David v. B. L. Fry Manufacturing Co.
| Decision Date | 07 June 1921 |
| Parties | J. H. W. DAVID, Respondent, v. B. L. FRY MANUFACTURING COMPANY, a Corporation, Appellant |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of the City of St. Louis.--Hon Franklin Ferriss, Judge.
REVERSED.
Judgment reversed.
Lewis & Rice for appellant.
(1) The plaintiff can only recover, if at all, on the cause of action set forth in the petition. Perry v. Barnett, 18 Mo 144; Reed v. Bott, 100 Mo. 62. (2) It was error to hold that the receipt by the secretary-treasurer of a corporation of $ 2500 in payment of twenty-five shares of stock owned by the president and secretary-treasurer as individuals, was a receipt by the corporation. Even if defendant's officers had represented that the corporation owned stock and would buy it back, such representations are not binding on the corporation. 1. Not within real or apparent authority of the officer who purported to make the contract for the corporation. Sears v. Illinois Wesleyan University, 28 Ill. 183; Buffalo Loan Co. v. Medina Gas Co., 162 N.Y. 67; Hardwick Savings Bank v Drenan, 72 Vermont, 438. 2. Contracts which a corporation has no power to make or perform are absolutely void; while contracts which it may make, but makes illegally or improperly, may be validated by ratification or estoppel. Orpheum Theatre Co. v. Seavey & Flarsheim Co., 197 Mo.App. 661. (3) This was a contract which defendant corporation had no power to perform or make. It is ultra vires for a corporation to purchase its own stock which is not treasury stock--and such a contract is therefore void (according to memorandum of court filed with the judgment, stock which plaintiff bought was not treasury stock). Wilson v. Torchon Lace & Mercantile Co., 167 Mo.App. 305; Sexton v. North Mo. Cent. Ry. Co., 194 S.W. 1081; Stringfellow v. Rosebrough Monument Co., 196 S.W. 1050; St. Louis Rawhide Co. v. Hill, 72 Mo.App. 142. Any agreement by a corporation to purchase its own stock which would reduce the capital stock of the corporation, is ultra vires under sec. 10159, R. S. 1919--which statutory provision, according to Wilson v. Torchon Lace & Mercantile Co., supra, provides the exclusive method of reducing the capital stock of a Missouri corporation. See, also, St. Louis etc. v. Hilbert, 24 Mo.App. 338. And these cases hold that a purchase of its own capital stock by the corporation reduces the capital stock of the corporation. (5) Even if the stock which plaintiff bought had been treasury stock, it is ultra vires for a Missouri corporation to purchase its own treasury stock--the prohibition against the power of a corporation to purchase its own shares is general and emphatic, and no Missouri law or case where the point has been at issue has declared that a corporation has authority to purchase its treasury stock. Hunter v. Garanflo, 246 Mo. 131; Interstate Grocer Co. v. Taylor, 200 Mo.App. 207; Shawhan v. Shawhan Distilling Co., 195 Mo.App. 445; Banking Co. v. Manufacturing Co., 168 Mo. 645; Boley v. Sonora Development Co., 126 Mo.App. 116; Gill v. Balis, 72 Mo. 424; St. Louis Rawhide Co. v. Hill, 72 Mo.App. 142; St. Louis Carriage Co. v. Hilbert, 24 Mo.App. 338; Coppin v. Greenliss, 38 Ohio State 275. (6) Plaintiff was allowed to recover under the third count of his second amended petition on the theory of money had and received. This was error; for even if defendant had received the money of the plaintiff in payment for stock--of which there was not proof--and even though defendant's officers had made the representations imputed to them, and plaintiff had had a right to rely thereon, this could not change the law in Missouri so as to allow a corporation to purchase its own shares of stock. A contract which a corporation has no power to make or perform is absolutely void. Orpheum Theatre Co. v. Seavy & Flarsheim Co., 197 Mo.App. 661, and cases under 5, supra. (7) It was error to refuse the declaration of law No. 1, requested by defendant, to-wit: The court declares that the laws and decisions of the State of Missouri porhibit the repurshase by a corporation of any part of its capital stock unless the repurchase be made to save the corporation from a financial loss. Wilson v. Torchon Lace & Mercantile Co., 167 Mo.App. 305 (8) It was error to refuse the derclaration of law No. 2, requested by defendant, to-wit: The court declares that under the laws and decisions of the State of Missouri, a contract of a corporaton to repurchase its stock is ultra vires and void. Wilson v. Torchon Lace & Mercantile Co., 167 Mo.App. 305. (9) It was error to refuse the declaration of law No. 5, requested by defendant. Sears v. Illinois Wesleyan U., 28 Ill. 183; See cases under point (2), above, (10) It was error to refuse the declarations of law No. 6, requested by defendant. Tripp v. New Metallic Packing Co., 137 Mass. 499. (11) Even if it is held that the contract sued on (as reformed) was within the apparent authority of the officers who purported to excute it for the corporation, the facts that purchaser was requested to make his checks payable to an officer of the corporation in his individual capacity, and that the purchaser received stock certificates belonging to and endorsed by the individual owners thereof, are sufficient to put the plaintiff on notice that the stock did not belong to the corporation. The corporation is not liable for acts within the apparent authority of its officer or agent where the person dealing with the officer or agent has notice of facts sufficient to put him upon inquiry as to the latter's authority. In such a case, if he acts without inquiry, he acts at his peril. In re Lance Lumber Co., 224 F. 598.
