Brooker v. William H. Thompson Trust Co.

• Decision Date: 06 December 1913
• Citation: 254 Mo. 125,162 S.W. 187
• Parties: BROOKER v. WILLIAM H. THOMPSON TRUST CO. et al.
• Court: Missouri Supreme Court

162 S.W. 187

254 Mo. 125

BROOKER v. WILLIAM H. THOMPSON TRUST CO. et al.

Supreme Court of Missouri, Division No. 1.

December 6, 1913.

Rehearing Denied January 3, 1914.

1. CORPORATIONS (§ 314)—DIRECTORS—MAKING PERSONAL PROFIT FROM OFFICIAL ACTS.

Where the directors of a corporation voted to purchase property from its promoter at a price $500,000 in excess of that paid by him therefor, which amount was to be divided between the promoter and such directors under an agreement between them, they acquired no rights thereunder, and their duty to refund such amount to the corporation depended on such rights as they possessed independent of such action of the board, although the capital stock specified in the articles of association was paid and the stock issued as a bonus represented the surplus of the corporation, since it belonged to the corporation, and the directors could not use their official positions for their own benefit or the benefit of any one except the corporation.

2. CORPORATIONS (§ 30)—PROMOTERS—RELATION TO CORPORATION.

The relation of the promoter of a corporation to the corporation and to those associated with him in the organization of the corporation depends upon the nature of the work and the contractual relations, expressed or implied, which he assumes with respect to those interested in the common object; the fact that he is a promoter not fixing the relationship.

3. TRUSTS (§ 33)—CREATION OF RELATION.

One receiving the money or property of others to manage is in equity treated as holding it upon a trust, although there may be no express agreement to that effect.

4. TRUSTS (§ 231)—DUTIES OF TRUSTEES— PERSONAL BENEFIT FROM TRANSACTION.

One receiving the money or property of others to manage for them cannot deal therewith for his own benefit, except upon a full disclosure to his principal or beneficiary of all facts and circumstances relating to his own interest, and in the absence of undue influence or advantage arising out of the fiduciary relation.

5. CORPORATIONS (§ 30)—PROMOTERS—ACQUIRING PERSONAL BENEFIT.

The promoter of a corporation was the agent and trustee of his associates whose money and credit he was using in furtherance of his scheme, and when their interests were vested in the corporation it became the beneficiary and was entitled to the honest execution of the trust in its favor, and he and his associates, who became the directors of the corporation, could not retain the proceeds of stock issued to him as a bonus, unless upon a full and fair disclosure of the circumstances all the members consented to its diversion.

6. CORPORATIONS (§ 207)—PROMOTERS—ACQUIRING PERSONAL BENEFIT.

By an agreement between the promoter of a corporation, a syndicate, the members of which were to subscribe for a part of the stock, and a bank which financed the organization of the corporation, the promoter was to receive a profit of $500,000 on property on which he held options, and which was to be transferred to the corporation, such bonus to be divided between him and the members of such syndicate. The corporation was formed and the board of directors, consisting of the promoter, the members of the syndicate, and one or two other stockholders associated with them, voted to purchase such property at such a price as allowed for such bonus. The corporation had a capital stock of $1,500,000, but by the agreement mentioned the stock was to be paid for at $150 a share, thus creating a surplus of $750,000, and the stock issued as the bonus represented a part of this surplus. All of those owning stock when such bonus was voted knew thereof, and were interested therein, either by themselves or through their representatives, except a brokerage company which subscribed for stock for the purpose of reselling it. The president of such brokerage company agreed to subscribe for the stock, and the secretary by direction of the president signed the subscription therefor, noting at the time that the transaction purported to be a purchase from the promoter and not an original subscription, and also noting a reference to the underwriting agreement mentioned purporting to be, but which he testified was not, attached. Held, that the brokerage company, having the means of knowledge before it, had notice of the issuance of such stock as a bonus, in view of the rule that when a written contract refers to another instrument such other instrument is a part of the contract, and hence such stock having been issued with the knowledge of all the stockholders, one who purchased stock from the brokerage company could not attack such issuance on behalf of the corporation.

Woodson, P. J., dissenting in part.

Appeal from St. Louis Circuit Court; Wm. M. Kinsey, Judge.

Action by August E. Brooker against the William H. Thompson Trust Company and others. From a judgment dismissing the bill, plaintiff appeals. Affirmed.

