The St. Louis, Kennett & Southern Railroad Company v. Wear

• Decision Date: 30 June 1896
• Citation: 36 S.W. 357,135 Mo. 230
• Parties: The St. Louis, Kennett & Southern Railroad Company et al. v. Wear, Judge, et al
• Court: Missouri Supreme Court

36 S.W. 357

135 Mo. 230

The St. Louis, Kennett & Southern Railroad Company et al. v. Wear, Judge, et al

Supreme Court of Missouri

June 30, 1896

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

On motion for allowance: 36 S.W. 658

The proceeding before Judge Wear was upon a petition in which Mr Kerfoot was named as plaintiff and the "St. Louis Kennett & Southern Railroad company, a corporation, and Louis Houck, E. F. Blomeyer, L. B. Houck, Theophilus Besel and E. S. McCarty, as directors in said Railroad Company, and the Pemiscot Railroad company, a corporation, and Robert G. Ranney, Leo Doyle, Robert T. Giboney, and John R. Jeannin, directors in said railroad company, and Louis Houck," defendants.

The substance of that petition (according to the statement of the counsel for defendants in the supreme court, which statement is regarded as sufficiently full for the purposes of the prohibition case) is as follows:

"On the 17th of March, 1890, there was organized under the laws of this state, the St. Louis, Kennett & Southern Railroad Company, with a capital of $ 180,000, divided into 1,800 shares of the par value of $ 100 each, designed to be constructed and operated from Campbell to Kennett, Dunklin county, Missouri, a distance of 19 miles. Of this stock, A J. Kerfoot held, and still holds, 108 shares, and E. S. McCarty, Harry H. Ferguson, Melvin L. Gray and George Denison respectively held 108 shares. Prior to the -- day of July, 1891, all the shares of the other stockholders in said company were purchased by said A. J. Kerfoot and E. S. McCarty.

"On July 8th, 1891, said Kerfoot and McCarty entered into a contract with relator, Louis Houck, by the terms of which said Houck agreed to transfer to said Kerfoot and McCarty ten interest-bearing extension bonds of the Cape Girardeau Southwestern Railway Company, each for $ 1,000, which were represented to be worth 81/100 of their face value, and also to organize a construction company for the purpose of making a connection between the said railroads at the town of Campbell, said connection being of the approximated length of thirty miles. Of the stock of said construction company, said Kerfoot and McCarty were to receive 49 per cent, and on the construction of said connection, said Kerfoot and McCarty were to be superintendent and general manager respectively, at salaries of not less than $ 175 per month. By the terms of this contract, one half of the real estate belonging to said St. Louis, Kennett & Southern Railroad Company at Kennett was to be transferred to said Kerfoot and McCarty. In consideration of the foregoing, said Kerfoot and McCarty were to transfer to said Houck 300 shares of their stock in said railroad company, on the completion of the contract aforesaid.

"After the above terms of said contract had been agreed on, and set forth therein, additional stipulations were inserted by said Houck in said contract, without the knowledge and consent of said Kerfoot and McCarty, to the effect that in no event was said Houck to be personally responsible for the fulfillment of said contract, and that if said contract should not be kept on his part, such failure should not affect in any wise the said contract, and that 1,360 additional full paid shares of stock in said company should be issued to said Houck, and that the 240 shares of said Kerfoot and McCarty should be considered full paid.

"While the bonds above referred to were by said Houck transferred to said Kerfoot and McCarty, not only were they not of the value represented by said Houck, but of no value whatsoever; and while said construction company was organized and certain certificates of its stock transferred to said Kerfoot and McCarty, the purpose of its organization, the construction of a connection between the aforesaid railroads, was not only never accomplished but never attempted to be carried out, and said certificates are consequently of absolutely no value.

"Shortly after the transfer of the 300 shares of the stock of the St. Louis, Kennett & Southern Railroad Company, by said Kerfoot and McCarty to said Houck on the faith of the performance of the terms of said contract by said Houck, said Houck held a meeting of the pretended shareholders holding shares in excess of those held by said Kerfoot and McCarty, -- to whom no notice of said pretended meeting was ever given or attempted to be given, and of which they had no knowledge or information, -- whereat said pretended shareholders did attempt and pretend to issue to said Houck, 1,360 additional shares of stock of said railroad company. This action of said pretended shareholders, respondent Kerfoot claims to be fraudulent, illegal and void, against which he has protested and now protests, and in affirmance of which he has done and will do nothing.

