State ex rel. v. Hartford Acc. & Indem. Co.

• Decision Date: 01 July 1940
• Docket Number: No. 19530.,19530.
• Citation: 143 S.W.2d 483
• Parties: STATE OF MISSOURI EX REL. FLORA MAE SANDERS, APPELLANT, v. HARTFORD ACCIDENT & INDEMNITY COMPANY OF HARTFORD, CONNECTICUT, RESPONDENT.
• Court: Missouri Court of Appeals

143 S.W.2d 483

STATE OF MISSOURI EX REL. FLORA MAE SANDERS, APPELLANT, v. HARTFORD ACCIDENT & INDEMNITY COMPANY OF HARTFORD, CONNECTICUT, RESPONDENT.

No. 19530.

Kansas City Court of Appeals, Missouri.

July 1, 1940.

Appeal from Circuit Court of Jackson County. — Hon. Emory H. Wright, Judge.

AFFIRMED.

Miniace & Donovan and Gladys B. Donovan for appellant.

(1) The petition states a cause of action under the Missouri Securities Act. Indemnity Ins. Co. of North America v. Kirchner, 47 Ohio App. 140, 191 N.E. 374; Mitchell v. Smith (Calif., 1928), 267 Pac. 540; Hyde v. Albert E. Peirce & Co., (Ore., 1934), 31 Pac. (2d) 755; Sec. 7744, R.S. of Mo., 1929; Hazberd v. Landfield (Calif., 1929), 278 Pac. 907. (a) Fraud constitutes a violation of the Missouri Securities Act covered by the bond. Secs. 7736, 7748, R.S. of Mo. 1929; People v. Latta et al. (1930), 244 N.Y.S. 487. (b) The transactions complained of in the petition come within the Missouri Securities Act and are covered by the bond. Welsh v. Standard Accident Ins. Co., 12 Pac. (2d) 16; Indemnity Ins. Co. of North America v. Kirchner, 191 N.E. 374 (Ohio, 1934); Betzer v. Olney et al., Kafohl v. Glens Falls Indemnity Co. et al. (Calif.), 57 Pac. (2d) 1377; Stone v. Indemnity Co. of North America (Mich.), 255 N.W. 312, 267 Mich. 580; Hyde v. Peirce & Co. (Ore.), 31 Pac. (2d) 755; Dunnette v. Henry L. Doherty & Co. et al. (Mich.), 233 N.W. 428; State ex rel. Smith v. Fidelity & Deposit Co. (N.C., 1926), 132 S.E. 792, l.c. 794; Dickson v. Fidelity & Casualty Co. of New York (Iowa, 1937), 273 N.W. 102; Sec. 7724, R.S. of Mo., 1929; School Consolidated Dist. No. 10 v. Wilson (Mo.), 135 S.W. (2d) 349, l.c. 352; Henry County v. Salmon, 201 Mo. 136, l.c. 153; Sec. 7738, R.S. of Mo., 1929; State to the use of Hubbard et al. v. United Surety Co. et al., 264 Mo. 581, 593-4; State ex rel. v. Johnson et al., 229 Mo. App. 16, l.c. 23; State ex rel. Smith v. Fidelity & Deposit Co., 132 S.E. 792; Dickson v. Fidelity & Casualty Co. of N.Y., 273 N.W. 102. (2) The Missouri Security Act covers all fraudulent dealings by a licensed broker. Sec. 8624, pages annotated, Ohio General Code; Sec. 9792, Compiled Laws Michigan, 1929; Sec. 3924, North Carolina Code, 1927; Sec. 8624-28, Ohio Securities Act, 1926-1935 Supp.; Sec. 8581-c13, Iowa Securities Act, Code of Iowa, 1935; Oregon Laws, 1939, p. 777; Secs. 7736, 7738, 7745, 7748, R.S. Mo. 1929.

Harding, Murphy & Tucker for respondent.