O. J. Mudd for respondent.
(1) The signing of the contract by the secretary-treasurer, at the direction and "under the eye" of the president, is equivalent to a signature by the president himself. 13 Corpus Juris, page 307, sec. 130; Start v. Newspaper Asso., 222 S.W. 871. (2) Under the law of the land, a corporation may have and own shares of its capital stock in such manner as enables it to validly enter into a binding contract for a conditional sale of the stock. 10 Cyc, page 416; 4 Thompson on Corp. (2 Ed. 1908), sec. 4080; Idem, secs. 4082-4087; 1 Cook on Corp. (1913), sec. 311, pages 892-3; Straight v. Steel & Iron Co., 148 Wis. 254; Lyons v. Snyder, 136 Minn. 252; Fleitman & Co. v. Cotton Mills, 186 F. 466; 2 Fletcher's Cyc. on Corp., sec. 604; 14 Corpus Juris, page 407, sec. 553; Idem, page 575, sec. 858; Sherman v. Shaughnessy, 148 Mo App. 679; Pallais du Costume Co. v. Beach, 163 Mo.App. 499; Wilson v. Torchon, etc., Co., 167 Mo.App. 305. Both Fry and St. Clair, by their conduct in making the contract in evidence, for and in the name of defendant, and by the recitals in that contract, are estopped to say that the stock, whose certificates they delivered to plaintiff, belonged to them as individuals. 21 Corpus Juris, pages 1156-7, sec. 158; Idem, page 1168, sec. 173, (4) The defendant corporation, having recited in the contract by which it employed plaintiff as assistant superintendent to manage its factory, that plaintiff "hereby does purchase from said second party" (second party being defendant), and by the attendant conduct of its managing officers, is estopped to deny its ownership of the stock. 21 Corpus Juris, page 1060, sec. 2; Idem, page 1011, secs. 110-114; Smith v. Railway Co., 74 Mo.App. 48. (5) Even if the contract were ultra vires, defendant having gotten plaintiff's money through the contract, and under the circumstances in evidence, must answer as for money had and received. Bank v. Lyons, 220 Mo. 538; Williams v. Everett, 200 S.W. 1045; Brown v. Railroad, 187 Mo.App. 104 (cases cited); Barree v. City of Cape Girardeau, 197 Mo. 382; Fensky v. Casualty Co., 264 Mo. 154; Alexander v. Relfe, 74 Mo. 495, Sherman v. Com. Prtg. Co., 29 Mo.App. 4. (6) If defendant's officers, after receiving plaintiff's money under his contract with the defendant, misapplied it, that fact, under the circumstances in evidence, may not bind the plaintiff. Donnell v. Bank, 80 Mo. 165.
--Plaintiff's petition is in three counts. The first count states a cause in equity, its object being the reformation of the contract on which the action is based, which contract in effect was the employment of the plaintiff by the defendant as assistant superintendent of its factory, upon consideration of the plaintiff purchasing twenty-five shares of the capital stock of the defendant company for the price of $ 2500. Plaintiff alleged that the written agreement entered into omitted by mutual mistake of the parties, one of the terms agreed upon to the effect that plaintiff at his option, within the first six months of his employment under the agreement, was to have the right to resign his position as assistant superintendent, return the twenty-five shares of stock, and receive back his purchase money.
Upon the hearing of the case a decree resulted which reformed the said contract as prayed in plaintiff's first count. The action of the learned trial court in this regard is not questioned here.
Plaintiff's second and third counts in fact set up but one cause of action at law in two counts. By the second count plaintiff seeks to enforce the contract as reformed, alleging that plaintiff had within six months after he had entered the employment of the defendant under the said written contract, resigned his position, tendered back his twenty-five shares of stock to the defendant, and requested the return of the purchase money, which defendant however refused to do.
The third count seeks to recover of the defendant the money paid by the plaintiff as the purchase price of the stock, as for...
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