St. Francois County Bank v. Hawn
| Decision Date | 21 June 1927 |
| Parties | ST. FRANCOIS COUNTY BANK, A CORPORATION, APPELLANT, v. E. K. HAWN, RESPONDENT. |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of St. Francois County.--Hon. Peter H Huck, Judge.
Judgment reversed and cause remanded.
Davis & Damron for appellant.
(1) Neither section 11761 nor 11740, Revised Statutes of Missouri 1919, relied on by respondent, makes void a note taken by a bank for subscription to its capital stock. The taking of the note for stock not being malum in se, the note is not void unless the statutes expressly so provide or clearly so intend. Farmers Mech. Savings Co. v. McCabe, 73 Mo.App. 551; York v. Farmers Bank, 105 Mo.App. 127 140-1; McClintock v. Bank, 120 Mo. 127; Welch v Ferd Heim Brewing Co., 47 Mo.App. 608; Glass v. Ferd Heim Brewing Co., 47 Mo.App. 639; Vette v. Geist, 154 Mo. 27; Miles v. Bank, 187 Mo.App. 230; Peoples Trust Co. v. Pabst, 113 A.D. 375; 3 A. L. R. 59 to 61 Inc.; Nelson v. Leiter, 190 Ill. 414; Insurance Co. v. K. C. Ft. S. & M. Ry., 149 Mo. 165. (2) A contract of a corporation, though ultra vires, is enforceable, unless malum in se, or malum prohibitum. York v. Farmers Bank, 105 Mo.App. 141; City of Goodland v. Bank, 74 Mo.App. 365; Mt. Vernon Bank v. Porter, 52 Mo.App. 244. (See, also, cases cited under paragraph Nos. 1, 3 and 4.) (3) The ultra vires contract is unquestionably enforceable where it has been entered into good faith, and the party seeking to repudiate the contract has derived some benefit or advantage thereunder. In such circumstances the State only can question the transaction. Question cannot be raised in collateral proceedings. Miles v. Bank, 187 Mo.App. 230; York v. Farmers Bank, 105 Mo.App. 140-1; City of Goodland v. Bank, 74 Mo.App. 372; Mt. Vernon Bank v. Porter, 52 Mo.App. 248; Hall v. Bank, 145 Mo. 418; St. Louis Drug Co. v. Robinson, 81 Mo. 18; Grohmann v. Brown, 68 Mo.App. 630; Weyrich v. Grand Lodge, 47 Mo.App. 398; St. Joe Ins. Co. v. Houck, 71 Mo. 469; Winscott v. Investment Co., 63 Mo.App. 367. (4) As in the above cases, these principles of law have been widely approved by courts of various States as well as by Federal courts. (5) Unless there is substantial evidence to support the verdict of a jury, it is the duty of the appellate court to reverse the judgment thereon. Blanchon & Bartholomees v. Distilling Co., 200 Mo.App. 610; Orchard v. Smith, 193 S.W. 574; In re Lankford Est., 197 S.W. 147; Bibb v. Grady, 231 S.W. 1020; Busse v. White, 259 S.W. 458. (6) A verdict founded upon mere conjecture and speculation, or when it is a result of passion and prejudice on the part of the jury, should be set aside. Bates Co. Bank v. Mo. Pac. Ry. Co., 98 Mo.App. 330; Empey v. Grand Ave. Cable Co., 45 Mo.App. 422. (7) The giving of an instruction which, in its nature is a comment on the character and evidence of witnesses, or which submits issues not made by the evidence, is error for which a cause should be reversed. State v. Gabriel, 256 S.W. 765; Hely v. Hineman, 260 S.W. 471; Finn v. United Railways, 267 S.W. 416.
Boyer & Smith for respondent.
This is an action on a note brought by plaintiff, appellant here, under the direction of the State Department of Finance of the State of Missouri, the bank having failed and was then in the hands of the State Finance Department for liquidation. The note is for $ 743.05 with interest, and the petition prays for $ 75 attorneys' fees under the terms of the note. There was a judgment for the defendant, from which the plaintiff has appealed.
