State ex rel. Shawhan v. Ellison

200 S.W. 1042, 273 Mo. 218, 1918 Mo. LEXIS 148

• Court: Supreme Court of Missouri
• Decided: February 2, 1918
• Status: Published

Opinion

WILLIAMS, J.

By this, an original proceeding in certiorari, relatrix, on the ground that it conflicts with our last previous ruling on the subject, seeks to quash an opinion delivered by the Kansas City Court of Appeals in the case of Mary F. Shawhan, Executrix, etc., v. Shawhan Distillery Co., 195 Mo. App. 445.

Facts, here material, and stated in the opinion of the Kansas City Court of Appeals, may be summarized as follows:

Mary F. Shawhan, executrix of the will of her deceased husband, George W. Shawhan, brought suit against the Shawhan Distillery Company, a Missouri corporation, upon a promissory note in the sum of $5000, dated January 31, 1912, due two years after date and payable to the order of said Geo. H. Shawhan. The note contained a collateral agreement pledging fifty shares of the capital stock of said corporation as security.

The answer pleads no consideration, and further that the only consideration for the note was the sale by Shawhan to the defendant corporation of the fifty shares of stock which were pledged as collateral security with the note. The answer was not verified. The reply was a general denial.

Evidence was introduced from which it might be inferred that the note in question was given by the corporation to Shawhan in the purchase by said corporation of a portion of its capital stock from said Shawhan. There was also evidence from which it might be inferred that fbe note in question was executed by the corporation to pay an obligation which one Garcelon had made with said Shawhan, whereby said Garcelon became obligated to purchase from said Shawhan said stock.

On the day before the note was executed said Shawhan indorsed on the written obligation of said Garcelon whereby Garcelon was obligated to purchase such stock, the following indorsement:

“I hereby acknowledge full settlement and satisfaction of the above contract.”

The secretary of the defendant corporation testified that all of the corporation’s “journals and ledgers” had, while this suit was pending below, been sold by defendant to a junk dealer, and it further appeared that the pages in the “bills payable” book or “tickler” of the defendant, which contained entries relating to four or five notes given by defendant to Shawhan on January 31, 1912, had been cut out and destroyed.

The Court of Appeals in effect held that on account of the spoliation by defendant of record evidence in its possession which would have shown the true character of the transaction, the remaining evidence was such that different inferences might arise therefrom and that therefore the evidence produced presented issues of fact for the jury’s determination; that the trial court, for that reason, did not err in refusing to direct a verdict for defendant.

The court in substance instructed the jury that “if the note was given by the defendant corporation, in purchase of its own stock from Geo. H. Shawhaii,” they should find issues for the defendant.

Instruction number 5 given at the request of plaintiff, is as follows:

“If you shall find and believe from the evidence that at any time prior to the 30th day of January, 1912, George H. Shawhan and F. B. Garcelon, on their own behalf and in good faith, entered into a written contract by the terms of which said Garcelon agreed to purchase for himself from said Shawhan 100 shares of the capital stock of the defendant corporation amounting to the par value of ten thousand dollars, and that said Garcelon had agreed to pay therefor the sum of ten thousand dollars on or before the 30th day of January, 1912; that on said 30th day' of January, 1912, the said George H. Shawhan accepted the note in question in part or in full satisfaction of the agreement so entered into between said Shawhan and said Garcelon, and that in consideration thereof said contract was in fact canceled and satisfied, then your verdict should be for plaintiff. ’ ’

The. jury found the issues for the plaintiff and judgment was entered by the trial court upon that verdict. Thereupon defendant duly appealed to the Kansas City Court of Appeals, which court reversed the judgment and remanded the cause on the ground that said instruction numbered 5 was erroneous.

In discussing said instruction the opinion states:

“This was erroneous and highly prejudicial. We need not pause to consider whether the defense of ultra vires attempted to be pleaded in the answer is well pleaded in law, the answer not being under oath; the defense of no consideration was well pleaded and the facts hypostatized in the instruction bore directly on that issue. On the premise, that defendant gave and Shawhan accepted the note in suit in satisfaction of Garcelon’s obligation to buy shares of defendant’s capital stock, the conclusion must necessarily follow that defendant received no valid consideration for the note and was entitled to a verdict under the plea of no consideration, since a transaction of that character could amount to nothing less than an attempted purchase by defendant of its own stock. For this error the judgment is reversed and the cause remanded.”

