Coerver v. Crescent Lead & Zinc Corp.

• Citation: 286 S.W. 3,315 Mo. 276
• Decision Date: 30 July 1926
• Docket Number: 25157
• Parties: J. H. Coerver, Philip J. Kealy, Lawrence E. Smith, Oliver Wroughton and William Grieves, Appellants, v. Crescent Lead & Zinc Corporation, Bayer-Rhodes Machinery Company, and Machinery & Supply Company
• Court: Missouri Supreme Court

286 S.W. 3

315 Mo. 276

J. H. Coerver, Philip J. Kealy, Lawrence E. Smith, Oliver Wroughton and William Grieves, Appellants, v. Crescent Lead & Zinc Corporation, Bayer-Rhodes Machinery Company, and Machinery & Supply Company

No. 25157

Supreme Court of Missouri

July 30, 1926

Appeal from Jasper Circuit Court; Hon. Grant Emerson Judge.

Reversed (with directions).

Harding Murphy & Tucker and Ryland, Boys, Stinson & Mag for appellants.

(1) Plaintiffs' names as beneficiary bondholders of the deed of trust being easily ascertainable and no effort having been made by Boyer Company to make them parties to the mechanic's lien suit, that judgment did not bind them. Landau v. Cottrill, 159 Mo. 308; Langdon v Klademan, 278 Mo. 236; Russell v. Grant, 122 Mo. 161; Redlands v. Lumber Co., 194 Mo.App. 650; R. S. 1919, secs. 7225, 7229, 7231. (a) Service on the trustee of the mortgage was not service on bondholders. Stafford v. Fizer, 82 Mo. 398; Lumber Co. v. Oliver, 65 Mo.App. 435; 2 Black on Judgments (2 Ed.) sec. 585; 2 Perry on Trusts (6 Ed.) sec. 873; Baker v. Central Trust Co., 235 F. 17, 31; Curtis v. Leavitt, 15 N.Y. 9. (b) The lien suit was a legal proceeding. Western Co. v. Boyce, 74 Mo.App. 343. (2) The lessees' interest and the improvements thereon, including the property sold, were an interest in or affecting real estate, and the ten days' advertisement of sale of the property, as personal property, and the sale thereunder, were void. R. S. 1919, secs. 1624, 1625, 1649; Kirk v. Mattier, 140 Mo. 23; Barnsdall v. Gas Co., 225 Pa. 338, 26 L. R. A. (N. S.) 614; 27 Cyc. 690; Tiedeman on Real Property, secs. 2, 75; 18 R. C. L. p. 1173, sec. 83. (3) The attempted service of summons on the Mining Company by serving only a watchman living on the abandoned mining premises, the company having no office or place of business in Jasper county, was void. It was void for the additional reason that the undisputed proof showed that the superintendent in charge of the plant was in the county at the time. R. S. 1919, sec. 1192; State ex rel. v. Meyers, 126 Mo.App. 544; Holtschneider v. Railroad, 107 Mo.App. 381; Mining Co. v. Cattle Co., 187 Mo. 420. (a) The sheriff's return is amenable to conform to the facts even in this court. Feurt v. Carter, 174 Mo. 289; Sebole v. McKinnies, 217 S.W. 577. (b) The service being void as to the principal debtor, the judgment was void as to any other party to the suit. Wibbing v. Powers, 25 Mo. 599; Russell v. Grant, 122 Mo. 161, 179; Ashburn v. Ayres, 28 Mo. 75. (4) Plaintiffs' bonds were voted by unanimous resolution of the directors who at the time were owners of a great majority of the Mining Company's stock. Since the bond issue, neither the Mining Company nor any stockholder has ever questioned its validity. Defendants are in no position to complain. Reisterer v. Lumber Co., 160 Mo. 141. Besides the by-laws of the company framed by the stockholders authorized in advance the issuance of bonds by the directors. (5) The manner in which the sale and bidding were conducted and the grossly inadequate sale price fully warrant setting it aside. Plaintiffs will gladly pay the judgment and interest and all expenses less amounts realized from sale of the property as a condition precedent to the relief prayed. Van Graafieland v. Wright, 286 Mo. 414; Rogers & Baldwin Hdw. Co. v. Building Co., 132 Mo. 442; Mangold v. Bacon, 237 Mo. 496.