"By reason of the aforesaid facts, it is claimed that the consideration for the transfer of said stock to Houck has failed, and was only brought about by the false and fraudulent representations of said Houck with the intent to cheat and defraud said Kerfoot and McCarty.

"It is also charged in said petition that having thus fraudulently obtained control of said railroad, said Houck and the other relators have mismanaged and been guilty of gross negligence and misconduct in their trust capacity as directors, officers, etc., and fraudulently combined to cheat and defraud respondent, Kerfoot, and to render his shares of stock valueless, etc., together with those of other of the stockholders.

"That the other relators as directors of said company are under the influence and control of said relator Houck, and conform their actions to accomplish his fraudulent and illegal purposes and to carry out his unlawful designs.

"That said Louis Houck is the principal shareholder in a company organized to construct a railroad through the counties of St. Genevieve and Perry in the State of Missouri, which said road is located many miles from the St. Louis, Kennett & Southern and that, being entirely without credit, said Houck has used in the construction of said road divers funds belonging to said St. Louis, Kennett & Southern Railroad Company, without any authority so to do from the stockholders and directors of said company, although with the pretended authority of said Board of Directors.

"That said Houck is also the principal stockholder in a certain railroad in process of construction through Scott county, Missouri, and in the construction of this road said Houck has illegally and fraudulently in like manner and to like ends appropriated the funds of said St. Louis, Kennett and Southern Railroad Company.

"That on or about February 15th, 1892, the Pemiscot Railroad Company was organized -- and constructed during the year 1894 -- of which said Houck was the real and substantial owner; that in the construction of this road, said Houck wrongfully and fraudulently appropriated certain of the funds of said St. Louis, Kennett and Southern Railroad Company, in the manner and with the purposes as aforesaid.

"That on the 22d day of April, 1895, said Houck in furtherance of his said designs to destroy the value of said Kerfoot's stock and of the property of said St. Louis, Kennett & Southern Railroad Company, caused the said pretended stockholders of said company to adopt a contract attempted to be entered into between the directors of said last named companies, whereby the two said railroads should be consolidated into one road. Of none of these proceedings was said Kerfoot notified and of none of which did he have any knowledge or information, nor did he in any manner participate therein.

"Under this pretended contract of consolidation, the stock of the two companies was to be called in and new stock in the consolidated company issued in lieu thereof. That said contract was submitted to a pretended meeting of said shareholders of the St. Louis, Kennett & Southern Railroad Company, and the minutes of said meeting purport to show that said contract was adopted by a majority of its stockholders, all of which is false.

"That a copy of said minutes and also the minutes of a similar meeting of the shareholders of said Pemiscot Railroad Company, showing a like pretended ratification of the same contract, has been filed in the office of the Secretary of State of the State of Missouri.

"The said attempted consolidation was fraudulent and void in that it was not effected in conformity with the laws of the State of Missouri, and with a fraudulent intent and purpose, and because no notice of said meeting was given said Kerfoot, who was not present thereat, although in the copy of the minutes of said meeting on file with the Secretary of State, he is falsely represented as voting in favor of said consolidation.

"That the terms of said contract of consolidation were not carried out by said Houck or the other relators.

"That the earnings of said company are not sufficient to discharge its accruing obligations, and that the salaries and wages of its employes have not been paid for the last six months, and that it is now in debt to its said employes to the extent of many thousands of dollars.

"That by reason of the acts aforesaid, said company is unable to secure supplies needed in the operation of the road; that the rolling stock and other properties are in need of repair and replenishing, which the relators have failed and refused to have done; that no provision has been or is now being made for the extinguishment of the outstanding debts and bonds hereafter to accrue; that said Houck on the 2d day of December, 1895, did remove respondent Kerfoot, from his position as superintendent of said road, and did appropriate his salary to himself through one of the relators, his kinsman, Louis B. Houck.

"That...