Anderson v. Johnson
| Decision Date | 04 March 1919 |
| Docket Number | No. 19820.,19820. |
| Citation | 277 Mo. 132,210 S.W. 23 |
| Parties | ANDERSON et al. v. JOHNSON et al. |
| Court | Missouri Supreme Court |
Appeal from Circuit Court, St. Louis County; John W. McElhinney, Judge.
Action by J. Arthur Anderson and others against Clarence D. Johnson and others. Decree dismissing bill, and plaintiffs appeal. Affirmed.
This is an action instituted by 25 stockholders of the Glen Echo Country Club, which seeks to set aside a sale of the club's property to the nine individual defendants, or to have a decree declaring that defendants hold said property in trust for the plaintiffs and other stockholders of said club.
Trial was had in the circuit court of St. Louis county, which resulted in a decree dismissing plaintiffs' bill.
Plaintiffs have duly perfected an appeal to this court.
The voluminous record before us tends to establish the following facts:
The Glen Echo Country Club was incorporated in 1900 under the laws authorizing the incorporation of business corporations. The purpose of the corporation was to own, operate, and maintain a golf and country club. Its capital stock was $35,000, divided into 350 shares of the par value of $100 each.
In 1905 the corporation purchased, for the sum of $100,000, about 150 acres of land lying in St. Louis county, near the corporate limits of the city of St. Louis. Upon this land the club built a clubhouse and a very excellent golf course.
Each member of the club was required to own one share of the stock. The money with which to operate the club was derived from annual dues, which each member was required to pay, and from charges made to the members for different services. Some years additional assessments were made against the membership for the purpose of making some improvements or to meet some deficiency in the revenue.
Several years before the club property was sold the club, in order to raise some needed funds, sold to about 25 of its members, at the price of $1,000 each, certificates known as "Life Memberships," which exempted the purchasers thereof from payment of dues and assessments during the life of the club. These holders of life certificates are referred to in the testimony as "perpetual members."
For several years prior to the sale of the club's property the business affairs of the club appeared to have been handled in a very loose manner. New certificates of stock in the corporation would be issued to persons who claimed to be the purchasers of outstanding shares of stock and in many instances the old certificates were not surrendered for cancellation. On some occasions the officers of the club neglected to issue shares of stock to persons entitled thereto. Sometimes, upon the death of a stockholder, the share of stock would pass into the hands of some one who did not care to use the club. Some of the members failed to pay their annual dues and assessments.
An attempt was made by the club to discipline some of its members for such failure by threatening to refuse them the privilege of the grounds. One of the members who was thus sought to be disciplined brought a suit in the local circuit court to enjoin the club from excluding him from the use of the grounds, and, on the theory that the club was a business corporation, the circuit court held that the stockholders could not be excluded from the use of the grounds for the failure to pay the annual dues and assessments. The case was appealed to an appellate court, but the final result of the case does not appear in the record.
The club ran behind each year, and in November of 1914 a financial report of the club's treasurer showed its liabilities to total $85,210. Among its liabilities was a $56,000 bonded indebtedness secured by a deed of trust on the club's property. This bonded indebtedness was to become due on December 27, 1914. On this bonded indebtedness the club had defaulted on the interest to the amount of $1,400. This bonded indebtedness was held by a trust company in the city of St. Louis. Another item was $20,000, evidenced by unsecured promissory notes of the club held by the same trust company. The notes were payable on demand. At this time the club had on hand $2,200 in cash, and there was due the club from its members, for unpaid dues, assessments, and accounts, the sum of approximately $11,000. Of this amount, $5,000 was charged off by the treasurer as doubtful. In the fall of 1914 the property was in need of considerable repairs. The officers of the club were under the impression that they could not discipline the club membership for the nonpayment of dues and assessments. It was also charged that the privilege of using the club by nonmembers was trafficked in by a few of the members. Some considerable dissatisfaction existed among the members concerning the manner in which the club was being conducted.
October 27, 1914, the officers of the club, for the purpose of seeing what could be done for the relief of the club's troubles, gave what was called a "get-together" dinner at the clubhouse. Each of the 350 members were invited to this free dinner, and about 48 members attended. The financial conditions of the club were explained to those present, but the stockholders present were unable to agree upon any plan. It was then suggested that the directors formulate a plan for financing the club and call a meeting of the stockholders later.
Pursuant to this suggestion they called a meeting of the stockholders for December 15, 1914. All the stockholders were notified of this meeting, and a financial statement was mailed to each stockholder. About 36 stockholders attended. At this meeting a committee, which had been theretofore appointed by the president to outline plans for financing the club, made its report. This committee recommended the following action by the stockholders, to wit: First, that an assessment of $75 be made against each member of the club for the purpose of liquidating its current liabilities; second, that the annual dues of the club be increased from $100 to $150 per year; third, that the club sell 23.4 acres of its land lying west of the Wabash Railroad tracks; fourth, that a second bond issue be made sufficient to meet the present requirements of the club, and that said bond issue be secured by a second deed of trust on the club's property, and the bonds be sold to the club members. All of the foregoing propositions were voted down by the stockholders, and thereupon a motion was made that an entire reorganization of the club be had. This proposition was also rejected by the stockholders. Thereupon a motion was made authorizing the officers of the club to execute and deliver a deed of trust on all of the club property not included in the first mortgage; this second deed of trust to be given to secure the $20,000 in notes held by the trust company. The trust company was demanding that these notes be secured. This latter proposition was unanimously adopted and the deed of trust was later executed.
About this time, or shortly thereafter, the trust company refused to make further loans to the club unless the directors would personally indorse for the club. This the directors declined to do.
After the stockholders' meeting had refused to adopt any substantial part of the plans for financing the club, certain stockholders, including the secretary of the club, believing that the club would not be able to finance itself, and that the club's property would likely be sold under the first mortgage, and in order to meet the contingency of a sale of the club's property, formed what is known in the record as a "Syndicate Agreement." By this agreement the signers thereof agreed to contribute $1,000 each to a fund with which to purchase the club's property in the event the club's property should be sold at public sale. Approximately 200 persons, including both members and non-members of the club, were invited to sign this agreement, and approximately 92 of those invited signed the agreement. It does not appear, however, that this agreement was ever used in the purchase of the club's property.
Some of the perpetual members heard of the "Syndicate Agreement," and, fearing that the club's property would be sold and their rights as perpetual members jeopardized, called a meeting of the perpetual members, January 9, 1915. At this meeting of the perpetual members a committee was appointed to call upon the board of directors to ascertain why the old club should not be continued, and to further see if suitable concessions would be made to the perpetual members if a new club were formed. Some of the perpetual members testified that they had agreed among themselves that they would raise the money with which to finance the club, but no definite plan was at that time agreed upon.
A committee representing the perpetual members called upon the secretary of the club, and he requested them to put their proposition in writing. On January 28, 1915, the committee representing the perpetual members wrote a letter addressed to the board of directors, stating that they would be pleased to see the club continued as it then was, and that if the present board of directors "fear that they cannot finance or manage the club under the present conditions, that they resign and permit the perpetual members to attempt to finance and manage the same"; and further stated that, if the board accepted this proposition, the perpetual members would be glad to have any members of the old board join the new board to aid in some manner to run and finance the club upon a sound financial basis.
The secretary of the club replied to this letter, stating that there had been no regular meeting of the directors to discuss the proposition, but that his own view, and those of the directors with whom he had talked, was that the proposition was too indefinite to be considered.
Some of the perpetual members then called an informal stockholders' meeting to meet on February 6, 1915. At that meeting a...
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