A. W. Thurman for respondents.

(1) The plaintiffs' petition does not state a cause of action in equity, as no equitable ground is alleged; there was no fraud or mistake on any other equitable ground alleged of equitable cognizance; if any action was stated it was an action at law in behalf of the trustee. The court should have sustained the defendants' objection to the introduction of the testimony and should have sustained the defendants' demurrer at the close of the testimony. A bill of equity is not the proper remedy for the recovery of title or possession; the remedy is at law. Janey v. Spadden, 38 Mo. 395; Odle v. Odle, 73 Mo. 289; Medicus v. Altman, 203 S.W. 637. The mere stating that the defendants claim some interest in the property does not entitle the plaintiffs to equitabe relief. Cole v. Parker Washington Co., 276 Mo. 266. The action of the alleged directors in authorizing a bond issue without assent of the stockholders was contrary to the statutes of Missouri, and was contrary to what is generally termed the "Blue Sky Law." Being a party to an unlawful agreement or in the assistance in violating the law, equity will not give him relief. It is contrary to public policy. Morrison v. Juden, 145 Mo. 282; 21 C. J. secs. 157, 178, 180. (2) The court committed error in receiving evidence in behalf of the plaintiffs to impeach the sheriff's return. The return recites that the summons and the certified copy of the original petition was served upon J. L. Poorman, who was then and there and ever since was in charge of the business office, usually had and maintained in the transaction of the business, that said Poorman was the agent in charge. It further certified that the president and other chief officers were absent from said county and not found. The return was sufficient under Sections 1191, 1192, 1193, R. S. 1919. Bedell v. Richardson Lubricating Co., 211 S.W. 104. The return should receive a reasonable and natural interpretation; it must be fairly construed and the effect must be fairly given in meaning. Davis v. Jacksonville, S. E. Line, 126 Mo. 75; State ex rel. v. Sale, 232 Mo. 166; Hill v. Ore & Steel Co., 90 Mo. 103. The sheriff's return was conclusive, and cannot be impeached. Boon Co. v. Lowry, 9 Mo. 24; State ex rel. Beck v. Finn, 100 Mo. 429; Newcomb v. N. Y. Central Railroad, 182 Mo. 687. (3) It was error for the court to admit the chattel mortgage offered in evidence by the plaintiff because the execution thereof was denied under oath and because there was no showing of any authority given by the stockholders or by any legal authority to execute the same. There was no evidence that the stockholders ever held a meeting to adopt by-laws as provided by law. R. S. 1919, sec. 9726. The original articles of association provided for three directors. There was no proper proof of the calling or convening of said directors or stockholders and no proof of any resolution authorizing the execution of the mortgage, and the same was void. There was no proof of the publication of the notice for sixty days or waiver thereof. Sec. 9741, R. S. 1919; Hill v. Coal Mining Co., 119 Mo. 9; Johnson v. School District, 67 Mo. 320. (4) These parties not only attempted to violate the law but did so. Any person or persons, agent or agents, who shall attempt to sell stock or bonds or any other security of any domestic or foreign corporation, who have not complied with the laws of the State, shall be guilty of a misdemeanor. R. S. 1919, secs. 11920, 11931. The power to prohibit persons of a corporation from disposing of bonds without compliance therewith is within the proper police power of the State. Bank of Bernie v. Blades, 247 S.W. 806; Hall v. Giger-Jones Co., 242 U.S. 538, 61 L.Ed. 480; 2 Parsons on Contract (9 Ed.) p. 746; Landwher v. Lingenfelder, 249 S.W. 723; Caldwell v. Stock Yards Co., 242 U.S. 598; Schmidt v. Stortz, 236 S.W. 694; Merrick v. Halsey, 242 U.S. 568, 61 L.Ed. 498. The mortgage and bonds secured were void because they were contrary to the statutes and public policy of the State, and they were void for the reason that they were not authorized by the legally constituted directors or stockholders as required by the statutes. In re Astell Engineering & Iron Works, 278 F. 743; In re Post, 219 F. 171, 135 C. C. A. 69. (5) The mortgage was void as to creditors because the Crescent Lead & Zinc Company by its articles of association and charter fixed its residence in Kansas City, Jackson county, and it is admitted that its chattel mortgage was neither filed nor recorded in the county of its residence. Sec. 2256, R. S. 1919, provides that chattel mortgages shall be recorded or filed in the county where the mortgagor or grantor executing the same resides. The filing of a chattel mortgage in Jasper county was void as to creditors. Bank of Malden v. Wayne Heading Co., 200 S.W. 693; Rice, Stix & Co. v. Sally, 176 Mo. 107; Jones on Chattel Mortgage (5 Ed.) 253; Pelton v. Transportation Co., 37 Ohio St. 450; In re Federal Contracting Co., 212 F. 688; Galveston Railroad Co. v. Gonzales, 151 U.S. 504, 38 L.Ed. 248; Fairbanks Steam Shovel Co. v. Wills, 60 L.Ed. 841.

OPINION

Atwood, J.

Appellants, who were plaintiffs below, are the owners and holders for value of a $ 50,000-bond issue dated and issued on or about September 1, 1918, by respondent Crescent Lead & Zinc Corporation, a Missouri corporation, having its chief office at Kansas City in Jackson County, Missouri. The bonds were secured by a mortgage deed of trust, Peoples Trust Company of Kansas being named therein as trustee, on the corporation's mining plant, machinery and lease in Jasper County, Missouri, and plaintiffs went to trial before the court on their second amended petition seeking an accounting and a personal judgment against said corporation, the foreclosure of said mortgage, a deficiency judgment, the appointment of a receiver, and for general equitable relief.

Other outstanding facts pleaded and in evidence are that in November, 1920, respondent Boyer-Rhodes Machinery Company claiming a mechanic's lien against said mining plant, machinery, equipment and lease of said Crescent Lead & Zinc Corporation, filed its lien statement in the office of the Circuit Clerk of Jasper County, Missouri, and afterwards, on November 17, 1920, filed its petition to enforce the same, making only the Crescent Lead & Zinc Corporation and Peoples...