Burgess v. St. Louis Co. R. Co.

• Decision Date: 27 January 1890
• Citation: 99 Mo. 496,12 S.W. 1050
• Parties: BURGESS et al. v. ST. LOUIS CO. R. CO. et al.
• Court: Missouri Supreme Court

12 S.W. 1050

99 Mo. 496

BURGESS et al. v. ST. LOUIS CO. R. CO. et al.

Supreme Court of Missouri.

January 27, 1890.

CORPORATIONS — STOCKHOLDERS — LACHES.

Directors of a railroad company executed a deed of trust to secure bonds issued to themselves as creditors. The board next elected brought suit to annul the deed and bonds for want of consideration. Pending the suit, the trustees advertised the property for sale under the power in the deed. At the sale the property was purchased under a compromise between the bondholders and all of the stockholders, except the plaintiffs, by which it was agreed that the suit should be dismissed, and that the purchaser should convey one portion in trust for the stockholders who had received no bonds. The trustee under the compromise, however, transferred the property to a new corporation, composed almost exclusively of persons who had never been stockholders in the old company. Held, that eleven years having elapsed since the deed of trust, and seven years since the compromise, and the property having, in the mean time, been transferred seven times, including one under foreclosure of a mechanic's lien, plaintiffs have been guilty of such laches as barred their right to recover, and it was immaterial that the acts complained of were ultra vires.

Appeal from St. Louis circuit court; AMOS M. THAYER, Judge.

This proceeding is termed "an action in equity." It was instituted by the plaintiffs against the St. Louis County Railroad Company, the Forest Park & Central Railroad Company, the St. Louis, Kansas City & Colorado Railroad Company, Francis Tiernan, E. R. Steward, Dwight Durkee, Robert C. Allen, Amos H. Shultz, William D. Clayton, John F. Hume, ______ Fox, Melvin L. Gray, Edwin Harrison, James O. Broadhead, Joseph Brown, H. A. Haeussler, Joseph Shippen, and other persons unknown to plaintiffs. Omitting the caption, the amended petition is as follows:

"Plaintiffs, by leave of court, file this, their amended petition, and, suing on behalf of themselves and all stockholders of the St. Louis County Railroad Company who may appear after interlocutory decree, state that the St. Louis County Railroad Company was a corporation duly organized under the laws of the state of Missouri concerning railroad corporations, for the purpose of constructing, maintaining, and operating a railroad commencing at a point in the city of St. Louis and state of Missouri, and thence extending westwardly to a point on Creve Cœur creek, in the county of St. Louis and state of Missouri. That defendants Harrison, Shultz, Shippen, Brown, Broadhead, Haeussler, Clayton, and one Briggs and plaintiff Edward Burgess were the last, and all the last, duly elected and qualified directors of said the St. Louis County Railroad Company. That said Briggs is dead, and no person has been chosen to take his place as such director, and that said Shippen and Clayton are non-residents of the state of Missouri, and they, said Shippen and Clayton, and the other directors above named, (now living,) save and except plaintiff, refuse to institute this suit or seek the relief herein prayed for. That the said St. Louis County Railroad Company, at the time hereinafter mentioned, owned and was in possession of a certain tract of land graded for a railroad bed, extending from Forsyth Junction, on the line of the Wabash, St. Louis & Pacific Railroad, westward to Academy lane, and thence to a point on Creve Cœur creek, which tract of land was known as the `St. Louis County Railroad,' and was principally located in the county of St. Louis and state of Missouri, although a part thereof was within the said city of St. Louis also. Plaintiffs further state that at the times hereinafter mentioned they were, and now are, the holders and owners of forty shares of the capital stock of said the St. Louis County Railroad Company. That on or about the _____ day of _____, A. D. 1875, Joseph Brown, William Marsh Kasson, and others were directors of said the St. Louis County Railroad Company, and as such directors issued, in the name of said company and as its act, three hundred bonds, each of the par value of one thousand dollars, payable by said last-named corporation thirty years thereafter, with interest coupons attached thereto payable every six months thereafter, and each for the sum of thirty-five dollars; which bonds and coupons the said directors last mentioned delivered to themselves as alleged creditors of said last-mentioned company, and then and thereupon executed, in the name of said corporation and as its act, a conveyance in trust of all its property, including the property hereinbefore described, to one Lackland and one Allen, as trustees to secure the payment of said bonds, with power in said Lackland and said Allen, or either of them, on default in said payment of any of said coupons, to advertise said property for sale, and to sell the same for cash, to pay said coupons and bonds. That the stockholders of said company, other than said directors who became bondholders as aforesaid, denied the validity of said bonds; and, at the next following election of directors of said last-mentioned corporation, other directors than those last mentioned were elected, none of whom had received or held any of said bonds; and thereupon the new board of directors last mentioned, in the name and on behalf of said last-named corporation, the St. Louis County Railroad Company, and with the assent of plaintiffs, instituted suit in the circuit court of St. Louis county, state of Missouri, to have said bonds and mortgage declared null and void, and of no effect, on the alleged ground that said bonds and said mortgage were fraudulently delivered to the holders thereof, and were null and void, and without consideration. That, while said suit was pending, the trustees aforesaid, in said mortgage or conveyance in trust, advertised for sale, under the provisions of said conveyance last mentioned, all of said railroad, its property and franchises. That on or about the day prior to that on which said sale was advertised to take place the said bondholders and the stockholders of said last-mentioned corporation, save these plaintiffs, entered into an agreement whereby it was stipulated that said suit last mentioned should be dismissed; that said last-mentioned sale of said railroad property and franchises should be made as advertised as aforesaid; that at the sale one Charles Miller should purchase all the railroad and all the property and franchises of said last-named railroad company; and that he, said Miller, should thereupon convey all the railroad and property of said railroad company lying west of Forsyth Junction, with all the franchises appurtenant thereunto, to defendant Melvin L. Gray, in trust for the benefit of the stockholders of said last-named corporation, to whom none of said bonds were delivered before the institution of said suit. That plaintiffs refused to consent to said last-mentioned agreement, and never received or claimed any benefit thereunder. That, in accordance with said agreement, said railroad and its property were sold by said trustees under said mortgage, and purchased by said Miller, as trustee as aforesaid, for the nominal price of twelve thousand dollars, although they were then well worth two hundred and fifty thousand dollars; and thereupon said Miller, in pursuance of his said agreement and of his said trust, conveyed to defendant Melvin L. Gray, as trustee for the benefit of all of said stockholders not holders of bonds aforesaid, all the railroad and property of said company last mentioned lying west of said Forsyth Junction, as aforesaid. Plaintiffs state that they refused to recognize said conveyances, and declared them null and void, and that in truth and in fact they were utterly void, and that this fact, and all the matters and things aforesaid, were then and there well known to all said bondholders and stockholders.

"Plaintiffs further state that...