Buford v. Keokuk Northern Line Packet Co.

• Decision Date: 07 December 1876
• Citation: Buford v. Keokuk Northern Line Packet Co., 3 Mo.App. 159 (Mo. App. 1876)
• Parties: THOMAS J. BUFORD, Appellant, v. THE KEOKUK NORTHERN LINE PACKET COMPANY et al., Respondents.
• Court: Missouri Court of Appeals

3 Mo.App. 159

THOMAS J. BUFORD, Appellant,

v.THE KEOKUK NORTHERN LINE PACKET COMPANY et al., Respondents.

St. Louis Court of Appeals, Missouri.

Dec. 7, 1876.

1. Officers of a corporation cannot, as a general rule, convey away all the property of the corporation against the wishes of a single stockholder, but the stockholder's contract with the corporation cannot bind the corporation to continue its business at a great pecuniary loss; nor does the law of public policy oppose the discontinuance of a corporation which is on the eve of extinction by the expiration of its charter.

2. The officers of a corporation which is on the eve of dissolution by the operation of law may, in the exercise of a sound discretion, transfer its assets to another corporation and take in payment the stock of such other, and convert it into money, for the purposes of liquidation.

3. A party who has not himself been defrauded, but rather benefited, by a transaction will not be heard to complain of frauds against third persons who make no complaint, especially where these third persons have instituted other proceedings for the purpose of settling the matter complained of.

4. A party purchasing property in litigation will not be held to be an innocent purchaser. The pendency of the suit imparts notice to all of the claim or title in litigation.

5. A fraudulent purpose is harmless if the fact itself is lawful, and unattended by any wrongful effect.

6. Counsel-fees are allowed in favor of defendant, upon dissolution of an injunction, upon the basis that he has been compelled to employ aid in ridding himself of an unjust restriction forced upon him by the act of plaintiff; and this without regard to whether the merits of the cause were passed upon on the motion to dissolve.

APPEAL from St. Louis Circuit Court.

Affirmed.

