Winchell v. Gaskill

• Decision Date: 05 November 1945
• Docket Number: 39245
• Citation: 190 S.W.2d 266,354 Mo. 593
• Parties: S. F. Winchell, H. F. Finks, G. C. Lingle and Paul McGeehan, former officers and directors and now trustees of the Brinkerhoff-Faris Trust and Savings Company, a Corporation, whose charter has now expired and/or been forfeited, Appellants, v. I. E. Gaskill, W. W. Johnston and D. R. Harrison, Commissioner of Finance of the State of Missouri
• Court: Missouri Supreme Court

190 S.W.2d 266

354 Mo. 593

S. F. Winchell, H. F. Finks, G. C. Lingle and Paul McGeehan, former officers and directors and now trustees of the Brinkerhoff-Faris Trust and Savings Company, a Corporation, whose charter has now expired and/or been forfeited, Appellants, v. I. E. Gaskill, W. W. Johnston and D. R. Harrison, Commissioner of Finance of the State of Missouri

No. 39245

Supreme Court of Missouri

November 5, 1945

Appeal from Lafayette Circuit Court; Hon. Robert D Johnson, Judge.

Affirmed.

Ralph P. Johnson, Ike Skelton, James H. Linton, Crouch & Crouch Cowgill & Popham, Johnson, Lucas, Graves & Fane and Sam Mandell for appellants.

(1) The order and judgment of the Circuit Court of Henry County entered October 28, 1938, directing the sale of the remaining assets of the bank to the defendant I. E. Gaskill, being obtained by fraud and imposition upon the court may be set aside in equity. Boonville Natl. Bank v Schlotzhauer, 317 Mo. 1298, 298 S.W. 732; 31 Am. Jur., secs. 621, 622, 653, 654, 655, 661, 674; Hockenberry v. Cooper County State Bank, 338 Mo. 31, 88 S.W.2d 1031; Spotts v. Spotts, 331 Mo. 917, 55 S.W.2d 977, 87 A.L.R. 660; Texier v. Texier, 342 Mo. 1220, 119 S.W.2d 778. (2) Since defendants admitted by their answers that the charter of the bank had expired, lapsed, or become forfeited, plaintiffs as surviving directors and officers of the bank were empowered, under Sec. 5036, R.S. 1939, to maintain this action in their names as trustees of the banking corporation. Sec. 5036, R.S. 1939; Jackson v. Rothschild, 99 S.W.2d 859. (3) There was clear, cogent, convincing proof of fraud. Munford v. Sheldon, 9 S.W.2d 907. (4) The court erred in sustaining defendants' objections to the proffered testimony of the witness Emory Hurt that Mr. Gracey had paid a $ 400 note, with currency, at Union State Bank on November 1, 1938, since such testimony was competent. Charles H. Fuller Co. v. St. Louis Wholesale Drug Co., 282 S.W. 535; Peppas v. H. Ehrlich & Sons Mfg. Co., 228 Mo.App. 556, 71 S.W.2d 821; State v. McDowell, 214 Mo. 334, 113 S.W. 1113. (5) The court conceded that plaintiffs had used due diligence in trying to obtain the testimony of Kelso Journey but abused judicial discretion in refusing plaintiffs a commission to take his testimony which was shown to be material and competent. Kronmueller v. Wipperman, 129 S.W.2d 43.

Horace F. Blackwell, Elmer E. Hall, H. E. Sheppard and Wm. G. Boatright for respondents.

(1) The proof of fraud produced by appellants was not so cogent, clear, strong and convincing as to leave no reasonable doubt of such fraud in the mind of the chancellor. This was the quantum of proof required. State ex rel. v. Shain, 344 Mo. 891, 129 S.W.2d 1048; Terminal Railroad Assn. v. Schmidt, 349 Mo. 890, 163 S.W.2d 722; Elliott v. McCormick, 323 Mo. 263, 19 S.W.2d 654. (2) Appellants were guilty of laches by attempting to assert, after lapse of more than five years and great change in conditions, the same claim of fraud they first asserted in January, 1939. Troll v. St. Louis, 257 Mo. 626, 168 S.W. 167. (3) Appellants have no legal capacity to maintain this suit. They are not trustees, statutory or otherwise. Sec. 5036, R.S. 1939 (now repealed) is not applicable. Sec. 7935, R.S. 1939, which is applicable, provides the exclusive method of procedure. Commerce Trust Co. v. Farmers Exchange Bank of Gallatin, 332 Mo. 979, 61 S.W.2d 928; Kirrane v. Boone, 334 Mo. 558, 66 S.W.2d 861; State ex rel. v. Sevier, 337 Mo. 1174, 88 S.W.2d 154; Koch v. Missouri-Lincoln Trust Co., 181 S.W. 44. (4) The court did not err in excluding the testimony of witness Hurt, that Gracey paid a note with currency. Such fact had no probative value to show that he got the currency from Johnston. (5) The court did not abuse his discretion in refusing a commission to take the deposition of Kelso Journey first requested by appellants at the close of their case. They had known since 1943 what both Johnston and Journey would testify to and knew before the trial commenced that Journey would not be present.

