Brookline Canning & Packing Co. v. Evans

• Decision Date: 01 April 1912
• Citation: Brookline Canning & Packing Co. v. Evans, 146 S.W. 828, 163 Mo. App. 564 (Mo. App. 1912)
• Parties: BROOKLINE CANNING & PACKING COMPANY, Respondent, v. J. B. EVANS, Appellant
• Court: Missouri Court of Appeals

146 S.W. 828

163 Mo.App. 564

BROOKLINE CANNING & PACKING COMPANY, Respondent, v. J. B. EVANS, Appellant

Court of Appeals of Missouri, Springfield

April 1, 1912

Motion for Reahearing Overruled, May 8, 1912.

Appeal from Greene Circuit Court.--Hon. James T. Neville, Judge.

AFFIRMED.

Judgment affirmed.

Henry C. Young for appellant.

(1) Justices of the peace are denied by the statute law of this state jurisdiction of any strictly equitable proceeding. R S. 1909, sec. 7397; Newberger v. Friede, 23 Mo.App 636. (2) This being a proceeding, instituted for the sole purpose of enforcing contribution between the stockholders of an insolvent corporation, is strictly equitable in its nature and maintainable only in a court having chancery jurisdiction. This is true for the following reasons: First in the absence of express statutory authority no action at law can be had or maintained to enforce the contingent liability of a stockholder for unpaid stock held by him in an insolvent corporation. 10 Cyc. 655. Second, no action at law is conferred by statute upon a stockholder who voluntarily pays his full liability to the company for recovery of the pro rata excess paid by him over the amount actually due, from his fellow shareholders, who may be delinquent. Such actions exist only in favor of creditors. Jerman v. Benton, 79 Mo. 163; Powder Co. v. Lead Co., 134 Mo.App. 187; Bank v. Bank, 130 Mo. 164. (3) Involving as it does the equitable remedies of contribution, marshaling of assets, accounting, discovery, administration of a trust fund, the avoidance of a multiplicity of actions at law, and the inadequacy of legal remedy, the procedure to enforce contribution inter sese between stockholders of an insolvent corporation for unpaid subscriptions is essentially and basically one over which courts of chancery have exclusive jurisdiction. Merrill v. Prescot, 74 P. 260 (Kas.) ; Thompson on Liability of Shareholders, sec. 258; Shickle v. Watts, 94 Mo. 410; Perry v. Turner, 55 Mo. 427; Beyer v. Trust Co., 63 Mo.App. 521; Erskine v. Loewenstein, 82 Mo. 301; Ford v. Railroad, 52 Mo.App. 452; Powder Co. v. Lead Co., 134 Mo.App. 187; R. S. 1909, secs. 3364, 3365. (4) The corporation having been dissolved for the purposes contemplated by the provisions of sections 2995, 3004 and 3006, by its insolvency and bankruptcy the right to sue for its assets at law if any such right exists at all was vested in its president and directors as trustees. The right of the corporation itself to sue had become extinct. Lewisohn v. Stoddard, 63 A. 621; Ford v. Railroad, 52 Mo.App. 452; Association v. Kellog, 52 Mo. 583, (5) Since a valid call is a condition precedent to the stockholders' liability, plaintiff cannot therefore recover. Bank v. Bank, 107 Mo. 133. (6) The defendant was not liable under the facts of this case as a stockholder. He held his stock under the terms of a contract whereby he was bound to account for its proceeds and deliver it over to the real owner whenever tender was made of the amount for which it was taken as security. R. S. 1909, sec. 3351; Colonial v. McMillan, 188 Mo. 547.