(1) Plaintiff's petition does not state a violation of Chapter 40, R.S. Mo., "The Missouri Securities Act." R.S. Mo. 1929, secs. 7725, 7728, 7736, 7744, 7747; State ex rel. Joseph C. Cirese and Mary Cirese v. Albert A. Ridge, opinion case No. 36946, S. Ct. Mo., not yet reported. (2) Plaintiff's petition does not state a cause of action on extrastatutorial language of the Blue Sky Law bond as a common-law obligation. Rubelman Hardware Co. v. Greve, 18 Mo. App. 6. (3) Plaintiff's second amended petition does not state a cause of action. (a) The statutory "Blue Sky Law" bond upon which this action is brought is limited to cover only violations of the Missouri Securities Act (Mo. Stat. Ann., p. 7370, sec. 7724 et sequi). Isaac v. Amer. Surety Co. (Ohio), 22 N.E. (2d) 280; National Surety Co. v. Dorsey, 42 Ariz. 180, 23 Pac. (2d) 111; State ex rel. Dyer v. Francis, 152 Ore. 448, 54 Pac. (2d) 297; Betzer v. Olney, 57 Pac. (2d) 1376, 14 Cal. App. (2d) 53; Roberts, Thomas & Co. v. Allen et al. (Calif.), 12 Pac. (2d) 451; Kennedy v. Fidelity & Deposit Co. of Md., 153 Ore. 646, 58 Pac. (2d) 625; Andrews v. Chase (Utah), 45 Pac. (2d) 938; Hyde v. Albert E. Pierce Co., 147 Ore. 5, 31 Pac. (2d) 755. (b) The purpose of the Missouri "Blue Sky" Securities Act is to protect the investing and purchasing public from misconduct of brokers and others in selling and distributing worthless or spurious securities. Sec. 7725, Mo. Stat. Ann., p. 7373; Sec. 7728, Mo. Stat. Ann., p. 7376; Sec. 7730, Mo. Stat. Ann., p. 7381; Sec. 7733, Mo. Stat. Ann., p. 7384; Sec. 7736, Mo. Stat. Ann., p. 7387; Dougherty v. McAuliffe, 74 F. (2d) 800; Gill Printing Co. v. Goodman, 139 So. 250, 224 Ala. 97; People v. Craven, 219 Calif. 522, 27 Pac. (2d) 906; Rossi v. Jedlick, 115 Cal. App. 490, 1 Pac. (2d) 1068; People v. Glassberg, 326 Ill. 379, 158 N.E. 103; People v. Federated Radio Corp., 244 N.Y. 33, 154 N.E. 655; Klatt v. Guaranteed Bond Co., 213 Wis. 12, 250 N.W. 825; Hornaday v. State (Okla.), 208 Pac. 228, 21 Cr. 354; Goodyear v. Meux, 143 Tenn. 287, 228 S.W. 57; 37 C.J., Licenses, p. 271, sec. 164; Reed & Washburn, "Blue Sky Laws," p. XVI; Hall v. Geiger-Jones Co., 242 U.S. 539; Manual of Federal Securities Act, Thorpe & Ellis, p. 2, par. 4. (c) The Missouri Securities Act and the bond filed thereunder do not cover an embezzlement by plaintiff's agent of proceeds from the sale of plaintiff's stock by the agent to a third party. Sec. 7724, Mo. Stat. Ann., p. 7370; 37 C.J., Licenses, p. 271, sec. 170; Prince v. Scura, 272 N.Y. Supp. 362. (d) Appellant's authorities distinguished. Indemnity Ins. Co. of North Amer. v. Kirchner (Ohio), 191 N.E. 374; Mitchell v. Smith (Calif.), 267 Pac. 540; Hyde v. Albert E. Pierce & Co. (Ore.), 31 Pac. (2d) 755; Hazberd v. Landfield (Calif.), 278 Pac. 907; People v. Latta, 244 N.Y. Supp. 487; Walsh v. Standard Accident Ins. Co. (Calif.), 12 Pac. (2d) 16; Betzer v. Olney (Calif.), 57 Pac. (2d) 1376; Stone v. Indemnity Co. of North Amer. (Mich.), 255 N.W. 312; Dunnette v. Henry L. Doherty & Co. (Mich.), 233 N.W. 428; Smith v. Fidelity & Deposit Co. (N.C.), 132 S.F. 792; Dickson v. Fidelity & Casualty Co. of N.Y. (Iowa), 273 N.W. 102; Sonken-Galamba Corp. v. Mo. Pac. Ry. Co., 225 Mo. App. 1066, 40 S.W. (2d) 524; Public Service Commission v. Kansas City Power & Light Co., 325 Mo. 1217, 31 S.W. (2d) 67, l.c. 70, 71; State ex inf. v. Kansas City Gas Co., 254 Mo. 515, l.c. 539, 163 S.W. 854; State ex rel. Pub. Serv. Comm. v. Mo. Southern R.R. Co., 279 Mo. 455, l.c. 464, 214 S.W. 381; State ex rel. v. Pub. Serv. Comm., 325 Mo. 862, 30 S.W. (2d) 112, l.c. 118; State ex rel. v. Pub. Serv. Comm., 308 Mo. 359, 272 S.W. 957, l.c. 963; State of Mo. v. Harry Wipke and The Reserve Mutual Casualty Co., No. 36793, Sept. Term, Mo. S. Ct., 1939 (Not yet reported); Woods v. State ex rel. Ramey, 10 Mo. 698; United States Fidelity & Guaranty Co. v. The Iowa Telephone Co., 174 Iowa, 476, 156 N.W. 727; Schisel v. Marvill, 198 Iowa, 725, 197 N.W. 662; 11 C.J.S., p. 411, sec. 25D; LaCrosse Lumber Co. v. Schwartz, 163 Mo. App. 659; State ex rel. v. Cochran, 264 Mo. 581; State ex rel. v. Johnson, 229 Mo. App. 16; Burton Machinery Co. v. Ruth, 194 S.W. 526; Fellows v. Kreutz, 189 Mo. App. 547; City of St. Joseph ex rel. v. Stone Co., 224 Mo. App. 895; State ex rel. v. Frazier, 165 Mo. 242; State v. Simmons, 284 Mo. 664.

