Webb v. Rockefeller

• Decision Date: 29 March 1906
• Citation: 195 Mo. 57,93 S.W. 772
• Parties: WEBB v. ROCKEFELLER et al.
• Court: Missouri Supreme Court

93 S.W. 772

195 Mo. 57

WEBB v. ROCKEFELLER et al.

Supreme Court of Missouri, Division No. 2.

March 29, 1906.

1. PARTNERSHIP—DEFECTIVE INCORPORATION — STOCKHOLDERS — LIABILITY FOR CORPORATE DEBTS.

Where the articles of association filed by the stockholders of a corporation falsely stated that a certain amount had been subscribed and paid up, when in fact it was agreed that certain of the stockholders should not be required to pay their subscriptions, it does not render the stockholders liable to creditors of the corporation as copartners.

2. CORPORATIONS—FRAUD.

Though Rev. St. 1899, § 1312, requires that the articles of association of a corporation shall set out the amount of the capital stock, the number of shares into which it is divided, and the par value thereof, and that the same has been bona fide subscribed and one-half thereof actually paid, the falsity of such statements in the articles of association does not render the incorporators liable to creditors on the ground of fraud; the statements being made to comply with the requirements of law and not as a representation to the creditors.

3. SAME.

That statements in articles of association of a corporation as to subscription and payment for stock were false, and that the Secretary of State issued a certificate of incorporation without knowledge of their falsity, does not render the incorporators liable to creditors as partners on the ground of fraud; the validity of the incorporation being impeachable only on direct attack by the state.

Appeal from Circuit Court, Jackson County; W. B. Teasdale, Judge.

Action by E. T. Webb against Frank Rockefeller and others. From a judgment sustaining a demurrer to the petition, plaintiff appeals. Affirmed.

H. W. Currey, R. W. Coleman, and Botsford, Deatherage & Young, for appellant. Gage, Ladd & Small, Frank Hagerman, and D. W. Brown, for respondents.

GANTT, J.

This suit was begun February 4, 1902, by the plaintiff filing a petition in the office of the clerk of the circuit court of Jackson county, at Kansas City. The defendants were duly served and filed their demurrer to the petition, which said demurrer was sustained on the 20th of June, 1903, and final judgment rendered in favor of the defendants on June 27, 1903. The facts stated in the petition are summarized by the plaintiff as follows: "First. That on the 27th day of November, 1899, the defendants and Frank Seigel and William Askew signed and filed in the office of the recorder of deeds for Jackson county, and a certified copy thereof, subsequently, in the office of the Secretary of State, articles of association, and obtained a corporate charter, wherein it was specified that they were a body corporate, under the name of `Seigel-Sanders Live Stock Commission Company.' That said articles of association specified: (a) That the name of the company should be Seigel-Sanders Live Stock Commission Company; (b) that the capital stock of the company should be $250,000, divided into 2,500 shares, of the par value of $100 each; (c) that all of said stock had been bona fide subscribed and all thereof actually paid up, and was in the hands of the persons named as the first board of directors; (d) that defendant Frank Rockefeller had subscribed for 1,000 shares, that defendant Swain had subscribed for 500 shares, that defendant Matchette had subscribed for 250 shares, and that Frank Seigel had subscribed for 500 shares, and William Askew had subscribed for 250 shares. Second. That all of the capital stock was not, in fact, bona fide subscribed and that one-half of the capital stock was not, in fact, paid up. Third. That the subscription of Frank Seigel and R. D Swain were not bona fide, but were simulated only. Fourth. That Seigel never paid any part of his subscription, and had an agreement with the defendants that he was not to pay the same, and the same as to Swain. Fifth. That the incorporators agreed at the time of signing the articles of association that the capital stock should not be paid, but that they would obtain the charter and use it as a shield from individual liability. Sixth. That the defendants were named as the first board of directors, and were its officers, and that the company never had $250,000, nor one-half that amount. Seventh. That they dealt and contracted plaintiff's debt in the corporate name. Eighth. That plaintiff in good faith believed the corporation had a paid-up capital of $250,000, and extended credit to the corporation on such faith, and parted with his money to the corporation, being deceived by the representation that the company had $250,000 capital paid up. And a prayer for judgment. We now ask the court to adjudge that the petition states a cause, and reverse and remand the case."

