Broussard v. Mason

• Decision Date: 15 February 1915
• Docket Number: No. 11401.,11401.
• Citation: 187 Mo. App. 281,173 S.W. 698
• Parties: BROUSSARD v. MASON.
• Court: Missouri Court of Appeals

173 S.W. 698

187 Mo. A. 281

BROUSSARD v. MASON.

No. 11401.

Kansas City Court of Appeals. Missouri.

February 15, 1915.

Appeal from Circuit Court, Jackson County; Allen C. Southern, Judge.

Suit by J. E. Broussard against B. C. Mason. From a decree for plaintiff, defendant appeals. Reversed and remanded.

E. H. McVey and B. N. Simpson, both of Kansas City, for appellant. Gilmore & Brown, of Kansas City, for respondent.

TRIMBLE, J.

The parties to this suit and one B. D. Hurd were accommodation indorsers upon a note of the Jefferson County Rice Company (a corporation), given on April 28, 1902, to the First National Bank of Beaumont, Tex. On October 14, 1903, plaintiff paid said note in full, amounting then to $3,367.42. This suit for contribution was instituted against the defendant Mason and said Hurd March 24, 1906. In his bill or petition plaintiff alleged that on the date he paid said note the rice company was, and ever since has been, insolvent, and has had no assets from that date to the present time, and is therefore unable to pay said note or any part thereof; and on that account plaintiff prayed that each of the defendants be compelled to contribute one-third of the amount so paid by him on said note.

After suit was brought, Hurd made a satisfactory arrangement of some sort with plaintiff, in consequence of which the suit was dismissed as to him.

Defendant Mason filed an answer, setting up the defense that plaintiff was an original incorporator and stockholder in said rice company and was a director and the treasurer thereof from and ever since its organization to the present time; that, in violation of his duty as such director and officer of the corporation, he caused a receiver to be appointed therefor, and had a secret understanding with the receiver that plaintiff was to be allowed to do all the work of the receivership, care for all the assets of the company, and handle all the moneys due the receiver as such; that, by means of his control of the assets and business of the receivership, plaintiff acquired to himself and now holds and claims to own all the property and assets of the rice company, and destroyed the ability of said company to pay said note, and, by other fraudulent and wrongful practices, procured property in excess of the amount due him or paid by him; that, by reason of the premises, plaintiff is a trustee ex maleficio, and as such must make an accounting; and that the result of an accounting will be to show that plaintiff has already been indemnified.

Plaintiff filed a reply, denying the facts alleged in the answer, and the parties went to trial. Being in equity, the case was tried by the court sitting as a chancellor.

The decree was in plaintiff's favor, requiring defendant Mason to make contribution to the full extent of one-third of the amount paid, with interest at 6 per cent. from October 14, 1903, aggregating $1,797.47. With reference to the defense set up in the answer, the decree recites that none of the matters therein alleged "constitute any defense for this action, even if they are true; that for that reason the court declines to pass upon or decide the questions sought to be raised."

This recitation in the decree is equivalent to sustaining a demurrer to defendant's evidence. If, as a matter of law, the facts charged in the answer do constitute a defense, or affect the liability of defendant, then it was error to refuse to pass upon them. And in that event, if defendant's evidence is sufficient to support an inference that plaintiff has wrongfully and fraudulently deprived the rice company of its ability to pay said note, or has lessened said ability, so that the defendant's liability for contribution has been created, or has been increased, then the decree should not be allowed to stand. It is true, in the case of an ordinary trustee, the right of a beneficiary or party in interest to demand an accounting does not depend upon whether any amount is due or not, for in such case the relation of trustee and cestui que trust exists independently of that fact, and the latter has a right to an accounting in order that he may learn whether anything is due or not. But, in the case at bar, defendant's right to assert the trust relationship of plaintiff depends solely upon the question whether or not it is likely that the ability of the principal debtor to pay the note has been destroyed or lessened, and defendant's liability to contribution has been thereby created or increased. No right of defendant's ownership or interest in the assets of the corporation is affected by this suit. His liability to contribution is the only thing that is affected. Hence in this case, although he asserts that plaintiff is a trustee ex maleficio, yet he cannot demand an accounting before making contribution, unless he makes some showing that his liability to contribute has been injuriously affected, and that an accounting will disclose that fact and enable the chancellor to render the particular decree which the equities of the case may demand. In other words, defendant is not entitled, as a matter of course, to an accounting merely upon showing that plaintiff, by reason of his official connection with the rice company and his acts in the premises, is a trustee. Defendant must also show that there is at least a reasonable probability that his liability has been affected by the acts of such trustee so as to make an accounting reasonably necessary. For these reasons we say we must decide: First, whether the facts charged in the answer constitute a defense in whole or in part; and, second, whether the evidence is sufficient to support that charge or make an accounting reasonably necessary. Of course, if the evidence discloses beyond question that, after an accounting had been made, nevertheless defendant would still be required to contribute all that is asked, then it would be needless and a useless expense to require an accounting. But if the evidence offered in defendant's behalf shows that his liability has been wrongfully affected, or even leaves it an open question whether it has or not, then defendant is entitled to an accounting, provided, of course, the first proposition is decided in the affirmative.