J. J. Gideon, G. D. Kirby and J. C. West for respondent.

(1) The right of the corporation to sue any stockholder, by suit at law for any arrears, debts or demands due by said stockholder to said corporation is plainly declared by sections 3003, R. S. 1909, which was section 984, R. S. 1899. (2) If the stockholder is indebted to the corporation on his stock, then the necessity or purpose for the call or suit by the corporation is not to be questioned by such stockholder when sued. If he owes the corporation the purpose of such corporation in enforcing payment is no concern of his. It is so held in case of Chouteau Ins. Co. v. Floyd, 74 Mo. 286; Cook on Corporations (5 Ed.), sec. 113. In this case it is also held that the stockholder cannot defeat an assessment by showing that the directors have compromised and paid all the debts of the corporation with their own money. (3) The liability of the stockholders is several and not joint and each stockholder must be sued separately and the stockholder thus sued must resort to his remedy in equity for contribution. Perry v. Turner, 55 Mo. 418. (4) It need not be proved that the corporation needed the money. The call is presumed to have been regularly made. Bank v. Company, 189 U.S. 221. (5) The cessation of business on the part of a corporation does not imply a dissolution of the corporation nor deprive it of its right to bring suit. Bank v. Robidouz, 57 Mo. 446; Hotel Co. v. Saner, 65 Mo. 279. (6) The insolvency of a corporation and the discontinuance of the business for which it was organized does not deprive it of the power of collection and enforcing in its own name claims due it. Mining & Milling Co. v. Coquard, 40 Mo.App. 40. (7) Nor does the fact that the plaintiff had been adjudged a bankrupt deprive it of the power to sue. Any creditor might after such bankruptcy have sued the stockholders by virtue of the statute. R. S. 1909, secs. 2995, 3004, 3006, but these sections are designed to empower the officers as trustees to sue the creditors in the name of the corporation. To sue in their own names does not render a judgment obtained by the corporation in a suit in its name invalid. That this is the only purpose these sections of the statute (3004 and 3006, R. S. 1909), clearly established. Bank v. Pulitzer, 11 Mo. 279; Hotel Co. v. Saner, 65 Mo. 279. (8) The appellant having taken the stock with notice that it was not paid for became liable to the corporation for the amount due. Shields v. Hobart, 172 Mo. 491; Berry v. Rood, 168 Mo. 316.

OPINION

GRAY, J.

This suit was instituted before a justice of the peace in Greene county, by the respondent corporation, to recover from the defendant the amount claimed to be due on an unpaid stock subscription. The cause was appealed to the circuit court, wherein the plaintiff obtained a judgment and the defendant's appeal was allowed to the Supreme Court on the theory that a constitutional question was involved. The Supreme Court held that no such question was involved, and transferred the case to this court.

The cause was tried before the court without a jury, and a special finding of facts made and filed, and as the facts are practically undisputed they may be abstracted as follows: The plaintiff is a corporation organized under the laws of this state under our statutes relating to manufacturing and business companies. At the time of its organization, only one-half of the stock subscriptions were paid, and the articles so recited. The corporation engaged in business, but was not successful, and in January, 1904, a petition was filed to have it adjudged a bankrupt. The tangible property of the corporation was sold under the administration in bankruptcy, and in addition thereto the trustee called upon each of the delinquent stockholders to pay a certain per cent on their shares. Several of them responded and made the payments called for, but others failed or refused. From a sale of the property, together with the amount received from the stockholders, a sufficient sum was obtained to pay all the debts of the corporation, including the expenses in the bankruptcy proceeding, and to leave a small balance which was subsequently paid to the corporation. After the bankruptcy proceeding, the corporation did not resume business, and made no effort to do so. It seems that meetings of the stockholders and directors were no longer held, and nothing was done until sometime in April, 1906, at which time a stockholders' meeting was held for the purpose of taking steps to collect from the delinquent stockholders the amount of their indebtedness to the corporation with a view that when the same had all been collected, to distribute the same among the stockholders as assets of the corporation, and to dissolve the latter.

The defendant was not one of the original subscribers to the stock, but acquired his from persons who had subscribed for the same, and with knowledge that only one-half had been paid.

It is appellant's first contention that the statement filed before the justice of the peace does not state facts sufficient to constitute a cause of action. The petition recites the organization and existence of the plaintiff as a corporation; that the defendant purchased from the original owners and subscribers to the capital stock $ 400 face value of the stock; that at the time of the purchase of the stock there was unpaid on the same fifty per cent of the face value, and defendant well knew that fact at the time of his purchase; that since the purchase by defendant, he has paid one-half of the amount due and leaving a balance of $ 100 unpaid; that defendant is the owner of the stock and the board of directors has, by resolution duly made, called for the unpaid portion, and the same is now due and defendant has been notified, but has failed and refused to pay the same or any part thereof.

The petition meets the requirements of the practice regarding statements filed before a justice of the peace.

The next contention is that the suit is in equity, and the justice of the peace had no jurisdiction. In the opinion of the Supreme Court transferring the cause, we find the following relating to this point: "Appellant is mistaken in the character of the suit, it is simply an action at law was tried as such and judgment rendered as such. Even if appellant is right in his contention that under the circumstances disclosed by the evidence he is accountable only in a suit in equity (as to which we express no opinion), that would not convert this into a suit in equity, it would only go to show that the plaintiff should not recover in this action; if appellant is correct the judgment is erroneous. ...