This is a suit by plaintiff, a stockholder of the Title Guaranty Company, by which that company is impleaded with the parties to a contract which they called an underwriting agreement for financing the organization and capitalization of the corporation. Its object is to secure the restoration to the corporation for the benefit of its stockholders of the sum of $500,000, paid them from the capital of the corporation under the provisions of the contract already referred to, which is as follows:

"This agreement, made this twenty-first day of January, 1901, by and between H. C. Pierce, J. C. Van Blarcom, W. H. Thompson, August Gehner, A. A. B. Woerheide, Tho. H. McKittrick, Andrew Sproule, L. D. Dozier, Jas. W. Bell, S. M. Dodd, E. C. Simmons, Thomas H. West, Festus J. Wade, Breckenridge Jones, Lorenzo E. Anderson, Murray Carleton, composing an underwriting syndicate, parties of the first part, and Eben Richards, party of the second part, and the National Bank of Commerce in St. Louis, party of the third part, witnesseth:

"(1) That the party of the second part is now the owner of options upon the title plants of the following persons, to wit: August Gehner & Co., St. Louis Trust Co., Union Trust Co., of St. Louis, Lincoln Trust Co., Joseph Wachtel, Albert Wenzlick, Babcock & O'Conner, August Ahrens, D. Ind. Neudorf, M. B. O'Reilly, Lewis & Hall, which options have been deposited with the party of the third part for the purpose of this agreement. And that the general object of this agreement is to form a corporation to purchase, own and operate the above title plants as one plant.

"(2) That the parties of the first and second parts hereto shall, and they hereby agree to form a corporation under the laws of the state of Missouri, relating to trust companies, and be called Title Guaranty Trust Company, with a capital stock of one million five hundred thousand dollars ($1,500,000.00), full paid and with a surplus of seven hundred and fifty thousand dollars ($750,000.00), full paid so that the book value of the stock of said corporation shall be one hundred and fifty dollars ($150.00) per share. The parties of the first part hereby subscribe to the capital stock of said corporation to be formed, at the price of one hundred and fifty dollars ($150.00) per share, the amount set opposite the name of each respectively, to wit:

                    Name.                            Amount
                H. C. Pierce ....................... $139,200
                J. C. Van Blarcom ..................   10,050
                W. H. Thompson .....................   10,050
                August Gehner ......................   10,050
                A. A. B. Woerheide .................   10,050
                Thos. H. McKittrick ................   10,050
                Andrew Sproule .....................   10,050
                H. C. Pierce .......................   10,050
                L. D. Dozier .......................   10,050
                Jas. W. Bell .......................   10,050
                S. M. Dodd .........................   10,050
                E. C. Simmons ......................   10,050
                Thos. H. West ......................   10,050
                Festus J. Wade .....................   10,050
                Breckenridge Jones .................   10,050
                Lorenzo E. Anderson ................   10,050
                Murray Carleton ....................   10,050
                

"And they, the parties of the first part, each agree to pay said sum so subscribed by them forthwith into the National Bank of Commerce in St. Louis, party of the third part, and to leave said sums on deposit with said third party, and to leave the stock so subscribed for by them with said party of the third part as collateral security of margin upon which the party of the second part may borrow from the party of the third part the amounts hereinafter set forth. The party of the second part agrees to subscribe for, or cause to be subscribed for, all the balance of the stock of said corporation at the price of one hundred and fifty dollars ($150.00) per share.

"(3) The party of the third part agrees to set aside and lend to the party of the second part for the purposes of this agreement only, upon the security of said options, subscriptions and stock of said corporation to be formed, the sum of one million nine hundred and fifty thousand dollars ($1,950,000.00) which, added to the three hundred thousand dollars ($300,000.00) subscribed and paid in by the parties of the first part, will make one million five hundred thousand dollars ($1,500,000.00) of capital stock and seven hundred and fifty thousand dollars ($750,000.00) of surplus of said corporation. And the party of the third part agrees to charge interest at the rate of five (5) per centum per annum on so much of said sum of one million nine hundred and fifty thousand dollars ($1,950,000.00) as is actually paid out by it and used for the purposes of this agreement until the same is returned and repaid to it, and to lend this amount so used to the party of the second part for the period of on or before six months.

"(3½) That the total of one million two hundred and fifty thousand dollars ($1,250,000.00) shall be reserved as a liberal estimated amount to cover the cost of the several title plants and all costs and expenses of...