State v. Bankers' Trust Co.

• Decision Date: 28 June 1911
• Parties: STATE ex rel. HADLEY, Atty. Gen., v. BANKERS' TRUST CO. LEE v. BANKERS' TRUST CO. et al.
• Court: Missouri Court of Appeals

138 S.W. 669

157 Mo. A. 557

STATE ex rel. HADLEY, Atty. Gen., v. BANKERS' TRUST CO.

LEE v. BANKERS' TRUST CO. et al.

Kansas City Court of Appeals. Missouri.

June 28, 1911.

1. BANKS AND BANKING (§ 315*) — TRUST COMPANIES — SCOPE OF POWERS — ENUMERATED POWERS.

As the enumeration of powers in the statute excludes all others, a trust company which, under Rev. St. 1909, § 1124, cl. 9, is authorized to buy and sell government, state, municipal, and other bonds, and negotiable and nonnegotiable paper, stocks, and other investment securities, has no authority to purchase a controlling interest in the stock of another bank, for the purpose of operating and managing that bank.

2. CORPORATIONS (§ 388*) — SCOPE OF POWERS — ULTRA VIRES ACTS — EFFECT.

The rule that a corporation is estopped, after receiving benefits, from pleading want of authority, and that the state alone can object, obtains only where the act is only voidable, and is not wrong per se, or against public policy.

3. BANKS AND BANKING (§ 315*) — TRUST COMPANIES — PURCHASE OF BANK STOCK — ULTRA VIRES ACTS.

Under Rev. St. 1909, § 1124, cl. 9, authorizing trust companies to buy and sell government, state, municipal, and other bonds, and negotiable and nonnegotiable paper, stocks, and other investment securities, the purchase by a domestic trust company of the stock of a Kansas bank for the purpose of managing and operating such bank is not only ultra vires, but is against public policy, as creating a monopoly, and so is totally void; and hence the trust company is not subject to the liability imposed upon stockholders of banks by the statutes of Kansas.

4. CORPORATIONS (§ 515*) — CORPORATE POWERS — CIVIL ACTIONS — DEMURRERS.

Where the petition in an action against a corporation shows on its face that an act of the corporation upon which liability is sought to be imposed was wholly void, the defense of ultra vires may be raised by demurrer.

Error to Circuit Court, Jackson County.

Quo warranto by the State, on the relation of Herbert S. Hadley, Attorney General, against the Bankers' Trust Company, in which H. A Lee, receiver of the Garland State Bank, intervened, claiming to be entitled to assets of the Bankers' Trust Company, both as against the company and Ira M. Cobe, purchaser of the assets. From a judgment sustaining a demurrer to his petition, intervener brings error. Affirmed.

W. R. Biddle, Keplinger & Trickett, and Thurmond & Farrar, for plaintiff in error. Frank Hagerman and Chas. A. Loomis, for defendants in error.

JOHNSON, J.

In October, 1907, an action was instituted in the circuit court of Jackson county by the state of Missouri, at the relation of its Attorney General, against the Bankers' Trust Company, a corporation organized under the laws of Missouri relating to trust companies. The company had become insolvent, and the purpose of the action was to wind up its affairs for the benefit of its creditors and stockholders. Shortly after the petition was filed, the circuit court appointed a receiver, who took charge of the assets and administered them under the direction of the court. After they were sold and the proceeds distributed among the creditors, the receiver filed his final report and prayed to be discharged. On the day his application was set for hearing, H. A. Lee, receiver of the Garland State Bank of Garland, Kan., asked and obtained leave of court to file an intervening petition, the object of which was to recover a judgment against the estate of the Bankers' Trust Company, on a demand of $7,300, alleged to be due the estate of the Garland State Bank, and to be founded on the liability incurred by the Bankers' Trust Company under the laws of Kansas, imposing a double liability upon stockholders in corporations organized under the laws of that state.

