Automatic Sprinkler Company of America v. Stephens

• Decision Date: 31 December 1924
• Docket Number: 24271
• Citation: 267 S.W. 888,306 Mo. 518
• Parties: AUTOMATIC SPRINKLER COMPANY OF AMERICA v. HENSON M. STEPHENS and ROBERT G. MORRIS, Receivers, Appellants
• Court: Missouri Supreme Court

267 S.W. 888

306 Mo. 518

AUTOMATIC SPRINKLER COMPANY OF AMERICA v. HENSON M. STEPHENS and ROBERT G. MORRIS, Receivers, Appellants

No. 24271

Supreme Court of Missouri

December 31, 1924

Appeal from St. Louis City Circuit Court; Hon. Benjamin F Klene, Judge.

Affirmed.

Charlton A. Alexander for appellant; Cobbs, Logan & Alexander and Curlee & Hay of counsel.

(1) Upon the expiration of the term of the charter, the corporation ceased to exist, and thereafter it had no power to make a contract, and its title to property ceased, and it had no power to bind or convey its property in its corporate name. Sec. 9755, R. S. 1919; Ford v. Ry. Co., 52 Mo.App. 452; McCoy v. Farmer, 65 Mo. 244; 8 Fletcher Ency. Corp. Pac., sec. 5424, p. 9030. (2) After the death of the corporation by limitation, nothing that the president could do as such could bind the corporate assets. Meramec Springs Park Co. v. Gibson, 268 Mo. 394; 14 C. J. sec 8303, p. 1149. (3) Upon the dissolution of the corporation by limitation, the title ordinarily vests in the managers as trustees of such corporation; but such trustees are not trustees for the creditors, as the creditors are not a part of the corporation, and have no voice in the management of same, being only entitled to receive payment of their claims. Sec. 9755, R. S. 1919. (4) The signature to the contract is that of the corporation, and as such is void as a corporate act, and can have no effect of binding the corporate property. 14 C. J. 1158; Venable Bros. v. So. Granite Co., 135 Ga. 508; Mason v. Prtg. Co., 133 U.S 64; Houston v. Utah Power Co., 187 P. 174. (5) After the dissolution, even the representatives as such, cannot make a contract under the statute which will have the effect of adding to its assets. 14 C. J. sec. 3815, p. 1158. (6) One who has contracted with an organization in its corporate name is estopped to deny the existence of the corporation at the time of making the contract. Bradley v. Reppell, 133 Mo. 533. (7) When the corporation continues to carry on its business, taking no steps to settle the corporate affairs after the expiration of the charter, the stockholders are doing business as partners, and become personally liable for all debts contracted as such. Ewald Iron Wks. v. Commonwealth, 140 Ky. 692; Central City Savings Bank v. Walker, 66 N.Y. 424; Commerce Natl. Bank v. Galinsky, 142 Iowa 170.

S. T. G. Smith and Thos. S. Meng for respondent.

(1) If Houchin was absolute owner, free of any trust, as appellants claim, then the right to a mechanic's lien was clearly made out. (2) Creditors have no lien upon the assets of a defunct corporation. Barrie v. United Rys. Co., 125 Mo.App. 96, 120; Hollins v. Brierfield Coal Co., 150 U.S. 383; Wagoner-Gates Milling Co. v. Ziegler Com. Co., 128 Mo. 495. (3) If Houchin was liquidating trustee the contract was enforceable as against the assets of the former corporation. When a person acts for a valuable consideration he is understood to engage to make the instrument as effectual as he has power to make it. Campbell v. Johnson, 65 Mo. 439. (4) A mechanic's lien is not created by the contract, but by the use of the materials and labor, upon the idea that the labor and materials have been a benefit to the property or have enhanced its value. Van Stone v. Stilwell Mfg. Co., 142 U.S. 136; Hannon v. Gibson, 14 Mo.App. 33; Fitzgerald v. Thomas, 61 Mo. 499; Holtzhuer v. Meer, 59 Mo. 434; Henry v. Evans, 97 Mo. 47. (5) Liquidating trustees may, in their discretion, incur such obligations as are properly incident to the management of the affairs in their charge. Mason v. Mining Co., 66 F. 402; Rossi v. Caire, 174 Cal. 81; Crystal Pier Co. v. Schneider, 180 P. 948; Havemeyer v. Superior Court, 84 Cal. 327, 10 L. R. A. 638; 14a C. J. 1169, sec. 3837. (6) The objection to the validity of the contract made by Houchin, being that it was beyond his powers as trustee, the rule as to ultra vires contracts of corporations should be applied, to the effect that where the contract has been fully executed by the other party and the benefit retained, such defense is unavailable. St. Louis v. Ry. Co., 248 Mo. 27; First Natl. Bk. v. Guardian Trust Co., 187 Mo. 527. (7) Where action of trustee results in benefit, the trust estate is obligated therefor. Stevens v. Melcher, 80 Hun, 514; Dilworth v. Linderlong, 1 Binney, 488; Pratt v. Thornton, 28 Me. 355; Lewin on Trusts (12 Ed.) pp. 713, 714; Beck v. Kinealy, 89 Mo.App. 418.

