State v. Bank of Missouri

• Court: Missouri Supreme Court
• Writing for the Court: WAGNER
• Citation: State v. Bank of Missouri, 45 Mo. 528 (Mo. 1870)
• Decision Date: 31 March 1870
• Parties: THE STATE OF MISSOURI, Plaintiff in Error, v. THE BANK OF THE STATE OF MISSOURI, Defendant in Error.

45 Mo. 528

THE STATE OF MISSOURI, Plaintiff in Error,

v.THE BANK OF THE STATE OF MISSOURI, Defendant in Error.

Supreme Court of Missouri.

March Term, 1870.

[COPYRIGHT MATERIAL OMITTED]

Error to St. Louis Circuit Court.

Wingate, for the State.

I. No valid sale of the stock in question could be made by the agent appointed to make sale thereof, under act of March 5, 1866, unless he complied strictly with the requirements of the act. The attempt on the part of Fogg to dispose of the stock without notice to the public, as required by the act, was such an abuse as rendered the whole proceeding void. (Sedgw. on Stat. and Const. Law, 347, 350-5, 687; Paley on Agency, 178-9, 202, 212-14; 8 Paige, 527; 7 Hill, 431; 26 Wend. 192; Blackf. on Tax Tit. 35-40, 54-7; Sto. on Cont. 67-8, § 70.)

II. Fogg, in receiving and reporting Eads' proposal, and in notifying Eads of its acceptance; the governor, in approving the same and transferring the stock; the treasurer, in receiving and receipting for the bonds and coupons paid by Eads, were but agents of the State charged with the performance of administrative functions, and therein powerless to dispose of the stock or bind the State, except when acting in strict accordance with the requirements of the law.

III. The act in question is a public law; and the bank, Eads, and all others claiming rights under it, are chargeable with notice of its provisions.

H. B. Johnson, Attorney-General, for the State.

I. The decisions upon constitutional provisions similar to ours all tend to the conclusion that the Legislature has no power to divert any portion of a common school fund from the purpose for which the same was created or appropriated, much less to dispose of such fund in a manner having the effect of depleting and destroying such fund. (Morton et al. v. Grenada Male and Female Academies, 8 Sm. & M. 773; State v. Trustees, etc., 11 Ohio, 24; State v. Newton, 5 Black, 445; Bush v. Chapman et al., 4 Scam. 186; Trustees for Vincennes University v. State of Indiana, 14 How. 268.)

II. The sale was without notice and void. (Gibbs v. Shands, 17 Wis. 197; Gill v. Given, 4 Metc., Ky., 197; Russell v. Dyer, 40 N. H. 173; Com. Dig. 11-15; Sto. on Agency, § 165; North River Bank v. Aymar, 3 Hill, 262; Tate v. Evans, 7 Mo. 419; Denning v. Smith, 2 Johns. Ch. 244; Sto. on Agency, 307, a; Lee v. Monroe, 7 Cranch, 36; Curtis v. United States, 2 Nott & Hun. 144; Baltimore v. Reynolds, 2 Md. 1; State v. Hastings, 10 Wis. 518; Hull v. County of Marshall, 12 Iowa, 142; Brady v. City of New York, 20 N. Y. 312; Delafield v. State of Illinois, 26 Wend. 192; The Floyd Acceptances, 7 Wall. 666.)

III. The sale being void, it is not necessary to institute a direct proceeding to set it aside. It may be impeached collaterally.

Glover & Shepley, and Burnes, for defendant in error.

I. The transfer of the stock having been made by the governor under the act, will be held to be conclusive as to the regularity of the proceedings until the plaintiff shall by proper proceedings set the sale aside.

II. So long as the plaintiff holds possession of the consideration received for the stock, to which these dividends are an incident, it is not competent to prove that the sale was void either from irregularities in the sale or on grounds derived from the language of certain provisions of the constitution in relation to school and seminary funds.

III. But even if, as against the purchaser, the approval of the governor was not conclusive, yet the Legislature, as if to provide for the very case, inserted a provision in the act which shows that, upon the transfer being made on the books of the bank, it should be conclusive as between the bank and the State.

IV. The sale, as made (if this was a proceeding to set aside the sale as invalid), is not invalid by reason of the purchase having been made with bonds of the State of Missouri instead of treasury notes.

