Berry v. Rood

• Decision Date: 29 March 1902
• Citation: 67 S.W. 644,168 Mo. 316
• Parties: BERRY, Appellant, v. ROOD et al
• Court: Missouri Supreme Court

67 S.W. 644

168 Mo. 316

BERRY, Appellant, v. ROOD et al

Supreme Court of Missouri, First Division

March 29, 1902

Appeal from St. Louis City Circuit Court. -- Hon. D. D. Fisher Judge.

Reversed and remanded.

Lee W Grant, P. R. Flitcraft and W. B. Homer for appellant.

(1) In an action at law the report of the referee is considered as equivalent to a special verdict by the jury, and in appeals in such cases the appellate court will look entirely to the ultimate facts as found by the referee, and give the judgment of the appellate court accordingly. O'Reilly v Cleary, 8 Mo.App. 188; Gamble v. Gibson, 83 Mo. 290; Singer Mfg. Co. v. Givens, 35 Mo. App 602. There are a number of other cases in which appellants have taken appeals on cases heard by referees without taking to the appellate court a complete transcript of the testimony, and the appellate courts have acted upon the report of the referee, applying the law to the facts as found by him. (2) The stock and bonds of a corporation shall be issued only for money paid, labor done, or money or property actually received. Const., art. 12, sec. 8; R. S. 1899, sec. 962; Chouteau v. Dean, 7 Mo.App. 210; Kehlor v. Lademann, 11 Mo.App. 550. The capital stock of a corporation is a trust fund for the benefit of its creditors. Where a contractor in a corporation enters into an agreement whereby the contractor is to perform work and furnish material to the corporation and to take stock in payment, such contractor can charge therefor only the reasonable market value for such labor and material thus given in exchange, and this is the case even though no fraud be proven. Shickle v. Watts, 94 Mo. 410; Leucke v. Tredway, 45 Mo.App. 507; Bank v. Gallaher, 43 Mo.App. 493; Shepard v. Drake, 61 Mo.App. 134; Van Cleve v. Berkey, 143 Mo. 109. (3) Whether we regard this as money stolen by Leighton from the jewelry company and then by him loaned to the onyx company, or whether it was a case of the president of the jewelry company making an unauthorized loan of its funds to the onyx company, the law is well settled that when an officer of a corporation is dealing with it in his individual interest, the corporation is not chargeable with his uncommunicated knowledge of facts derogatory to his title to the property in question. Bank v. Lovitt, 114 Mo. 525; Johnson v. Shortridge, 93 Mo. 227. (4) On the other hand, it is also the law that the knowledge which comes to a corporation officer through his own private transactions, or beyond the range of his official duties, is not the knowledge of the corporation, and attaches to it no responsibility by way of notice. State Savings Association v. Printing Co., 25 Mo.App. 650; Barnes v. Trenton Gas Company, 27 M. J. E. 36; Bank v. Skinner, 62 P. 705.

Dawson & Garvin, Smith P. Galt and Leonard Wilcox for respondents.