I. Relatrix contends that the opinion of the Court of Appeals should be quashed, because the above quoted portion conflicts with the following previous rulings of this court, to-wit:

(a) Green v. Higham, 161 Mo. 333, l. c. 337; Strode v. St. Louis Transit Co., 197 Mo. 616, l. c. 623; City of St. Louis v. St. Louis Gaslight Co., 70 Mo. 69, l. c. 116; Carr v. Card, 34 Mo. 513, l. c. 517; Marks v. Bank of Missouri, 8 Mo. 316, l. c. 319; which cases, in effect, hold that “an inconvenience, loss or injury, or the risk of it to the party promised” is a sufficient consideration for a contract;

(b) McDearmott v. Sedgwick, 140 Mo. 172, l. c. 183; Kelerher and Little v. Henderson, 203 Mo. 498, l. c. 511; Bell v. Warehouse Co., 205 Mo. 475, l. c. 492; St. Louis Agricultural & Mech. Assn. v. Delano, 108 Mo. 217, l. c. 220; German Savings Institution v. Jacoby, 97 Mo. 617, l. c. 627; Musser v. Adler, 86 Mo. 445, l. c. 449; Moore v. Ringo, 82 Mo. 468, l. c. 473; Sybert v. Jones, 19 Mo. 86, l. c. 88; which, in effect, hold that “when the illegality does not appear from the contract itself, or from the evidence necessary to prove it but depends upon extraneous facts, the defense is new matter and must be pleaded in order to be available;” and

(c) First National Bank v. Guardian Trust Co., 187 Mo. 494, l. c. 526; Cass County v. Mercantile Town Mutual Ins. Co., 188 Mo. 1, l. c. 16; City of St. Louis v. Railway Co., 248 Mo. 10, l. c. 27; which, in effect, hold that “a corporation cannot avail itself of the defense of ultra vires when the contract in question has been in good faith fully performed by the other party and when it will not advance justice but on the contrary will accomplish a legal wrong.'”.

These points will be discussed in their order.

Point (a). In the case at bar plaintiff’s instruction five permits a recovery if the jury finds that the corporation executed the note in suit upon the consideration that Shawhan release Garcelon from his written obligation to purchase and pay for this stock. In other words, this instruction told the jury in effect that if it found. Ft]iq §f®k9§4ti«£>$. its note in payment of or the releas%rqf 7flja #gbt of another (an act clearly ultra vires the corporation, Hunter v. Garanflo, 246 Mo. 131, l. c. 134-5) it should find for plaintiff.

Relatrix’s position is that, since Shawhan in consideration of the execution of the note by the corporation agreed to and did release Garcelon from his obligation, such loss or surrender of rights upon the part of Shawhan was a sufficient consideration for the making of the note under the rulings mentioned above, and' that therefore the opinion of the Court of Appeals holding that it was not a sufficient consideration conflicts with said rulings.

Upon a careful reading of the cases cited it does not appear that any of them deal with a situation such as we have here. In none of those cases was it either expressly or impliedly held that “a loss to the party promised” (which loss did not result to the promisor’s benefit) was a sufficient consideration for an ultra vires contract. Nor have we been able to find where we have ever made a ruling on this exact point. ,

In the 29 Am. & Eng. Ency. Law (2 Ed.), page 59, it is said: “Some courts maintain that the ground of a corporation’s liability on ultra vires transactions is the acceptance and retention by it of benefits, and per-. mit the plea of want of power where nothing has passed to the corporation, although the other party has acted to his prejudice in reliance upon the contract. In other words, according to this doctrine the fact of disadvantage to the other party is not a sufficient consideration.” (Italics ours.) We do not quote the above for the purpose of here undertaking to decide as to what is the correct rule in that regard, but merely to show that the case at bar presents a legal question different from the one held in judgment in the cases cited under “Point (a) ” above. So far as our research has been able to discover, said legal question has not been decided to the contrary by this court. We therefore conclude that the alleged conflict does not exist.