The facts upon which defendant relies to constitute plaintiff a trustee ex maleficio are as follows:

In 1899 J. E. Broussard, B. C. Hebert, and I. D. Polk, all residents of Beaumont, Tex., were the owners of 10,424 acres of land in Jefferson county, of that state. Certain parties were contemplating the organization of a corporation to purchase these lands and engage in the rice growing business, and also to sell the land at retail in small tracts to settlers from the north. Hurd was the promoter and organizer of the scheme. On December 26, 1899, the three owners of the land entered into a contract with B. D. Hurd and A. H. McVey, trustees for the stockholders of the proposed corporation, whereby the owners agreed to sell said land to said trustees or to such corporation as they might designate for $185,000, of which $15,000 was to be in cash and the other $170,000 secured by promissory notes secured by recorded vendor's lien which was the same as a deed of trust to secure that amount of the purchase price.

On May 14, 1900, the corporation was organized by Broussard, Hebert, Polk, Hurd, Mason, and McVey, and was called the Jefferson County Rice Company. A few days prior thereto, to wit, on April 26, 1900, these last-named parties entered into a secret agreement or contract, whereby they agreed to divide a certain amount of the stock among themselves for their services and profits; that is to say, to Broussard and Hebert $27,382.62 of the capital stock of said corporation, and to Mason, McVey, and Hurd each $19,104.89 of such stock, and to Polk $1,274.71 thereof, all payable one-tenth cash, balance in eight annual installments, bearing 7 per cent. interest thereon. It was further agreed that the sum of $79,001.11 of the vendor's lien notes should be divided among them in the following ratio: Broussard and Hebert were to have $25,154.60 of such notes; Mason, Hurd, and McVey were each to have $17,555-80 thereof; and Polk was to have $1,179.11 thereof. It was further agreed that the interest coupons on the vendor lien notes given by the corporation for the purchase price of the lands should be used to pay the interest on all stock subscriptions made to the corporation by said parties, and the notes themselves were to be used in payment of the stock subscribed for by said parties. As 10 per cent. had been paid on the stock subscriptions, it was thought and agreed that the said notes and interest would pay the stock subscriptions made by said parties and the interest thereon.

Pursuant to the contract of December 26, 1899, the land was conveyed to the corporation, and the vendor's lien notes were executed. It was the intention of the several contracts that the three owners of the land should receive $9.50 per acre therefor in addition to the amount of stock subscribed by each.

It seems that the business of rice growing did not prosper. It is a business requiring continuous fresh water irrigation, and that salt water is injurious thereto. The land was adjacent to Taylor's Bayou, an inlet of a fresh water body known as Lake Sabine, located a short distance from the Gulf of Mexico. A ship canal, built in 1899, had connected this bayou with the Gulf; and as there was no current in the bayou, when large quantities of water were taken therefrom, it caused a back flow of salt water into the bayou, which injured the rice. The plaintiff Broussard knew this at the time the land was sold, but whether the purchasers did or not is perhaps disputed. At any rate, the salt water was a material factor in injuring the rice growing business of the company.

The Beaumont Rice Mills was a partnership largely owned and controlled by the plaintiff. It held a claim for over $4,000 on the Jefferson County...