It appears from the averments of the intervening petition that the Garland State Bank was incorporated under the laws of Kansas with a capital stock of $10,000, divided into 100 shares of the par value of $100 each; that at various times before the failure of the bank or of the Bankers' Trust Company three different certificates of stock, representing in the aggregate 73 shares of the par value of $7,300, were issued, respectively, to M. H. Woods, Myron A. Waterman, and J. O. Ellis; that said stock stood on the books of the bank in the names of said Woods, Waterman, and Ellis, and at no time was in the name of the Bankers' Trust Company; and that about 18 months before the filing of the intervening petition the bank failed, and the intervener was appointed its receiver in a proceeding instituted in Kansas. We quote from the petition as follows:

"Petitioner further alleges as a fact which he has learned by inquiry and upon information and belief that the Bankers' Trust Company, through its officer, purchased the Garland State Bank, and that the stock of M. H. Woods, M. A. Waterman, and J. O. Ellis, as alleged in the petition, was paid for by said Bankers' Trust Company, and was taken out in the name of said J. O. Ellis, in order that he might be cashier of said bank, and that M. A. Waterman was an employé and M. H. Woods was an officer in the Bankers' Trust Company at the time. That the Garland State Bank declared dividends after its organization and before its failure on several occasions upon said stock of J. O. Ellis, M. H. Woods, and M. A. Waterman, which was then held by the Bankers' Trust Company by assignment, and that said Bankers' Trust Company collected and appropriated such dividends. That at one time during said period $600 was distributed by said Garland State Bank upon its $10,000 of capital stock, and of said sum the Bankers' Trust Company received $432. That said Garland State Bank from its purchase as aforesaid to the time of its insolvency was controlled by the officers of the Bankers' Trust Company. That said Bankers' Trust Company supplied said Garland State Bank with most of its discounts during said time, and that the cashier was constantly under the direction and management of the officers of the Bankers' Trust Company, and that during all of said time said M. H. Woods and Myron A. Waterman were officers and employés of the Bankers' Trust Company, and said J. O. Ellis was the cashier of the Garland State Bank.

"Petitioner further says that by reason of the premises the owner of the stock which stands in the name of M. H. Woods is indebted to said receiver in the sum of $4,000. That the owner of said stock standing in the name of Myron A. Waterman by reason of the premises is indebted to said receiver in the sum of $2,300, and that the owner of the stock standing in the name of J. O. Ellis, by reason of the premises, is indebted to the receiver in the sum of $1,000, making a total of $7,300. Petitioner further says that said Woods, Waterman, and Ellis are hopelessly insolvent and unable to pay any of said indebtedness. Petitioner further says that he is reliably informed and believes, and states and avers it as a fact, that said stock so held by said Woods, Waterman, and Ellis was paid for by the Bankers' Trust Company. That the stock was issued to said Woods, Waterman, and Ellis, but the certificate thereof was assigned and delivered by them to said Bankers' Trust Company, but that such assignment and transfer was never carried out on the books of the Garland State Bank, nor had the depositors of said Garland State Bank any knowledge of the same. That all of these transactions occurred before said Bankers' Trust Company was placed in the hands of a receiver, and before the Garland State Bank was placed in the hands of a receiver, and the said H. A. Lee, as receiver, is informed and believes and alleges the fact to be that said Bankers' Trust Company was the real owner of said stock and had the physical possession thereof, and well knew that said M. H. Woods, Myron A. Waterman, and J. O. Ellis were insolvent, and that they knowingly and purposely failed to have said stock transferred into their own names, for the purpose of escaping double liability. Petitioner further states that by reason of said transaction the Bankers' Trust Company was the equitable owner of said stock.

"Petitioner further says that the assets of the Garland State Bank, when converted into cash, will not pay the indebtedness of the same, and that said double liability on said stock is necessary in order to assist in paying the creditors. That there was proved up before said H. A. Lee, receiver, as liabilities of said Garland State Bank, the sum of $67,597.95. That there has been paid on said liabilities the sum of $43,957.66, leaving a balance unpaid of said liabilities of over $23,000, and with expenses incident to said receivership will make the liabilities of said bank at least $25,000. That the receiver has proceeded against and collected the double liability from each and every stockholder in said bank residing in Kansas, and excepting the claims herein presented for the stock standing in the names of M. H. Woods, J. O. Ellis, and Myron A. Waterman there is only one other stockholder that has not paid the double liability, and that the said H. A. Lee, as receiver, does not know the whereabouts of said stockholder.

"Petitioner further avers that the Bankers' Trust Company, through Mr. Marks, its receiver, has sold to Ira M. Cobe, a resident and citizen of Chicago, in the state of Illinois, all of the assets in said defendant's hands and belonging to said Bankers' Trust Company, in consideration for which said Ira M. Cobe has paid and agreed to pay a sum equal to 43 per cent. on all of the indebtedness of said Bankers' Trust Company, and that by reason of the premises this plaintiff is equitably and legally entitled to a participation in the benefits derived from said sale, and that unless such relief is granted said H. A. Lee, receiver, will be unable to derive any benefit from the double liability on said stock, as provided for under the laws of the state of Kansas."

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