The petition is in usual form.
The answer admits the corporate existence of the bank and that it was in the hands of the State Department of Finance; admits that the defendant executed the note described in the petition and filed, and that he delivered it to plaintiff bank at the time alleged in the petition, but avers that the note was given wholly without consideration. Further answering, it is alleged that the note was given to plaintiff by defendant as a renewal of a previous note, which previous note was given for subscription to an increase of the capital stock of the bank to be effected under section 11761, Revised Statutes, Missouri 1919; that the defendant has never received four shares of stock; that no money or other thing of value except the unsecured note in the suit and those of which it is a renewal passed from the defendant to the plaintiff for such subscription for the shares of stock in the increased capitalization; that no stock certificate or other thing of value was ever delivered to the defendant as a consideration or purported consideration of the note sued on, nor for the original note of which the note in suit is a renewal, but that, if such stock was ever placed upon the books of the bank to the credit of defendant, or a stock certificate issued in his favor, same was retained by the bank as security for the purported loan to this defendant represented by the original purchase of stock subscription note aforesaid and all subsequent renewals thereof. And it is then pleaded that the note is void under the provisions of section 11761, and is void because of subdivisions 6 and 7 of section 11740, Revised Statutes, Missouri, 1919, and also is against public policy.
The reply is conventional.
The controversy involves one distinct proposition of law. It is contained in the pleadings, was contested throughout the trial and is embodied in the instructions. The defendant maintained, and the court below shared that view, that the note sued on is void if it was a renewal of original notes given for stock in the bank, because section 11761 of our statutes makes it a condition precedent to the increasing of the capital stock that such increase may be effected only when the full amount of such purposed increase has been subscribed in good faith and paid in cash to the Board of Directors of said bank, and further reliance is had on subdivisions 6 and 7 of section 11740 of the statutes which, it is argued, show a legislative intent to make such transaction void.
The bank maintains that neither section 11761 nor 11740, Revised Statutes, Missouri, 1919, make void a note taken by a bank for a subscription to its capital stock; that the taking of the note or stock is not malum in se; that the note is not void unless the statute expressly so provides or clearly so intends. Further, if the contract of the corporation is ultra vires it is enforceable, unless malum in se, or malum prohibitum.
This presents a very interesting and somewhat novel question of law in this State.
Subdivisions 6 and 7 of section 11740, Revised Statutes, Missouri, 1919, are as follows:
Observably, then, subdivision 6 is intended to prohibit a bank from making a loan or a discount on the security of its stock. Subdivision 7 prohibits a bank from making a loan of its funds to enable any person to pay for or hold shares of stock, and provides a penalty against an offending bank doing so.
Section 11761 authorizes and permits a bank to increase its capital stock "when the full amount of said proposed increase has been bona fide subscribed and paid in cash, to the Board of Directors of said bank."
Now, unless it is manifest and clear from a reading of the statute that such statute makes such notes, taken in payment of its increased capital stock, void, it must be held that this note is not void because of the statute. The proof, in view of our holding that the case was tried on an erroneous theory of law does not become decisive in this appeal. Briefly, plaintiff introduced the note and showed the liquidation of the bank, and produced evidence as to a reasonable attorney fee for conducting this suit, and then rested in chief.
Defendant took the stand in his own behalf and testified that the note in suit was a renewal of notes for the purchase of purported bank stock; that he at no time received credit or stock for the original notes or the note in suit, saying: "I believe they paid one or two little dividends;" that he never paid any money for such stock. He said he was induced by an officer of the bank to give his notes for these four shares of a proposed increase in the capitalization, and that he could pay same off from time to time; then, he signed two notes which were renewed later by the one note now in suit. He admitted, on cross-examination, that he was handed a stock certificate and signed it and returned it to the bank, or rather that the bank allowed him to sign same but did not give it to him; that he did not "have actual possession of it;" that he signed same to identify the stock, and that it was his understanding that same was to be turned over to him when he...
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