1. The appeal in this case involves a number of the questions discussed and decided in First National Bank of Deadwood v. Rockefeller et al., 93 S. W. 761. The pleader in this case, however, alleges a perfect formal compliance by the defendants and Seigel and Askew with the statutes of this state in procuring an incorporation of the Seigel-Sanders Live Stock Commission Company. It is not claimed in this petition that any of the original incorporators failed to acknowledge the articles of association, which were filed in the office of the recorder of deeds of Jackson county, and a certified copy thereof subsequently filed in the office of the Secretary of State. On the contrary, it is alleged that all of the steps prescribed by the statute as a matter of form were duly and literally complied with, and that a corporate charter was issued to them by the Secretary of State on the 1st day of December, 1899. But it is alleged in this case, as in the Deadwood Bank Case, that all the capital stock of the said company was not in fact bona fide subscribed, and that one-half thereof was not in fact paid up, and that the incorporators agreed at the time of signing the articles of association that the capital stock should not be paid in full, and that plaintiff, in good faith believing that the corporation had a paid-up capital of $250,000, extended credit to it on such faith, and parted with his money to the corporation, being deceived by the representation that the company had $250,000 capital paid up. Learned counsel for plaintiff does not charge anywhere in his petition that the defendants by reason of the aforesaid premises became and were copartners and liable to him as such. In fact, learned counsel ingenuously confesses that he has not named the cause of action upon which he seeks to recover, but has left it to the court to denominate it. For the reasons assigned in First National Bank of Deadwood v. These Same Defendants, it must be held that the defendants are not copartners, and liable as such to the plaintiff, merely because the full amount of the capital stock subscribed for by them in the original articles of association was not paid up, either to the first board of directors at the time of the organization of the corporation, or into the treasury of said corporation at that time. The allegations of the petition on their face declare that the Seigel-Sanders Live Stock Commission Company was a de facto corporation by virtue of the articles of incorporation issued to it by the Secretary of State prior to the incurring of the debt, if any, for which plaintiff brought this action.

2. It remains, then, to be seen whether the action can be sustained upon the theory of fraud and deceit. If we grasp correctly the contention of the plaintiff on this point of the case, it is that as our statute (section 1312, Rev. St. 1899) requires that the articles of association shall set out the amount of the capital stock of the corporation, the number of shares into which it is divided, and the par value thereof, and that the same has been bona fide subscribed and one-half thereof actually paid up in lawful money of the United States, and is in the custody of the persons named as the first board of directors or managers, and that as the defendants and their associates stated in their articles of association that the capital stock of the Seigel-Sanders Live Stock Commission Company should be $250,000, and that all of said stock had been bona fide subscribed and all thereof actually paid up, and was in the hands of the persons named as the first board of directors, and that as it is admitted that this statement in the articles was untrue, plaintiff was deceived by this representation made in the articles of association and parted with his money to the corporation. There is no allegation in the petition that the plaintiff knew, at the time of advancing his money as alleged, that the company was or claimed to be a corporation under the laws of this state, or that he had any knowledge of the articles of association or the contents of them. But plaintiff insists that in dealing with said commission company he was conclusively presumed to know of the required articles of association made, filed, and recorded by the defendants, and of the terms, provisions, statements, and representations therein made by the defendants. But, conceding that he had known of the filing of the articles of incorporation, and had read them before giving credit to the company, and had given credit upon the faith of them, the question then arises whether, upon these facts alone and the falsity of those statements as to the payment for the stock, he can maintain an action as for fraud and deceit.

In Priest v. White, 89 Mo. 609, 1 S. W. 361, the action was for deceit against two of the original subscribers and incorporators of the Jackson Coal & Mining Company. The petition stated the indebtedness of the coal and mining company to the plaintiff, and then alleged in substance that Bell and Hardin and two others each subscribed for $25,000 of stock in the said coal company and conspired together to cheat the corporation of its stock, with a view of converting the same to their own use, and...