V. The act of the Legislature is not unconstitutional, as embracing more than one subject.

VI. The sale is not invalid by reason of any supposed irregularity of the acts of the agent. The governor is the sole and exclusive judge of the regularity of the proceedings. Indeed, all the other acts are merely preliminary to the act of the governor, who is to decide whether a sale shall be effected or not. If this were, what it is not, a proceeding instituted to set aside this sale, yet no recovery could be had under any proof that might be adduced so long as the State has not, prior to suit, offered to return the bonds she received from the purchaser in payment of his purchase.

WAGNER, Judge, delivered the opinion of the court.

The controversy in this case grows out of the question as to who is rightfully entitled to certain dividends arising out of shares of stock of the defendant, a corporation. The facts in the case appear to be briefly these:

The plaintiff, as trustee of the school and seminary fund, and in its own right, held and owned a large number of shares of stock in the bank. On the 30th day of June, 1866, dividends on those shares were declared to the amount of $104,410.75. On the 26th day of July, 1866, the governor, and also the treasurer of the State, demanded of the bank payment to the State of the dividends due upon the stock above mentioned, and payment was refused on the ground that the stock was claimed by James B. Eads. The real contest is between Eads and the State; the bank has no interest in the question, and its answer, therefore, substantially performs the office of an interpleader. The authority whence the alleged sale to Eads took place, together with the subsequent proceedings thereon, is derived from an act of the Legislature approved March 5, 1866. (Sess. Acts 1865, p. 14.) The act is entitled “An act to authorize the Bank of the State of Missouri to reorganize as a national bank, to provide for the sale of the stock owned by this State in said bank, and to protect the seminary and common school fund and provide for its safe investment.” The first three sections of the act make provision for reorganizing the State Bank into a national bank. In the event of the reorganization, the fourth section gives the governor power to appoint a competent agent in behalf of the State to sell the stock owned by the State in its own right, and as trustee for the seminary fund and the common school fund. Section 5 declares that immediately after his appointment said agent shall proceed to cause said stock to be advertised for sale in one or more newspapers published in the cities of St. Louis, Boston, New York, and Philadelphia, for the period of not less than thirty days; and shall invite sealed proposals for the purchase of said stock, or any part thereof, and from such proposals said agent shall report to the governor those which offer in good faith the largest price and the terms most advantageous for the State; and if, in the opinion of said agent, any of said proposals so received shall appear to be the fair value of said stock, he shall mention the fact in said report; and if such proposal shall be approved by the governor, the whole or any part of said stock may be sold accordingly, in which event the person or persons submitting said proposal shall be notified by said agent of the acceptance of his or their said proposals; and within thirty days after such notice the said purchaser or purchasers shall pay or deliver to the treasurer of this State the money or other securities, as hereinafter provided, to the amount of his or their said proposals; and the treasurer shall give his duplicate receipts, one of which shall be filed with the auditor, therefor; and upon the production of this receipt the governor shall assign and transfer said stock on the books of said bank, and said bank shall issue to such purchaser or purchasers a certificate or certificates therefor, which said certificates shall be taken and considered as a complete cancellation of all claim or interest in behalf of the State, and of said several funds for which said stock is now held, and the holder or holders of such certificates shall be entitled to all the rights and privileges and subject to all the liabilities now enjoyed by the private stockholders in said bank, or to which they are entitled; provided, however, that no such sale shall be valid until submitted to and approved by the governor in writing. The sixth section provided that the bank stock, so owned by the State, in its own right or as trustee for the seminary and school fund, should be sold only for money or the bonds of the State then due or thereafter to become due, or the coupons of any such bonds, at the option of the purchaser or purchasers.

The seventh section made it the duty of the treasurer, as soon as practicable after the sale was completed, to invest the proceeds received from the sale of the stock held for the benefit of the common school fund, and that held for the benefit of the seminary fund, in the interest-bearing bonds of the United States; and it was declared that until the same should be so invested the State should be held and considered the debtor of the said several funds, and the treasurer should pay to said several funds, out of any money then in the treasury, the interest on the full amount of the several funds, at the rate of six per cent. semi-annually.

In pursuance of the authority given in the fourth section, the governor appointed Josiah Fogg as agent on the part of the State to make sale of the stock, who caused an advertisement to be inserted in the newspapers that he would receive sealed proposals for the purchase of said stock, or any part thereof, until 12 o'clock M. of Monday, June 4th, 1866. Under this advertisement bids were received within the time limited by the terms thereof, and Fogg says that the highest was duly forwarded to the governor; but it does not appear from the record that it ever reached him, or that any action was taken upon it.

On the 12th of June, 1866, and without any...