(1) We unhesitatingly assert that there is no case in the books that support the contention of appellant in this case, that, when stock in a corporation is paid for by a contract between the corporation and parties who acquire the stock, by their transferring to the company property of a substantial value (it is admitted in the petition here that the property transferred in this case was worth at least $ 30,000) and in fixing the value thereof the parties to the contract acted in good faith, and "as ordinarily careful business men would have acted under the same circumstances and conditions, and they exercised reasonable and ordinary business judgment and discretion in fixing the value of the property," nevertheless, because success does not follow the venture, they shall be held responsible therefor. Certainly none of the cases cited by appellant countenances any such doctrine, for the purpose of "robbing Peter to pay Paul." The facts existing at the time of the transaction, decide for or against its validity, and it matters not whether it involves oil or onyx property. (2) Whatever may be the facts with reference to creditors there is absolutely, so far as we know, no conflict in the authorities to the effect that as between the corporation and its stockholders the stock was fully paid, and if there is any liability on the part of these defendants to any one it is to creditors of the corporation and not to the corporation itself. This must be so on principle. If the corporation is authorized to take the property in payment of its stock, and that is the settled law of Missouri, it must also have the authority to determine the valuation at which the property shall be received. It is the settled law of Missouri that an assignee of a corporation stands in the shoes of the corporation and can not recover against the stockholders as for unpaid stock unless the corporation could have recovered. Haskell v. Worthington, 94 Mo. 574; Republic Ins. Co. v. Sweigert, 135 Ill. 167. This receiver has no other or greater rights against the stockholders, the defendants, than an assignee for the benefit of creditors would have. The rule is that when a receiver is appointed for the purpose of taking charge of the property and assets of a corporation, he is, for the purpose of determining the nature and extent of his title, regarded as representing only the corporate body itself and not its creditors or shareholders, being invested by law with the estate of the corporation and deriving his own title under and through it and for the purpose of litigation he takes only the right of the corporation, such as could have been asserted by it in its own name and that upon that basis only can he litigate for the benefit of their stockholders or creditors. Republic Ins. Co. v. Sweigert, supra; Coffin v. Ramsdell, 110 Ind. 417; Beach on Receivers, sec. 607. (3) But even upon the plaintiff's own theory that the receiver may recover in the right of creditors although he could not recover in right of the corporation, the facts in evidence and the findings of the referee are fatal to his recovery. It is alleged in the petition that the property received by the corporation in payment of its capital stock was in its possession and control at the time the receiver was appointed and that prior to the bringing of this suit he had sold it. This property had been in the possession of the corporation from the date of its organization in March, 1891, until it was sold by the receiver, January, 1894, a period of nearly three years. There had at no time been any objection on the part of the corporation or anybody to the valuation at which it had been put into the company during all this period. The referee finds that the sale by the receiver was made with the consent of all the creditors, and with full knowledge of all the facts connected with the transfer of the property. He further finds that the proceeds of this sale were distributed by the receiver amongst the creditors. These facts, even if for the sake of argument it be conceded that the receiver represents creditors in the sense contended for by plaintiff, constitute an absolute estoppel both against him and them. Forman v. Bigelow, 4 Cliff. (U.S.) 508; Coffin v. Ramsdell, supra; Cook on Stock and Stockholders (3 Ed.), secs. 46 and 47.

OPINION

VALLIANT, J.

This appeal comes up on a copy of the judgment and of the order granting the appeal in lieu of a full transcript, and the printed abstract filed by appellant gives what purports to be the substance of the pleadings and of some of the orders of the court, including an order of reference, the report of the referee, the exceptions to the report, the rulings on the exceptions and the judgment. The evidence before the referee is not given. The respondents file a motion to affirm and a motion to dismiss the appeal for alleged insufficiency of the abstract and failure to comply with the rule of court in that respect.

Since appellant has failed to bring up the evidence he can not ask this court to consider any of his exceptions relating to the findings of fact by the referee, but must accept those findings and can complain only of the conclusions of law drawn from those facts. Respondents have no ground to complain of this because the findings of the referee are in the main in their favor. The motions to affirm and dismiss are therefore overruled.

The suit is by the receiver of the Ozark Onyx Company against the stockholders of that corporation, to recover balances he claims to be unpaid on their several stock subscriptions.

The case was referred to Mr. P. Taylor Bryan, who made an elaborate report, which is set out in the printed abstract, and which contains all the facts that are given us in the case, and from which we make the following summary:

The corporation was formed under the laws of this State in 1891 with a nominal capital of $ 300,000, stated in its articles to have been all subscribed and fully paid in cash. None of the subscriptions, however, were paid in cash, but the organizers were the owners of certain lands in Pulaski and Crawford counties, believed to contain valuable onyx deposits which, pursuant to the understanding among them from the beginning, they put into the concern at a valuation of $ 200,000, as in payment to that extent of their subscriptions and one subscriber, being the owner of certain onyx works and machinery in Vermont, put the same in at a valuation of $ 90,000, as in payment of his subscription to that extent. On the subject of the actual values of these properties the referee in his report, after referring to the deposits of onyx on the lands, said: "The conclusion of the referee on these facts is that these deposits added little, if any, real value to the land. There was no evidence before the referee sufficient to enable him to determine accurately what was the real value of the lands of the Leighton syndicate and Rood. While they were worth...