Barrie v. United Railways Co. of St. Louis

• Decision Date: 24 May 1909
• Citation: 119 S.W. 1020,138 Mo.App. 557
• Parties: DAVID BARRIE, Respondent, v. UNITED RAILWAYS CO. OF ST. LOUIS, Appellant
• Court: Missouri Court of Appeals

119 S.W. 1020

138 Mo.App. 557

DAVID BARRIE, Respondent,
v.
UNITED RAILWAYS CO. OF ST. LOUIS, Appellant

Court of Appeals of Missouri, St. Louis

May 24, 1909

[119 S.W. 1021]

February 4, 1909, Submitted

Appeal from St. Louis City Circuit Court.--Hon. Matthew Given Reynolds, Judge.

AFFIRMED.

Motion overruled.

Boyle & Priest, T. M. Pierce and T. E. Francis for appellant.

The court erred in not sustaining defendant's motion to elect because the positions assumed by the plaintiff in his petition were inconsistent, irreconcilable and the proof of one necessarily disproved the other. Jordan v. Transit Co., 202 Mo. 426. Plaintiff cannot recover because he has failed to prove that the defendant took the assets of the Transit Company without any or adequate consideration. Benesh v. Insurance Co., 72 N.E. 674; Baker v. Harpster, 22 P. 415; Fernschild v. Vedder, 49 N.E. 151; Shoe Co. v. Prickett, 84 Mo.App. 94; Alexander v. Williams, 14 Mo.App. 13; Kitchen v. Railway, 69 Mo. 224; Powell v. Railroad, 42 Mo. 63; Burge v. Railway, 100 Mo.App. 160; Fogg v. Blair, 133 U.S. 534; Warfield v. Canning Co., 34 N.W. 467; Noyes on Intercorporate Relations, sec. 123; Huston v. Tyler, 140 Mo. 263; Cole v. Armour, 154 Mo. 350; Schiffman v. Schmidt, 154 Mo. 214. Neither by operation of law nor by any stipulation in the tripartite agreement did the defendant agree to pay the judgment of the plaintiff. Bank v. Iron Co., 97 Mo. 44; Hageman v. Railroad, 202 Mo. 249. The court erred in admitting, over the objection of the defendant, plaintiff's "Exhibit R," being an agreement between Brown Brothers & Company and F. S. Smithers and others. Barrie v. Railways, 125 Mo.App. 121. The court erred in admitting, over the objection of the defendant, plaintiff's "Exhibit S," being a letter written by Mr. Carleton on the 14th day of November, 1904. Barrie case, supra. The court erred in admitting, over the objection of defendant, plaintiff's "Exhibit U," being an affidavit made by James Campbell and accompanied by an exhibit in a lawsuit unconnected in any way with the case under consideration. Barrie case, supra. The court erred in admitting, over the objection of defendant, plaintiff's "Exhibit V," being a copy of a telegram from James Campbell to Brown Brothers & Company, dated October 11, 1904. Barrie case, supra.

Marion C. Early for respondent.

The assets of a corporation are impressed with a trust in favor of creditors and no distribution can be made among shareholders until all debts and liabilities have been satisfied. Toy Mfg. Co. v. Insurance Co., 4 S.D. 173; Oil Co. v. Refining Co., 108 La. 74; 2 Morawetz on Corp., 790; Berry v. Rood, 168 Mo. 316. When the directory and principal officers of two corporations are substantially identical all transactions between them are prima facie fraudulent as against the rights of creditors. The findings of the trial court that the consideration was inadequate and that as to the leasehold there was no consideration is conclusive. Barrie v. United Railways Co., 125 Mo.App. 96; Noyes on Intercorporate Relations, sec. 124, pp. 194, 195; Sweeney v. Sugar Co., 30 W.Va. 443; Insurance Co. v. Transportation Co., 13 F. 578; Railroad v. Evans, 66 F. 810; Railroad v. Bell, 44 Cal. 398; Couse v. Powder Co., 33 A. 297; Bank v. Alabama Sanitarium, 103 Ala. 358; Montgomery Web Co. v. Dienelt, 133 Pa. 585; Lewis v. Gro. Co., 38 S.W. R. 755; Coningsham's Appeal, 57 Pa. 474; Chouteau v. Allen, 70 Mo. 290, 338. When one corporation acquires all the assets of another corporation, issues its stock in exchange for the stock of the old company, and the old company ceases to be a going concern and the new company continues the business, the new company receives the assets of the old company burdened by its liabilities. Such arrangement has the effect of distributing assets of the old company among its stockholders to the exclusion of creditors. This cannot be done. The new company will by operation of law be held to have assumed and agreed to pay the debts of its vendor, including a judgment subsequently recovered against it in an action for negligence which was pending at the time of the transfer. Jennings v. Lumber Co., 91 Mo.App. 333; Railroad v. Lee, 84 S.W. 332; Grinnell v. Gas Co., 112 Mich. 70; Capsule Co. v. Isaacs, 55 N.E. 836; Railroad v. Jones, 29 Ind. 465; Railroad v. Boney, 117 Ind. 50; Meyer v. Johnston, 64 Ala. 656; Railroad v. Ashling, 160 Ill. 373; 10 Cyc. pp. 303-308 inclusive; Thompson on Corp., secs. 405, 8231, 8240-41; Cook on Corp. (4th Ed.), sec. 897; Furniture Co. v. Hall, 107 N.W. 117; Cook on Stock and Stockholders (3 Ed.), sec. 671; Session Acts of Mo., 1907. And in such case the new company holds the property received from the absorbed company with notice of any trust attaching to it in favor of creditors and cannot claim the rights of a bona fide purchaser without notice. The Key City, 14 Wall. 653.