Dalton, C. Bradley and Van Osdol, CC., concur.

OPINION

DALTON

Action in equity by the surviving officers and directors of the Brinkerhoff-Faris Trust and Savings Company, a corporation, whose charter had been forfeited and whose assets and affairs had been placed in the hands of the Finance Commissioner of Missouri and liquidated by him, to set aside, on the ground of fraud in its procurement, an order and judgment of the circuit court of Henry County, Missouri, authorizing the commissioner of finance to sell the remaining assets of the corporation to one I. E. Gaskill, for the purpose of paying the creditors of the corporation. Plaintiffs further sought an accounting and other relief. The trial court found the issues for defendants and dismissed plaintiffs' petition. Plaintiffs have appealed.

The Brinkerhoff-Faris Trust and Savings Company, hereinafter referred to as the bank, was a banking corporation located at Clinton, Henry County, Missouri. The bank closed in November, 1932 and was not able to reopen. On February 6, 1933, its affairs were placed in the hands of the commissioner of finance for liquidation in conformity with Art. I, Chapter 39, R.S. 1939. W. W. Johnston was appointed special deputy finance commissioner in charge of liquidation. Johnston employed Wayman Gracey, a former employee of the bank, to assist him. The clerical work was done by Loretta Cole and Edith Wills.

Among the assets of the closed bank was substantially all of the stock of the Benton Land Company, a subsidiary of the bank. This company handled and serviced real estate loans. Notes secured by first deeds of trust on Texas lands were sold to eastern investors and the company held commission notes secured by second deeds of trust on the same land. The company collected interest on commission, looked after the payment of taxes, sometimes advanced funds for that purpose, looked after foreclosures and frequently took title for the benefit of itself and the note holders. After the bank was in liquidation Johnston, Gracey and Cole became officers and directors of the Benton Land Company. Johnston was president and Gracey secretary-treasurer. Thereafter, the Benton Land Company of Texas was organized to assist in handling business in Texas. Its stock was owned by the Missouri company. Both of these corporations continued to function during the period of liquidation and no orders of court were obtained with reference to the transaction of their business.

The liquidation proceedings were not without the usual difficulties in the collection and distribution of the assets of the closed bank. By the close of 1937 the preferred and secured creditors had been paid in full and 70% had been paid depositors and general creditors. The cost of continuing the liquidation of the bank was far exceeding the income from the assets of the trust estate and the commissioner of finance was pressing the special deputy commissioner to bring the liquidation to a close as early as possible.

On March 18, 1938 many depositors signed a petition requesting the commissioner of finance to continue the liquidation "for at least a year or perhaps longer," on the theory that if the liquidation was continued "there is very good hope that the depositors will be paid in full, and, even if that hope is not realized, that very substantial dividends can be paid." By the summer of 1938 the balance due depositors and other creditors (except liability to stockholders) had been reduced to $ 44,000 and the special deputy commissioner was trying to negotiate a sale of the remaining assets for enough to pay the depositors and other creditors of the bank in full.

During 1938 the members of the Faris family, who owned most of the capital stock of the closed bank, became interested in buying the remaining assets of the bank on the same basis upon which they were subsequently sold. On July 6, 1938 a list of assets was obtained by these stockholders and some investigation was made. The interested stockholders, however, were unable to raise the necessary funds, and, in addition, their attorney advised mildly against a purchase of the remaining assets. On September 8, 1938 the commissioner of finance wrote the attorney for these stockholders urging that the ideal way to close up matters would be for the stockholders to pay depositors in full and complete the liquidation in the interest of all stockholders. No action, however, was taken. Only two parties were found who indicated a real interest in buying the remaining assets of the bank. They were I. E. Gaskill and William L. Koenig. The best offer obtained from Koenig, after investigation and conferences, was $ 25,000, but Gaskill indicated that he might go as high as $ 35,000.

On September 26, 1938 the finance commissioner directed Johnston to "take immediate steps to bring the liquidation to a close as soon as possible." Gaskill was invited to meet with the commissioner of finance and other interested parties at Clinton, Missouri, on October 27, 1938. Representatives of stockholders, depositors and others attended the meeting. Gaskill offered to buy the remaining assets of the bank and pay the amount required to pay depositors in full and the final costs of liquidation. The offer was accepted. A contract was prepared and signed by Gaskill and Commissioner of Finance Holt, subject to the approval of the circuit court. The contract provided that the assets were sold "without warranty or guaranty of any kind and subject to any and all liens thereon and defenses which may be made against the same." Thereafter, Johnston petitioned the circuit court and obtained the order and judgment (now sought to be set aside) approving the contract of sale. No objection...