Denny v. Guyton

• Citation: 40 S.W.2d 562,327 Mo. 1030
• Decision Date: 27 May 1931
• Docket Number: 28922
• Parties: Younger R. Denny, Executor of Estate of Josiah C. Wolcott, Appellant, v. Margaret A. Guyton, Fannie G. Carkener and J. Frank Guyton, Executors of Estate of J. D. Guyton, and H. M. Beers and W. R. Harrington
• Court: United States State Supreme Court of Missouri

40 S.W.2d 562

327 Mo. 1030

Younger R. Denny, Executor of Estate of Josiah C. Wolcott, Appellant, v. Margaret A. Guyton, Fannie G. Carkener and J. Frank Guyton, Executors of Estate of J. D. Guyton, and H. M. Beers and W. R. Harrington

No. 28922

Supreme Court of Missouri

May 27, 1931

Rehearing Granted, Reported at 327 Mo. 1030 at 1095.

Appeal from Jackson Circuit Court; Hon. Ralph S. Latshaw Judge; Opinion filed at October Term, 1930, March 3, 1931 motion for rehearing overruled at April Term, May 27, 1931.

Reversed and remanded (with directions).

J M. Johnson, Watson, Gage & Ess, Reed, Holmes & Taylor, J. P. Aylward, Donald W. Johnson and Henri L. Warren for appellant.

(1) There is a close analogy between joint adventures and partnerships. One distinction lies in the fact that while a partnership is ordinarily formed for the transaction of a general business of a particular kind, a joint adventure relates to a single transaction but may comprehend a business to be continued for a period of years. 23 Cyc. 453; 33 C. J 841; Rowley on Modern Law of Partnership, secs. 160, 196, 795; Fewell v. Surety Co., 80 Miss. 782; Reece v. Rhoades, 165 P. 449; Tusant & Son Co. v. Chas. Weitz Sons, 195 Iowa 1386, 191 N.W. 884; Fletcher v. Fletcher, 206 Mich. 153, 172 N.W. 436; Nelson v. Lindsey, 179 Iowa 862; Livingston v. Lewis, 109 Kan. 298, 198 P. 952; In re Taub, 4 F.2d 993; Elliott v. Timber Co., 117 Ore. 387, 244 P. 93; Boles v. Akers, 116 Okla. 266, 244 P. 184; Boyd v. Am. Carbon Black Co., 182 Pa. St. 206; 2 Fletcher Cyclopedia Corporations, secs. 841, 842; Thompson on the Law of Corporations (2 Ed.) sec. 8380; Anderson v. Blair, 202 Ala. 209; Hoge v. George, 27 Wyo. 423, 200 P. 96; O'Hara v. Harman, 43 N.Y.S. 556; Keiswetter v. Rubenstein, 235 Mich. 36, 209 N.W. 154; Alderton v. Williams, 139 Mich. 296; O. K. Boiler & Welding Co. v. Lumber Co., 103 Okla. 226, 229 P. 1045; Forman v. Lumm, 212 N.Y.S. 487; Joring v. Harriss, 292 F. 974; Schaefer Const. Co. v. Jones, 3 S.W.2d 288; Dolan v. Dolan, 107 Conn. 342, 140 A. 745; Modlin v. Licht, 224 A.D. 614, 231 N.Y.S. 265; Darling v. Buddy, 1 S.W.2d 169; Dexter & Carpenter, Inc., v. Houston, 20 F.2d 647; Goss v. Lanin, 170 Iowa 57, 152 N.W. 43; Bond v. O'Donnell, 218 N. W. (Iowa), 901; Fried v. Guiberson, 217 P. 1089 (Wyo.) ; State ex rel. v. Daues, 13 S.W.2d 537. (a) A business corporation is incapable of becoming a partner, but it may bind itself by a contract for a joint adventure, either with another corporation or with individuals, where the purposes of such contract are within those of the business of the corporation. 23 Cyc. 453; Rowley on Modern Law of Partnership, secs. 160, 196, 795; 2 Fletcher Cyclopedia Corporations, secs. 841, 842; Thompson on the Law of Corporations (2 Ed.), sec. 8380; Mestier & Co. v. Paving Co., 180 La. 562; Municipal Paving Co. v. Herring, 150 P. 1067; Salem-Fairfield Tel. Assn. v. McMahan, 153 P. 788; Gehlhar v. Konoske, 195 N.W. 588, 60 N.D. 256; Dexter & Carpenter v. Houston, 20 F.2d 647; Allan v. Hargadine Co., 286 S.W. 16. (b) Where the relationship is one of joint adventure, one party may sue the other at law for a breach of the contract, or a share of the profits or losses, or a contribution for advances made in excess of his share, but this right will not preclude a suit in equity for an accounting. 23 Cyc. 453; 33 C. J. 851; Rowley on Modern Law of Partnership, secs. 160, 196; Salem-Fairfield Tel. Assn. v. McMahan, 153 P. 788; Boyd v. Am. Carbon Black Co., 182 Pa. St. 206; Livingston v. Lewis, 109 Kan. 298, 198 P. 952; Longworth v. Kavanagh, 286 Mo. 545; 33 C. J. 858, sec. 54; 33 C. J. 867, sec. 84; Spier v. Hyde, 87 N.Y.S. 285; Halsted v. Schmelzel, 17 Johns. (N. Y.) 80; Joring v. Harriss, 292 F. 981; Reece v. Rhoades, 165 P. 449. (c) The contract constituting the joint adventure need not be in writing and need not be express, but may be implied from the acts of the parties. 23 Cyc. 453; Knapp v. Hanley, 108 Mo.App. 353; Goss v. Lanin, 170 Iowa 57, 152 N.W. 43; Nelson v. Lindsey, 179 Iowa 862; Tusant & Son Co. v. Weitz Sons, 195 Iowa 1386, 191 N.W. 884; 2 Rowley on Modern Law of Partnerships, sec. 994; In re Taub, 4 F.2d 993; 33 C. J. 847; Crawford v. Forrester, 108 Kan. 222, 194 P. 635; Anderson v. Blair, 202 Ala. 209; Hoge v. George, 27 Wyo. 423, 200 P. 96; 33 C. J. 848, sec. 20; 33 C. J. 851; Dolan v. Dolan, 107 Conn. 342, 140 A. 745; