Booth v. Scott

• Citation: 276 Mo. 1,205 S.W. 633
• Decision Date: 04 June 1918
• Docket Number: No. 18543.,18543.
• Parties: BOOTH v. SCOTT et al.
• Court: United States State Supreme Court of Missouri

205 S.W. 633

276 Mo. 1

BOOTH v. SCOTT et al.

No. 18543.

Supreme Court of Missouri, Division No. 1.

June 4, 1918.

Motion to Set Aside Order Denying Motion to Transfer to Court en Banc Denied September 16, 1918.

Appeal from Circuit Court, Jackson County; Kimbrough Stone, Judge.

Suit by Ida B. W. Booth against S. W.

Scott and others. From judgment for defendants, plaintiff appeals. Reversed and remanded.

This suit was brought against the above-named defendants and one Robert Miller to recover the sum of $2,000, and to secure the cancellation of a note for $3,000, dated August 3, 1908, payable to the Mexican Gulf Land & Development Company, Limited, one year after its date. It was afterward dismissed as to Miller for failure to secure service of summons upon him, owing to his absence in Mexico.

The petition alleged that at the time of these transactions the defendants were copartners doing business in Kansas City, Mo., under the firm name and style move mentioned, which was represented by defendants, both to the public and to plaintiff, to be a corporation created by the laws of the territory of Arizona, authorized to do business in this state, and that the money was paid and the note executed in payment for 500 acres of land in the state of Tamaulipas, republic of Mexico, to be conveyed to the plaintiff in pursuance of a contract filed with the petition; that a deed in form, at least, was afterward made in said corporate name, purporting to convey the same land to plaintiff. The petition charges that the entire transaction was void and inoperative for the reason, among others, that the entire transaction with plaintiff was conducted and consummated in the state of Missouri, of which plaintiff was a resident; that all the incorporators of the alleged corporation which we have named were residents and citizens of this state, and secured their incorporation in Arizona for the purpose of avoiding the laws of this state, and that they have never complied with the laws of this state by securing a certificate authorizing them to do business in Missouri, as required by statute; that the deed made and delivered to plaintiff was inoperative and insufficient, under the laws of the republic of Mexico, to convey the lands in question. These things are pleaded with great detail.

The answers are sufficient to put all material allegations of the petition in issue. They also pleaded the limitation of three years applicable to actions upon statutes for penalties and forfeitures, and certain constitutional defenses, to which reference may be made in the opinion. The following agreement is pleaded and in evidence:

"I hereby make application for 50 shares of preferred stock in the Mexican Gulf Land & Development Co., Limited, of the par value of one hundred dollars ($100) each. These shares of stock are fully paid and nonassessable, and they bear interest from date at the rate of seven per cent. (7%) per annum, payable annually.

"This stock is due and payable, principal and interest, five (5) years from its date, but is subject to payment by said corporation at any time.

"It is further understood that I have the option of returning my preferred stock into the treasury of said company at any time while I am the holder of the same, and to receive in lieu thereof a deed for land of said company in the republic of Mexico at the selling price. Ten dollars ($10) per acre has been fixed for the first 10,000 acres sold.

"The preferred stock purchased by me is a lien on all of the property belonging to said corporation. It is understood and agreed by the holder of this certificate that the corporation reserves the right to sell any part of said land free and clear of this lien by reserving, however, five dollars ($5) per acre for each and every acre sold, as a sinking fund to pay said preferred stock. For each share of preferred stock subscribed and paid for by me I am to have, free of further charge, one (1) share of the common stock of said corporation.

"I agree to pay the sum of $2,000 dollars for said preferred stock upon signing this application, and the balance, the sum of $3,000 dollars, on or before August 3, 1909. All checks payable to Mexican Gulf Land & Development Co., Limited.

                       "Name, Ida B. W. Booth
                       "Address, 2625 Garfield Ave
                  "Date Aug. 3, 1908."
                

And on reverse side is the following:

"I hereby elect to surrender the preferred stock and take land in lieu of it.

                                    "Ida B. W. Booth
                "Aug. 3, 1908
                

"We hereby acknowledge receipt of the within contract, and have filed the same, and agree to make warranty deed to land named to the amount of 500 acres as soon as the same is surveyed; also to issue the common stock provided for in this contract at the next meeting of the board of directors.

