Cummings v. Parker

• Decision Date: 31 May 1913
• Citation: 157 S.W. 629
• Parties: CUMMINGS v. PARKER et al.
• Court: Missouri Supreme Court

157 S.W. 629

CUMMINGS v. PARKER et al.

Supreme Court of Missouri, Division No. 1.

May 31, 1913.

1. CORPORATIONS (§ 430) — SALE OF ASSETS — NEW CORPORATION — INTERLOCKING DIRECTORS — TRUST.

Where a fish club corporation, being unable to renew a lease of its grounds, sold its property to another corporation having the same directors with the consent of all its stockholders except plaintiff for full value, plaintiff was not entitled to have the conveyance vacated on the ground of fraud, in the absence of any proof of actual fraud, on the theory that the fish club corporation's directors were in fact trustees and in effect transferred the property to themselves.

2. CORPORATIONS (§ 404) — DIRECTORS — SALE OF CORPORATE PROPERTY.

While directors of a corporation are trustees as to the corporation's property and as against stockholders, the dealings between corporations having interlocking directors or dealings with such directors anent corporate property will be critically scrutinized, yet the directors of a solvent corporation which is a going concern and laboring under no vital distress as to its corporate life may dispose of all of its corporate property without the unanimous consent of its stockholders, provided the transaction is accomplished in good faith.

3. CORPORATIONS (§ 404) — SALE OF ASSETS — GOOD FAITH.

Where a fish club corporation operated for the benefit of its members and perfectly solvent was unable to obtain a further lease of its game preserve property and its buildings were in need of repair, a sale thereof by the corporation's directors to another corporation which was able to obtain a new lease, for full value, was in good faith and valid as against the rights of a minority stockholder.

Appeal from Circuit Court, St. Charles County; James D. Barnett, Judge.

Action by Constantine S. Cummings against Herbert L. Parker and others. Judgment for defendants, and complainant appeals. Affirmed.

Among the authorities cited by appellant were the following: Hannerty v. Standard Theater Co., 109 Mo. 310, 19 S. W. 82; Feld v. Roanoke Investment Co., 123 Mo. 613, 27 S. W. 635; Hill v. Gould, 129 Mo. 106, 30 S. W. 181; Keokuk Packet Co. v. Davidson, 95 Mo. 467, 8 S. W. 545; Bent v. Priest, 86 Mo. 475; Soulard v. City of St. Louis, 36 Mo. 546; Glover v. Bond Investment Co., 138 Mo. 408, 40 S. W. 110.

Those cited by the respondent and referred to in the opinion are the following: The right and interest of the Game and Fish Club in and to the shooting grounds having terminated by the expiration of its lease thereon, it was competent for a majority of the stockholders to sell the remaining property, which had been acquired and used merely as an adjunct to the shooting grounds, notwithstanding the protest of the plaintiff. Tanner v. Lindell Railroad, 180 Mo. 1, 79 S. W. 155, 103 Am. St. Rep. 534; 2 Cook on Corporations (5th Ed.) § 670, p. 1554; Bartholomew v. Rubber Co., 69 Conn. 521, 38 Atl. 45, 61 Am. St. Rep. 57. The sale having been authorized by a majority of the stockholders, at a stockholder's meeting, is not constructively fraudulent by reason of the fact that the stockholders who voted for it were also members of the purchasing corporation. Nye v. Storer, 168 Mass. 53, 46 N. E. 402; Bjorngaard v. Bank, 49 Minn. 487, 52 N. W. 48; U. S. Steel Corporation v. Hodge, 64 N. J. Eq. 807, 54 Atl. 1, 60 L. R. A. 742; Alexander v. Williams, 14 Mo. App. 13; Kitchen v. Railroad, 69 Mo. 224; Bank v. Big Muddy Iron Co., 97 Mo. 38, 10 S. W. 865; Hill v. Gould, 129 Mo. 106, 30 S. W. 181; Butler v. Land & Mining Co., 139 Mo. 467, 41 S. W. 234, 61 Am. St. Rep. 464; Twin Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. Ed. 328; Hill v. Nisbet, 100 Ind. 341; Copsey v. Bank, 133 Cal. 657, 66 Pac. 7, 204, 85 Am. St. Rep. 238; Rogers v. Railroad, 33 C. C. A. 517, 91 Fed. 299; Gamble v. Water Co., 123 N. Y. 91, 25 N. E. 201, 9 L. R. A. 527; Transportation Co. v. Beatty, L. R. 12 App. Cas. 589.

M. McKeag, for appellant. Ferris, Zumbalen & Ferris, of St. Louis, for respondents.

LAMM, J.

