Bromschwig v. Carthage Marble & White Lime Co.

• Decision Date: 20 December 1933
• Citation: 66 S.W.2d 889,334 Mo. 319
• Parties: Clara Bromschwig and Clara Bromschwig, Trustee for Joseph Remmers, v. Carthage Marble & White Lime Company, a Corporation, George S. Beimdiek, Emil Beimdiek and Arthur O. Beimdiek, Appellants
• Court: Missouri Supreme Court

66 S.W.2d 889

334 Mo. 319

Clara Bromschwig and Clara Bromschwig, Trustee for Joseph Remmers, v. Carthage Marble & White Lime Company, a Corporation, George S. Beimdiek, Emil Beimdiek and Arthur O. Beimdiek, Appellants

Supreme Court of Missouri

December 20, 1933

Appeal from Circuit Court of City of St. Louis; Hon. Granville Hogan, Judge.

Affirmed.

Bryan Williams, Cave & McPheeters and Howard Gray for appellants.

(1) A refusal to permit plaintiff to examine the books of defendant company would not have justified the appointment of a receiver. Certainly then, a failure to send a financial statement when requested could not be grounds for such appointment. 8 Fletcher on Corporations (2 Ed.) 8885; Carson v. Glass Co., 189 F. 798. (2) Neither the corporation itself nor its creditors or stockholders sustained any damage through any acts of defendant, George S Beimdiek. Before George S. Beimdiek could be rendered liable to the corporation or to a creditor or stockholder for any act, damage must have been sustained. 4 Fletcher on Corporations (2 Ed.) 3660. (3) There is no principle of equity which would allow plaintiff, the owner of ten and five-sevenths shares out of a total of two hundred fifty shares of stock of defendant company, to be now declared to be the owner of the entire capital stock of defendant company. Lindemann v. Rusk, 104 N.W. 119; Ward v Natl. Ice Cream Co., 246 S.W. 557.

Marion C. Early and Ivon Lodge for respondents.

(1) This is a case where an officer and general manager of a corporation occupying a highly fiduciary relationship abused that trust by using corporate funds for his own private gain. In such a case equity will require a strict accounting to the corporation for all profits made from the use of corporate funds. Ambruster v. Ambruster, 31 S.W.2d 28; Southwest Pump & Mach. Co. v. Forslund, 29 S.W.2d 165; Caldwell v. Eubanks, 30 S.W.2d 976; Hall v. O'Reilly Realty Co., 267 S.W. 411; Central Mfg. Co. v. Montgomery, 144 Mo.App. 507; Prewitt v. Prewitt, 188 Mo. 675; 7 R. C. L., pp. 456-458, secs. 441, 442; Barker v. Montana Gold Mining Co., 35 Mont. 351, 89 P. 66; Hughes v. Mining Co., 108 P. 235; Muller v. Buyck, 12 Mont. 354; Ins. Co. v. Gregory, 132 Kan. 129; 9 Fletcher on Corporations (2 Ed.), sec. 2303, p. 3546; Miner v. Ice Co., 93 Mich. 97; Nelson v. Jones, 38 Idaho 664, 224 P. 435; Ford v. Ford, 285 S.W. 538; McMillan v. Storage Co., 28 F.2d 763; Kahle v. Stephens, 4 P.2d 145; Petroleum Co. v. McNally, 254 Mich. 569, 237 N.W. 53. (a) In such a case a minority stockholder may maintain a suit in behalf of himself and others similarly situated to compel an accounting to the corporation from those who have received a profit. Flectcher on Corporations (Cumulative Supp. 1930), p. 658, sec. 4063; Hall v. O'Reilly, 267 S.W. 976; Pump Co. v. Forslund, 29 S.W.2d 165; Hughes v. Mining Co., 108 P. 231, syl. 6 and 10; Red Bud Realty Co. v. South, 96 Ark. 286; 2 Thompson on Corporations, p. 825, sec. 1339. (b) In such a case a demand upon the corporate officers to bring a suit on behalf of the corporation would be a useless requirement, because it would be asking the wrongdoers to sue themselves. Hall v. O'Reilly, 267 S.W. 407; Caldwell v. Eubanks, 30 S.W.2d 976. (2) In the case at bar the use of corporate funds was not authorized, and was not even known to the board of directors other than Beimdiek. Even if known it could not have been approved because in direct conflict with a statute of this State (R. S. 1929, sec. 4944), which says, "and no loan of money shall be made by the corporation to any stockholder therein." (a) The fact that the moneys used by George Beimdiek were ultimately all charged on the books of the corporation against his account does not ratify the taking. Bank v. Wrecking Co., 210 Ala. 678. (b) The doctrine of laches does not apply to this case. First, because plaintiff proceeded with diligence to uncover the transaction when it was discovered; second, "Defense of laches is not available, even though delay was long," where, as here, no prejudice has resulted. Fletcher Cyclopedia of Corporations, Permanent Edition (not yet completed), p. 6951. "Not laches applies but limitations, where the act is one that is incapable of ratification" (same text, p. 6954). Murray v. Smith, 166 N. Y. App. 528, 152 N.Y.S. 102.