Railey, C. Higbee, C., concurs.

OPINION

RAILEY

Plaintiff, Automatic Sprinkler Company of America, a New York corporation, commenced this action in the Circuit Court of the City of St. Louis, Missouri, against Henson M. Stephens and Robert G. Morris, receivers of the Star Manufacturing Company, a Missouri corporation, et al., defendants, to establish a mechanic's lien for a balance amounting to $ 9868.75 against a building in the city of St. Louis, and the leasehold interest formerly owned by said Star Clothing Manufacturing Company in the lot of ground on which the building was situated, for material and labor furnished in equipping the building with what is known as a sprinkler system.

The latter consisted of pipes and valves connected with the city water supply, and equipped with sprinkler heads distributed throughout the building which fuse at a certain temperature, thus permitting a discharge of water and extinguishing incipient fires. There is also an automatic fire-alarm or signal to the fire department. It is a system of fire prevention as distinguished from insurance which provides indemnity only. The evidence tends to show that it prevents large fire loss, and therefore results in great reduction of rates of fire insurance. In this case the insurance rate, after the equipment was installed, was only one-sixth of the former rate. That is to say, the former rate was $ 1.38, while the rate with the sprinkler was twenty-three cents. The evidence shows that the receivers saved about $ 5500 in reduction of fire insurance premiums during the liquidating period after the sprinkler was installed. As a matter of fact, the building was sold by the receivers appointed by the Federal court, after the installation of this Sprinkler system, for $ 20,000 more than the Star Clothing Company paid for the property.

There is no dispute as to the installation of the system being in accordance with the plans agreed to between this plaintiff and James A. Houchin, as president of the Star Clothing Maunfacturing Company. Said installation was completed within the time required by the terms of the undertaking. A substantial part of the material was delivered, work commenced by December 1, 1920, and the installation completed February 24, 1921. The lien account was filed in the clerk's office August 19, 1921, and this suit was commenced within a proper time thereafter. The contract for the installation of the sprinkler system was dated October 12, 1920, nine days after the company's charter had expired. The contract was in the form of a proposition made by the Sprinkler Company, and was accepted as follows:

"Acceptance.

"We hereby accept the above proposal this 12th day of October, 1920, and authorize the 'automatic' Sprinkler Company of America to do the work therein specified, and we agree to pay therefor as therein proposed.

"Star Clothing Mfg. Company,

"Jas. Houchin, President.

"Witness: John Friesch."

The title to said property stood in the name of the Star Clothing Manufacturing Company until sold by order of the Federal court at St. Louis. Soon after the installation of the above system, the Star Clothing Company experienced financial reverses and the Federal District Court at St. Louis appointed defendants, Henson M. Stephens and Robert G. Morris, receivers; and it was through them, as such, that the sale of the property was effected.

The evidence shows that John B. Houchin and Mollie Houchin are the father and wife of James A. Houchin, and upon the corporate records appear as directors, though no stock appears to have been issued to them. Both of them deny that they ever received or owned any stock or acted as directors of said corporation.

James F. Bippus was made a defendant, because he was the pledgee of all of the stock of the Star Clothing Company at a time when it was a going concern, and Jas A. Houchin made the pledge for borrowed money. Service was had by publication against Bippus and the unknown holders of the deed of trust and notes secured thereby, mentioned in the pleadings and evidence.

The present suit was filed in the St. Louis Circuit Court by leave of the United States court aforesaid, which had set aside enough of the proceeds of the sale of the property to satisfy the lien sought to be established here.

It clearly appears that, at the time the contract for the sprinkler system was made, none of the parties knew that the Star Company had ceased to be a legal entity. No dispute is made as to the plaintiff being entitled to the amount for which it seeks to establish the mechanic's lien, if entitled to anything. Plaintiff contends that, while all the parties thought at the time the contract was made that a contract for the sprinkler system with the Star Company was being made, yet since that company was dead, its statutory trustee, James A. Houchin, was bound by the contract of October 12, 1920. It is evident from the foregoing facts that James A. Houchin, when he signed the paper for the sprinkler system, did not propose to bind himself personally, nor as trustee for the Star Company, for he did not then know the company had ceased to exist. He thought at that time, the Star Company was a legal entity, that it was a going concern and that he was making such a contract as he had the legal right to make...