Morrison, Nugent, Berger, Byers & Johns, Amici Curiae.

(1) The condition for an accounting contained in the bond in question is not provided for by the statute, and must therefore be rejected as surplusage. Woods et al. v. State, to the use of Rainey, 10 Mo. 698; Zellars v. National Surety Co., 210 Mo. 86, 108 S.W. 548; Kansas City ex rel. Barlow v. Robinson, 322 Mo. 1050, 17 S.W. (2d) 977; Board of Education of City of Detroit v. Grant et al. (Mich.), 64 N.W. 1050; Fairmont Cement Stone Mfg. Co. v. Davison et al. (Minn.), 142 N.W. 899, 901; U.S.F. & G. v. Iowa Telephone Co. et al., 174 Iowa, 476, 156 N.W. 727; United States v. Hodson, 10 Wall. 395, 19 L. Ed. 937, 940; United States v. Jones et al., 77 Fed. 717, 720; United States v. Humason, 8 Fed. 71; United States v. Bradley, 10 Pet. 343, 9 L. Ed. 448, 456. (2) Chapter 40, Revised Statutes of Missouri, 1929, has two purposes: one, that all securities sold in the State shall be based upon bona fide assets, the accomplishment of this end being provided for by a requirement for registration; and two, the restriction of the privilege of offering securities to the public in this State to dealers and salesmen of good repute, the accomplishment of which is provided for by a requirement for licensing and registration. This chapter in no way directly prohibits personal business dishonesty, conversion, or embezzlement, upon the part of dealers. Bridges v. Price et al. (Cal. App.), 273 Pac. 72; Blumenthal v. Larson et al., 79 Cal. App. 726, 248 Pac. 681; Mitchell v. Smith (Cal. Sup.), 267 Pac. 540; Anthony v. Van et al. (Cal. App.), 274 Pac. 563; Giles v. Welling et al. (Cal. App.), 280 Pac. 539; Roberts, Thomas & Co. v. Allen, 7 Pac. (2d) 309; Betzer v. Olney et al. (Cal. App.), 57 Pac. (2d) 1376; National Surety Co. v. Dorsey (Ariz.), 23 Pac. (2d) 111; Stone v. Indemnity Ins. Co. of N. Amer. (Mich.), 255 N.W. 312; State v. Francis et al. (Ore.), 54 Pac. (2d) 297.

SHAIN, P.J.

This is a suit brought against the surety on a bond. The court sustained defendant's general demurrer to the petition. The relator refused to plead further and judgment went against her dismissing her action. She has appealed.

The petition is replete with allegations of fraud and misrepresentations with little statement of facts to support them. Stripped of conclusions of law the petition alleges that A.B. Collins & Company, Inc., was a securities dealer or broker in Kansas City, and as such was required by the State Securities Act, Chapter 40, Revised Statutes 1929, to furnish a bond "running to the people of the State of Missouri, conditioned upon the said A.B. Collins & Company, Inc., properly accounting for all moneys or securities received from or belonging to another, and upon the faithful compliance with the provisions of the `Missouri Securities Act' by said dealer and by all salesmen registered by it or acting for it;" that on the 31st day of December, 1934, A.B. Collins & Company, Inc., entered into a bond "unto the people of the State of Missouri" in the sum of $5000, with defendant as surety, reciting that A.B. Collins & Company, Inc., had made application to the Secretary of State...