                                 "James T. Burney, Pres
                                 "Robert Miller, Secy."
                

There is little or no controversy about the facts. They are fully developed in the writings in evidence and the admissions of the parties upon the trial. The transaction began in a contract made March 30, 1908, between the defendant Scott of the one part, and his six associates in the promotion of the Arizona corporation and codefendants in this action on the other, in which they style themselves "promoters of a corporation hereinafter named." It began with a declaration that he (Scott) held a deed to 75,000 acres of land in the state of Tamaulipas, republic of Mexico, which he sold to the parties of the second part, and agreed to deliver to a corporation to be organized by all, to be known as "The Mexican Gulf Land & Development Company, Limited," with an authorized capital of 7,500 shares of common stock of the par value of $100 each, and 2,500 shares of preferred stock of the same par value; the latter to have no voting power nor voice in the management of the corporation, and all the stock to be paid up and nonassessable. The total consideration for this sale and the conveyance of the land was $150,000 `United States gold and 1,000 shares of the common stock of the corporation. For the payment of this the corporation agreed to set apart 1,000 shares of its preferred stock and to sell the same within 60 days, and pay from the proceeds $355,000 to Scott within that time, the balance of the proceeds to be set aside by the corporation for expense of promotion and developing the property. The remaining $95,000 of the purchase price was to be secured by the remaining 1,500 shares of preferred stock which was to be sold by the corporation, and 66 2/3 per cent. of the net proceeds to be credited until the $95,000 remaining unpaid to Scott should be fully paid with interest; the remaining 33 1/3 per cent, to be retained by the corporation. The preferred stock was to be sold at par, each share to carry a bonus of one share of common stock, so that each purchaser should have a share of each kind for the par value of one of them. Of the remaining 5,000 shares of common stock 1,000 shares was to then go to Scott and 4,000 shares to his copromoters, share and share alike. If it should not be found necessary to sell all the preferred stock, the common stock set aside for the part unsold should also go to the copromoters. In the meantime the entire issue of preferred stock, with the equal amount of common stock appertaining to it, was to be issued to Scott, and by him transferred to the purchasers.

The preferred stock was to bear interest at 7 per cent. per annum, and to be a first lien upon all assets of the corporation, and be payable five years from its date, and redeemable at any previous time after issue. Its lien was subject to the sale of the land under the agreement. In case of default of the copromoters, the thing was to be off.

On May 2, 1908, the promoters already mentioned prepared and signed articles of incorporation for the "Mexican Gulf Land & Development Company, Limited," which were sent to Phœnix, Ariz. and filed in the office of the state auditor May 12, 1908, at 2:30 p. m. This act is relied upon for the creation of the corporation. It was signed and acknowledged by all the promoters on May 2, 1908, at Kansas City, Mo. It begins with the statement of their intention to form a corporation under the laws of Arizona. The principal place in the territory of Arizona in which the business of the corporation was to be transacted was Phœnix, and its principal place of business outside Arizona was the city of Kansas, Jackson county, Mo., "at which place meetings of the board of directors of the corporation may be held and any and all business of the corporation transacted, and the corporation may have such other branch office, either within or without the territory of Arizona, as may be established by the board of directors, where meetings of the board of directors may be held and where any and all business of the corporation may be conducted."

Its business included practically everything that could be done by individuals within the United States and Mexico. Its capital stock was stated at $1,000,000, one-fourth of which was to be interest-bearing preferred stock, "due five years from its date, and payable at any time after its issue at the option of the company, said preferred stock to have no voting power." The articles further provided as follows:

"Said capital stock shall be paid `into this corporation at such time as the board of directors may direct, either in cash or by the sale and transfer to it of real or personal property, or for services rendered for the uses and purposes of said corporation, in payment for which shares of the capital of said corporation may be issued, and the capital stock so issued shall thereupon and thereby become and be fully paid up and nonassessable, and, in the absence of actual fraud in the transaction, the judgment of the directors as to the value of the property purchased or services rendered shall be final and conclusive."

The commencement of the corporation was...