This is a suit in equity at the instance of a stockholder to set aside a conveyance made by one corporation to another and to appoint a receiver and wind up the affairs of the grantor corporation. From a judgment for defendants on the merits at a trial before Judge Barnett as chancellor in the St. Charles circuit court, after hearing plaintiff's evidence alone, plaintiff appeals.

Two corporations are involved, one we will call "Fish Club," the other "Shooting Club"; a certain Realty Company also figures in the record (whether it has stockholders or is incorporated is dark). The Realty Company is not sued, Fish and Shooting Clubs are parties defendant, the individual defendants are the directors of Fish and Shooting Clubs (the personnel of each directorate being the same). Plaintiff is a stockholder in Fish Club and is a "member" of Realty Company, but is not a stockholder in Shooting Club. At a certain time in 1908, Fish Club made a conveyance of its clubhouse on the banks of the Mississippi, with its appurtenances, to Shooting Club. It is of that conveyance plaintiff complains; fraud being the gravamen of his cause of action. No assignment of error here calls for the reproduction of the pleadings, hence the case may proceed on appeal on the theory they were sufficient to permit the introduction of the evidence and grant relief if fraud was proved.

On the facts, the case is this:

In 1888 one Gallagher owned, say, 1,800 acres of land and water in St. Charles county which, we will assume, were likely for fishing and hunting. At that time about 30 hunting and fishing gentlemen of St. Louis, including plaintiff, with an eye to that tract and presumably clubable men, took stock in and organized a corporation, named the Dardenne Game and Fish Club, with a capital at the outset of $5,000 divided into 25 shares, presently increased to $6,000 divided into 30 shares, with the charter purposes following, to wit: "To purchase, obtain, lease, own, control, sell, or otherwise dispose of such tract or tracts of land, or spaces of water as might be suitable for wild or tame birds, game, animals, and fish; also such licenses or privileges for hunting, shooting, fishing, catching or preserving such birds, game, animals and fish on suitable lands or waters; to stock such land and waters, and acquire and enjoy the product and profit thereof; to acquire, buy, build, lease and have, in connection with such lands and waters, houses, boats or other appropriate conveyances and appliances; to keep and maintain a clubhouse or clubhouses at the city of St. Louis or where said lands and waters may be, with all suitable sustenance, furniture and comforts for the use of the members thereof; and to control all of the property and business of the corporation by such by-laws, rules and regulations as it might adopt, or authorize the directors to adopt, including making of assessments for yearly dues, not to exceed $100.00 on each member for one year, with all powers conferred by law or incident thereto."

Pursuant to those charter purposes, Fish Club bought from Gallagher a little the rise of two acres of land adjacent to his 1,800-acre tract, and at the same time leased from him the latter tract, or at least the exclusive hunting and fishing rights thereon, for a term of ten years. The fish was theirs and the game was theirs — provided they could take the one or shoot the other, a distinction with a difference as shrewd observers have remarked. Fish Club paid $300 for the two acres and took a deed. By its lease it contracted to pay a rental on the Gallagher 1,800-acre tract of $600 a year. Presently it built a clubhouse and appurtenant outbuildings on the two acres at an outlay of, say, $3,000, and became the owner of some boats and other fishing and hunting incidentals.

For the ten years next following, Fish Club kept and performed its lease with Gallagher, and as headquarters for its corporate purposes occupied its clubhouse. At the end of its first term, the Gallagher lease was renewed for a like term with like conditions, and the renewed lease was also kept and performed by Fish Club. The second term expired in 1908, and at about that time Realty Company was born; whether (as said) it was a corporation issuing stock to its members, or was some form of unincorporated voluntary association, we do not know. Neither its capital, purpose, or organization is disclosed. With some few exceptions, the members of this Realty Company (including plaintiff) were also stockholders of Fish Club. At or before the expiration of the term of said renewed lease, this Realty Company became owner in fee of said 1,800-acre tract by purchase from its then owner. At about the same time the other corporate defendant, the Dardenne Shooting Club, was organized. Its capital stock is not disclosed, nor are its corporate purposes defined. But the case travels below and here on implied concessions that the latter ran on the lines of those of Fish Club. With a few exceptions (one of whom was plaintiff), it had the same stockholders.

Outside the testimony of the one witness, put on the stand by plaintiff, there was no oral testimony introduced. Read into the case, during the progress of this witness' testimony, were certain instruments, to wit, leases and deeds (the terms of which have been sufficiently stated already) and the proceedings of one stockholders' meeting of Fish Club (of which more hereafter), together with the proceedings of its board of directors of a certain date.

The case on some phases was darkly developed. Doing the best we can with the record, we take the facts to be that at some time in the history of Fish Club, near the close of the renewed lease, a question arose what it should do with its two acres and its clubhouse appurtenances. This in view of the fact that for reasons wholly dark Fish Club either could not, would not, or did not, get a renewal of the lease on...