Point (5). The cases cited by relatrix under this point have to do with the rule that new matter, to be available as a defense must be specifically pleaded. That rule has no bearing on the situation here. In the case at bar the instruction under review does not permit the defendant to recover on a defense not pleaded, but the instruction authorizes the plaintiff to recover on a finding of facts which upon their face show the transaction to have been ultra vires the corporation. The judgment of the Court of Appeals holding this instruction bad cannot- therefore be said to conflict with the rule announced in the cases under “Point (b)” above, but would seem to be rather in harmony with the spirit pf our previous rulings which in effect hold that a person’s recovery cannot be based upon grounds which upon their face appear to be illegal: [McDearmott v. Sedgwick, 140 Mo. 172, l. c. 182-3]

Point (c). What we have said under “Point (a)” disposes of this point. If the holding of the Court of Appeals (e: g\, that the consideration mentioned in the instruction was not a sufficient consideration for the execution of the note) be permitted to stand because not in conflict with our previous rulings, then it clearly follows that the question as to whether or not the contract had been fully performed by Shawhan necessarily drops out of the case. And that is perhaps the reason why the Court of Appeals did not discuss the principle mentioned under this point.

II. The respondent Shawhan Distillery Company in its brief, however, contends that portions of the opinion of the Court of Appeals, other than the portion above discussed, conflict with certain of our previous rulings and that the opinion should be quashed for that reason.

While it is unusual for both parties in certiorari to claim that the opinion of the Court of Appeals should be quashed on the ground of conflict, yet when this court once gets jurisdiction of the case for the purpose of determining matters of conflict we know of no reason why all matters of conflict, whether they be suggested by relator, respondent or even by the court’s own discovery, should not be determined. In fact we are of the opinion that all questions of conflict which may come to the court’s attention by either source should be determined. We will therefore proceed to review the alleged grounds of conflict urged upon us by the respondent.

Respondent contends that the opinion of the Court of Appeals conflicts with our previous rulings in the following particulars, to-wit:

(1) That the holding, that the trial court did not err in refusing to direct a verdict for defendant, conflicts with the rule announced in Bragg v. Metropolitan Street Railway Co., 192 Mo. 331, l. c. 354, holding “that a mere presumption may not be indulged to establish a fact when there is actual knowledge of the non-existence of the fact.”

(2) That the opinion of the Court of Appeals in holding that there was no error in excluding the evidence of the witness Morrin conflicts with our ruling in the case of Epstein v. Railway Co., 250 Mo. 1, l. c. 19; State v. Long, 257 Mo. 199, l. c. 214; Wagner v. Binder, 187 S. W. 1128. These in their order.

Point (1). Respondent’s contention under this point is that the evidence offered by defendant, as a matter of law, destroyed the presumption that the note was given for a valid consideration, and that therefore the presumption in plaintiff’s favor falling,, her ease likewise falls and a demurrer to the evidence should have been sustained. Whether the rule announced in the case of Bragg v. Railway Co., supra, should be given the effect claimed by counsel or whether such a rule in effect has been announced by this court in other cases, we need not here stop to consider; this, because the evidence offered by defendant was not of such character as to permit the court to say as a matter of law that the presumption above mentioned was thereby dispelled. The opinion of the Court of Appeals states that documentary evidence in the hands of the defendant corporation at the commencement of this litigation which would have left no doubt as to the real facts of the situation was destroyed by either being sold by the defendant to a junk dealer or by the destruction of certain pages in the “bills payable” book of the corporation while in its possession and .under its control.

Upon this point the Court of Appeals reaches the conclusion that “the failure of defendant to produce documentary evidence, which should have been extant and in its possession, to show with precision the nature of the consideration of the note in suit, leaves the evidence on that issue in a state affording support to contradictory inferences and therefore, as presenting issues of fact for the jury to determine. The court did not err in refusing to direct a verdict for defendant.”

Under the above circumstances we are unable to see wherein the opinion conflicts with any previous ruling of this court.

’ Point (2). Concerning this point it is sufficient to say that nothing is said in the opinion about witness Morrin or his competency as á witness. In determining conflict in these proceedings we will not go beyond the opinion to ascertain the facts. [State ex rel. Wahl v. Reynolds, 272 Mo. 588.]

From what has .been said above it follows that the writ of certiorari issued herein should be quashed. It is so ordered.

Graves, C. J., Walker and Faris, JJ., concur, Bond and Blair, JJ., concur in' the result, Woodson, J., not sitting.