REYNOLDS, P. J. REYNOLDS, P. J. Judge GOODE concurs in full; Judge NORTONI, not sitting or participating in the consideration or determination of the case.

OPINION [119 S.W. 1022]

[138 Mo.App. 563] REYNOLDS, P. J.

This is the second appeal in this case, the first having been taken by plaintiff, and the action in this court reported 125 Mo.App. 96. In the present appeal, as in the former, it was heard before two of the judges of this court, one of the judges not sitting. It was reversed and remanded, with the concurrence of both judges, for error in the admission of a tabulated statement of assets received and liabilities assumed by the defendant, generally hereafter referred to as Railways or United Railways Company, from the St. Louis Transit Company, generally hereafter referred to as the Transit Company, and for failure to set out evidence as to the value of a certain leasehold, surrendered by the last-named company to the defendant. On the second trial there was evidence covering both of these, and the case is now here on appeal by defendant. It might be a sufficient statement of the facts in the case to refer to the statement prepared by Judge BLAND, who has in the meantime retired from the bench by reason of the expiry of his term, as the evidence on the second trial was practically the same as that introduced when the case was first tried, with the additions above noted, but it will probably be more satisfactory to here make a connected statement, referring, however, to the one in 125 Mo.App. for points in evidence there developed but not specifically covered by this statement.

A corporation known as the Central Traction Company was incorporated on the fifth of March, 1898, under the laws of this State. Its capitalization was $ 100,000, divided into 1000 shares of the par value of $ 100 each. The purposes for which the corporation was formed, as stated in its articles of association, were "to construct or acquire by purchase, lease or otherwise, and to maintain and operate by any and all kinds of motive power, street railways for public use in the conveyance of persons and property in the city of St. Louis, and in the county of St. [119 S.W. 1023] Louis, State of Missouri."

[138 Mo.App. 564] By Ordinance No. 19352, the city of St. Louis authorized the Central Traction Company to construct, operate and maintain a single or double-track passenger railroad over, along and across certain streets, etc., in that city and to operate its road by electric power, "and to run over the tracks of other roads, and to acquire and convey by lease, purchase or sale its own property and franchises or the property and franchises of other street railway companies in the city of St. Louis, and to operate the same." The franchise was granted for a period of fifty years from the date of its passage. It was passed April 12, 1898. It does not appear that the Central Traction Company ever operated or constructed any line under that name.

On the second day of March, 1899, a corporation under the name of the St. Louis Transit Company was formed with a capital stock of $ 3,000, divided into thirty shares of the par value of $ 100 each.

By an ordinance of the city of St. Louis, approved March 20, 1899, certain street railways named in it, their successors and assigns, were authorized to sell, lease or convey, "if found desirable, their property, rights, privileges and franchises now owned and held or herein granted, respectively, to any of the said companies named in this section, or to the St. Louis Transit Company, its successors and assigns." The title of this ordinance and the first and third sections of it are set out in the opinion of Judge GOODE, in the case of Moorshead v. United Railways Co., 119 Mo. App., commencing at page 550, and it is not necessary to repeat that here nor to transcribe any other portions of that ordinance.

It does not appear that the Transit Company ever owned or built any line in its own right--whatever it built being under the lease before and hereafter referred to.

On the tenth day of July, 1899, the Central Traction Company filed an affidavit in the office of the Secretary [138 Mo.App. 565] of this State, changing its name to United Railways Company of St. Louis, and afterwards, on the sixteenth day of September, 1899, United Railways increased its capital stock from $ 100,000 to $ 45,000,000, divided into $ 20,000,000, or 200,000 shares of preferred cumulative 5 per cent stock, and $ 25,000,000 or 250,000 shares of common stock; and on the twentieth day of September, 1899, under its new name of United Railways Company of St. Louis, by unanimous vote of its stockholders, determined "to increase the bonded indebtedness of said company from nothing to $ 45,000,000, . . . and to issue $ 45,000,000 par value, of first general mortgage 4 per cent gold bonds of said company, and to secure the same by a mortgage upon all the property, real, personal and mixed, including all rights, franchises and privileges of whatever kind and nature now owned...