James Taussig, for appellant, cited: Phosphate of Lime Co. v. Green, Law Rep. 7 C. P. 43; Zabriskie v. Hackensack, etc., R. R. Co., 3 C. E. Green, 78; Sharon Canal Co. v. Fulton Bank, 7 Wend. 412; Smith v. Smith, 3 Desau. 557; In re Bridgeport Old Brewery Co., Law Rep. 2 Ch. 191; Gross' Stat. Ill. 1818-1869, 2d ed., 95, 451-457; Rev. Stat. Ill. 1874, pp. 294, 295; Caldwell v. City of Alton, 33 Ill. 416; Trustees v. McConnell, 12 Ill. 140; McIntire v. Preston, 5 Gilm. 60; Town v. Metzger, 21 Ill. 205; Illinois, etc., College v. Cooper, 25 Ill. 148; Metropolitan Bank v. Godfrey et al., 23 Ill. 579, 602, 603, and notes; Marine Bank of Chicago v. Ogden, 29 Ill. 248; Pierce v. Madison, etc., R. R. Co., 21 How. 441; Whittenton Mills v. Upton, 10 Gray, 582; Susquehanna, etc., Co. v. Bonham, 9 Watts & S. 27; Solomons v. Laing, 12 Beav. 339; s. c., 12 Beav. 377; Abbott v. American, etc., Co., 33 Barb. 578; The Central R. R. Co. v. Collins, 40 Ga. 582; Sears v. Hotchkiss, 25 Conn. 171; Black v. Delaware & Raritan Canal Co., affirming Kean v. Johnson, 9 C. E. Green, 455; Goodin v. Cincinnati, etc., Canal Co., 18 Ohio St. 169; Rollings v. Clay, 33 Me. 139; Railway Co. v. Allerton, 18 Wall. 233; Eidman et al. v. Bowman, 58 Ill. 444; Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; Imperial Bank of China v. Bank of Hindustan, Law Rep. 6 Eq., 91, 100; Clinch v. Financial Corporation, Law Rep., 5 Eq. 450, 464; s. c., on appeal, Law Rep. 4 Ch. 117, 120; Alabaster's Case, In re Commercial Bank, Law Rep. 7 Eq. 273; Treadwell v. Salisbury, etc., Co., 7 Gray, 393; Hodges v. N. E. Screw Co., 1 R. I. 347; 3 Kent, 12th ed., 67, and cases cited; Vernon v. Manhattan Co., 17 Wend. 526; s. c., 22 Wend. 183; Watkinson v. Bank of Pennsylvania, 4 Whart. 482; Pope v. Rieley, 23 Mo. 185; Pars. on Part. 419; Peabody v. Flint, 6 Allen, 52, 57; Spackman v. Evans, Law Rep. 3 H. L. 233, 234; s. c., Law Rep. 4 Ch. 117; Ex parte Morgan, 1 Mac. & G. 225; In re Magdalena Navigation Co., Johns. 690; In re Empire Assurance Corp., Dougans' Case, Law Rep., 8 Ch. 540; Pycroft v. Pycroft, 2 Sm. & G. 326; Scott v. Becher, 4 Price, 346; Palin v. Gathercole, 1 Coll. 565; McKay v. Chiles, 5 Mon. 259; Payne v. Wallace, 6 Mon. 381; Porter v. Scobie, 5 B. Mon. 387; Lampton v. Usher's Heirs, 7 B. Mon. 57; Fishback v. Williams, 3 Bibb, 342; Clarke v. Lyon Co., 7 Nev. 75; Bruner v. Wheaton, 46 Mo. 363; Joint Stock Discount Co. v. Brown, Law Rep. 3 Eq. 140; s. c., Law Rep. 8 Eq. 381; Hilles v. Parrish, 1 McCart. 380; Marsh v. Eastern R. R. Co., 40 N. H. 548;43 N. H. 515; Ramsey v. Gould & Fisk, Law, et al., 57 Barb. 399; Hea h v. Erie R. R. Co., 8 Blatchf. 347, and cases cited; Brewer v. Boston Theater Co., 104 Mass. 378; 2 Joyce on Inj. 1274; Service v. Castaneda, 9 Jur. (o. s.) 367; Bramwell v. Halcomb, 3 Myl. & Cr. 740, 741; Mosely v. Mosely, 9 W. & R. 531; High on Inj., sec. 980; Ross v. Gordon, 2 Munf. 289; Hoffman v. Marshall, 1 J. J. Marsh. 64; Oelrichs v. Spain, 15 Wall. 231; Honey v. Rubber Tip Co., 12 Abb. Pr. 360; Bank of New Orleans v. Toledan, 20 La. An. 571; Dyke v. Dyer, 14 La. An. 701; Dunn v. Davis, 37 Ala. 95; Bullock v. Ferguson, 30 Ala. 227; McDaniel v. Crabtree, 21 Ark. 431; Sturgis v. Knapp, 33 Vt. 486; Wallis v. Dilley, 7 Md. 237; Hale v. Meegan, 39 Mo. 277; Uhrig v. St. Louis, 47 Mo. 528; Jenkins v. Parkhill, 25 Ind. 473; Wilson v. McEvoy, 25 Cal. 169; Prader v. Grimm, 28 Cal. 11; Allen v. Brown, 5 Lans. 511; Langworthy v. McKelvey, 25 Iowa, 48; Hill. on Inj. 99, secs. 53, 54; 11 Paige, 223; 1 Barb. Ch. 613; 54 Ill. 334; Collins v. Sinclair, 51 Ill. 328; Wag. Stat. 1030, secs. 11, 13, 14.