OPINION

Tipton, J.

This is a suit in equity brought by Clara Bromschwig, in her own right and as trustee for Joseph Remmers, respondents, against the Carthage Marble & White Lime Company, a Corporation; George S. Beimdiek, Emil J. Beimdiek and Arthur O. Beimdiek, appellants.

Hereafter, George S. Beimdiek will be referred to as the appellant; Clara Bromschwig, both in her individual capacity and in her capacity as trustee, will be referred to as respondent; and the Carthage Marble & White Lime Company will be referred to as the company.

Respondent in her petition complains that on several occasions she demanded of the company and the appellant, its president, a financial statement of the company's affairs, but they refused to give her such statement. She also charges that the appellant in September, 1922, purchased what is referred to as the Brannon Avenue property in St. Louis and paid for the same with company funds, and that he wrongfully took the deed in his own name. She further charges that in 1927 the company sold its quarry and operating properties and received a large sum therefor; that the proceeds thereof were invested in ultra vires investments; that since that time the appellant had only devoted a trivial amount of his time to the company but was drawing a large salary. She further pleads that in 1922 the appellant used the funds of the company to purchase shares of the company; that he did purchase all of the outstanding shares except the shares held by the respondent and had the stock issued to himself and members of his family.

Most of the principal facts upon which the respondent bases her cause of action are admitted in the answer of the appellant. The facts briefly are as follows. The company was organized in the year 1884 with a capital stock of $ 25,000 divided into 250 shares. It conducted a prosperous business in Jasper County, Missouri. In the year 1913 the appellant, who resided in Carthage, Missouri, was made general manager; the stockholders and directors lived in the city of St. Louis. In 1917 the company owed the United States Bank of St. Louis a note for $ 36,000, which they were unable to pay when due and the same was taken up by Mr. Riddle, then president of the company, and a mortgage was placed upon the assets of the company to secure this loan. This note was paid off in the year 1921. In 1917 or 1918 one of the directors by the name of Remmers died. One share of stock was then issued to the appellant, qualifying him as a director. In the year 1922 the appellant was made general manager of the company, an officer and a director therein, had charge of the books and records, was custodian of its assets and possessed an intimate knowledge of its business. The appellant testified that in the latter part of the year 1921 it was suggested by Mr. Riddle and other directors that he purchase their stock, which he did, paying $ 100 per share for 220 shares. He was unable to purchase any of the stock owned by the Remmers' estate due to the fact that it was at that time in litigation. It appears from the evidence that he purchased the stock under the following terms: twenty-five per cent cash together with his personal notes payable in four installments, the installments becoming due in April, July and October of 1922, and in January, 1923. These notes, given for the purchase price of the stock, were secured by deposits of the stock as collateral. He obtained the money to pay for the stock by taking it out of the treasury of the company, charging himself with this money on the books of the company, and making the payments on the notes held by the former stockholders from money obtained from the company. At the time of the purchase of the stock the books showed that the company was indebted to him in the sum of $ 596. Later the appellant bought all the shares of the Remmers' heirs with the exception of those owned by the respondent, which totaled 10 5/7 shares. The appellant had one share of stock issued to his brother Arthur, and another share issued to his brother Emil. Thirty odd shares of stock were issued to his wife. Shortly after the purchase of this stock he caused the by-laws to be changed so that the board of directors was composed of three members instead of four, and his wife and brother Emil were made the directors. His wife died prior to the filing of this suit and his other brother was elected a director in her place. In the year 1922 the books of the company showed that the appellant took credit for $ 17,500 on account of real estate transactions, but no real estate was ever deeded to the company, and in the latter part of that year this credit was canceled and a special account was opened on the books showing his indebtedness to the company for this sum.

In the year 1922 the appellant took $ 5,000 of the company's money and purchased a piece of property in St. Louis known as the Brannon Avenue property which could be used for the St Louis sales office. He testified that this property was bought for the reason that the property used for the sales office in St. Louis was costing too much rent and that by buying this property he was able to reduce the rent $ 300 per year and to save paying the taxes on the leased property. He was the grantee in this deed and in 1929 he executed a deed conveying this property to his brother Emil, but in his answer he admitted that he held the property in trust for the company; that this property was...