited the defendant's bank-account with that sum, and took the note; that before the defendant had left the bank, Holle tore up the note and obtained from Margenau, the book-keeper, the certificate for the ten shares of stock. The defendant afterwards asked if it was all right on the books, and was told that “it was all charged up to the bank.” It appeared that Holle, the cashier, had been buying stock for the bank, and also for other people, and that for these twenty shares the bank was charged by Holle $1,000, of which the defendant got $930, Holle $30, and two of the bank's book-keepers the rest. The defendant admitted that he had been a director of the bank until he sold his stock. It did not appear that the other directors knew of these transactions. The stock was transferred to the bank. The defendant's testimony tended to show that he sold the first ten shares to Holle in the belief that the latter was buying them for one Hackman, and not for the bank; that he sold the $450 note in good faith to the cashier, and did not know that it was torn up, or the other shares transferred to the bank; that he had no idea that the bank was insolvent, and that he kept on making deposits as usual; that he had no understanding that the stock should be charged to the bank. The jury found for the plaintiffs upon each count, and there was judgment for $1,023.

It is first contended that a demurrer to the evidence should have been sustained on the ground that by the assignment no right passed to the assignees to annul this fraudulent sale; that the present claim was not among the assets, and was not a “credit or effect” within the statute; that the assignees do not represent the creditors, and cannot object in their behalf. But cases like Hurlbut v. Carter, 21 Barb. 223, and Estabrook v. Messersmith, 18 Wis. 545, are not here in point. No corporate franchise is here involved; and this is not an instance of property transferred in fraud of creditors, and a transfer good except as to them. This action, if made out, is that the transfer was bad inter partes, and lies in favor of the bank's representatives. It is true that the plaintiffs' second instruction, quoted below, was asked on a different theory; but the question is now as to how the action can be properly maintained.

Whether the right passed by the assignment is another question. This depends, not on the form of the action, but on the nature of the right. We must not confuse the form with the right, the process with the result. If the right is essentially one of property, as distinguished, for example, from a personal tort, the fact that case or trover may lie to secure the right does not prove that it is not assignable under the statute. Suppose that the claim was that the appellant, instead of fraudulently obtaining money of the bank, had by means of a fraudulent purchase obtained goods or specific securities. Trover would lie, the sale being disaffirmed, for the conversion; but it would not then be contended that the securities were not securities of the bank. So in the present case,...