Baumhoff v. Grueninger

• Decision Date: 01 June 1915
• Docket Number: No. 17308.,17308.
• Citation: 178 S.W. 102
• Parties: BAUMHOFF et al. v. GRUENINGER et al.
• Court: Missouri Supreme Court

178 S.W. 102

BAUMHOFF et al. v. GRUENINGER et al.

No. 17308.

Supreme Court of Missouri, Division No. 1.

June 1, 1915.

Motion to Transfer to Court in Banc Denied June 30, 1915.

Appeal from St. Louis Circuit Court.

Action by George W. Baumhoff and others against John Grueninger and others. From a judgment for defendants, plaintiffs appeal. Affirmed.

The plaintiffs brought this suit in the circuit court of St. Louis county against the defendants, to follow and recover `certain equitable assets, which they claim in equity should be subjected to the payment of their judgments against the St. Louis Monte-Sano & Southern Railway Company, unlawfully abstracted therefrom by the defendants, who constituted a majority of the board of directors of said railway company. The St. Louis Union Trust Company, trustee mentioned in certain bonds issued by the railway company, filed an intervening petition in behalf of the bondholders. Demurrers were filed to both the petition of the plaintiff and to the intervening petition of the trust company. The demurrers were sustained, and the plaintiff and the trust company declined to plead further, and judgment was accordingly rendered against them, and they duly appealed the cause to this court.

The pleadings are unusually lengthy, covering about 30 pages of printed matter; and for that reason I will not undertake to set them forth, but will briefly state so much thereof as will be sufficient upon which to predicate the legal propositions presented for determination.

The St. Louis, Monte-Sano & Southern Railway Company was a corporation duly organized and existing under the laws of the state of Missouri, the design of which was to construct and operate a line of railroad from the southern limits of the city of St. Louis, through the counties of St. Louis, Jefferson, and St. Francois to Farmington, Mo., and the defendants, other than John Grueninger, the sheriff of St. Louis county, constituted a majority of the board of directors of said railway company. The Monte-Sano Construction Company was a corporation organized by the defendants for the purpose of constructing said line of railroad. The St. Louis Union Trust Company was a corporation duly incorporated under the laws of the state of Missouri, regarding trust companies. The railway company issued a certain number of bonds for the face value of $1,000 each, due in 30 years, bearing 5 per cent. interest, payable semiannually, secured by a deed of trust covering all of the property owned by the company at the date of their issuance, and all that it might thereafter acquire; and the St. Louis Union Trust Company was the trustee named in said deed of trust. Said bonds and deed of trust provided that the line thereof should be subject to mechanics' liens for labor and materials furnished in the construction of the road. The Monte-Sano Construction Company constructed certain portions of said road and had mechanics' liens established against the road for a sum of about $13,500. The plaintiffs Baumhoff and Herkert were owners of 14 of said railway bonds, and the other plaintiffs were general judgment creditors of the railway company. The construction company had the railway property sold under mechanic's lien judgments for the sum of $____, which was paid to the defendant sheriff, which he had in his hands at the time of the institution of this suit, and that was the reason for his having been made a party to the suit.

The plaintiffs seek to have one of those mechanic's lien judgments against the railroad declared a junior lien to the general judgment liens of the plaintiffs, against said road, because of the fraud charged in the petition to have been perpetrated by the defendants, they being the majority of the board of directors of the railway company and the owners of the stock and board of managers of the Monte-Savo Construction Company, in favor of which the mechanic's lien judgments were rendered, and thereby have that portion of the sale price of the road to which defendant Schibi is under the law entitled (the construction company having assigned its $13,500 mechanic's lien judgment to him, with a guaranty) applied to the payment of plaintiffs' and all other bondholders' claims, all of whom came in and were represented in the suit by the trust company. The casual fraud charged against Schibi, the assignee of the construction company's claim and the other defendants is substantially as follows: That said claim or judgment of the construction company was fraudulent and void because the contract upon which the same was bottomed—

"was entered into in violation of section 1121, R. S. Mo. 1899, section 3161, R. S. Mo. 1909, and in violation of section 22, art. 12, of the Constitution of the state of Missouri, both of which provide that the officers and directors of a railway company shall not be directly or indirectly interested in contracts with railway companies of which they are officers or directors in furnishing supplies or materials to it. That two of the directors of said railway were at the time directors in said Monte-Sano Construction Company and owned all of the stock thereof, save one share. That said alleged contract was also invalid because it provided in terms for the election of two directors named in said construction company, as directors of said railway company, which provision was actually carried out."

The petition then charges that said claims of the construction company could and would have been defeated, etc., had it not been for the agreement and conspiracy between the officers and directors of the railway company and the construction company to allow the same, and have them paid in violation of said statute and constitutional provision.

Whatever additional facts that may be necessary to be stated in order to properly present any legal proposition involved will be done in that connection.

Lee A. Hall, of St. Louis, and Stevens & Stevens, of Clayton, for appellants. C. W. Wilson, of St. Charles, William Broadhead, of Clayton, and Theodore C. Bruere, of St. Charles, for respondents.

WOODSON, J. (after stating the facts as above).

I. Counsel for plaintiffs have presented three principal, legal propositions for determination, and a dozen or more subsidiary ones, all, of course, pointing to a reversal of the judgment; but from the view we have taken of the case, it will be only necessary to apply a single equitable maxim to the facts of the case in order to demonstrate that the plaintiffs are not entitled to the relief prayed, and that the judgment of the circuit court should be affirmed. The maxim referred to is the crown jewel of them all, "He who seeks equity must do equity." This maxim is peculiarly applicable to the facts of this case. The fraud complained of by plaintiff is not fraud in fact. The casual fraud charged constitutes a violation of prohibitive laws, that is, malum prohibitum, and not acts which are malum in se. Those laws were enacted upon the grounds of public policy, not that the acts prohibited were evil within themselves, but the self-interest, involved therein tended evilward, upon the principle that man cannot serve both God...