Glover & Shepley, for respondents, cited: Seargent v. Webster, 13 Metc. 497; Buel v. Buckingham, 16 Iowa, 284; Revere v. City of Boston, 15 Pick. 363; Binney's Case, 2 Bland, 142; Town, etc., v. Bank, etc., 2 Dougl. (Mich.) 530; Reynolds v. Comrs., etc., 5 Ohio St. 113; Barry v. Exchange, 1 Sandf. 280; Treadwell v. Salisbury, 7 Gray, 393; Stevens v. Hill, 29 Me. 133; Merrick v. The Bank, etc., 8 Gill, 59; Hodges v. The Screw Co., 1 R. I. 347; Durfee v. The Old Colony, etc., 5 Allen, 230; Gregory v. Patchet, 33 Beav. 595; Kent v. Jackson, 14 Beav. 384; Gray v. Chapin, 2 Russ. 126; Samuel v. Holliday, Woolw. 415; Graham v. Burkenhead, 2 Mac. & G. 158; High on Inj. 457, sec. 771; Hodgsson v. Powis, 1 DeG. M. & G. 12; Flooks v. London, etc., 1 Eng. Law & Eq. 12; Abb. on Corp. 780, sec. 108; Hodges v. New England, 3 R. I. 9; Toch v. Adams, 10 Cush. 252;Floyt v. Thompson, 19 N. Y. 207; Woodbury v. The Proprietors, etc., 6 Vt. 528; Woolworth v. Farmers, etc., 16 Wis. 629; McPherson v. Ohio & Mississippi R. R. Co., 35 Mo. 13; Galveston R. R. Co. v. Lowdry, 11 Wall. 459.

LEWIS, J., delivered the opinion of the court.

In February, 1873, a number of competing steamboat lines were engaged in the traffic to and from St. Louis on the Upper Mississippi River. Among these was the Keokuk Packet Company, a corporation created by the State of Illinois, whose charter was to expire in April, 1873, with the privilege of continued existence, for purposes of liquidation only, two years longer. Its officers, with those of four of the other lines, finding that the business, so divided, was not sufficiently remunerative to any, projected a plan for the formation of a new company, in which all should be interested, and which should run a single line of boats under the common control.

It was agreed that the steamboats and other property of each company should be valued by appraisers and turned over to the new corporation; whereupon, stock in the latter to the amounts of such valuations should be issued to the old companies, respectively. The new corporation, under the name of “The Keokuk Northern Line Packet Company,” was organized February 26, 1873, in pursuance of the general law of Missouri, with a capital stock of $700,000, of which $175,000 was subscribed on behalf of the Keokuk Packet Company. The steamboats belonging to this company were transferred to the new corporation at a valuation of $152,000, for which the former was credited with 1,520 shares of stock in the latter at $100 per share. On May 14, 1874, the board of directors of the Keokuk Packet Company adopted a resolution in which it was recited that “whereas the Keokuk Packet Company has ceased to do any business, except to dispose of its assets and pay its debts; and whereas the indebtedness of said company is large and at a heavy interest; and whereas fifteen hundred and eighteen shares of the stock of said company in the Keokuk Northern Line Packet Company can be sold for sixty thousand eight hundred dollars; and whereas it is deemed most advantageous to the creditors and stockholders of the Keokuk Packet Company to sell said stock and pay off its debts;” therefore the president of said company was thereby authorized and requested to sell and transfer said shares of stock, upon the terms mentioned, to William F. Davidson, who is one of the defendants in this proceeding. The sale and transfer were consummated in accordance with the resolution.

On August 29, 1874, the plaintiff filed his petition in this suit, alleging that he was owner of one share of stock in the Keokuk Northern Line Packet Company; that the 1,518 shares sold to Davidson were issued to the Keokuk Packet Company without valid consideration; that the Keokuk Packet Company acquired no title to those shares, and transferred none to Davidson; that the whole transaction was a fraud, Davidson being a party thereto; and that suits were then pending, brought by certain stockholders of the Keokuk Packet Company in the United States Circuit Court and the Circuit Court of St. Louis County, to set aside the issue of said stock to the Keokuk Packet Company, to cancel the certificates thereof held by Davidson, and to recover back the property delivered by the Keokuk Packet Company to the Keokuk Northern Line Packet Company. It is further alleged that the issue of the stock and its subsequent transfer were for the purpose of giving Davidson control of the affairs of the Keokuk Northern Line Packet Company, by vesting in him a majority of the stock; that the defendants, other than the ...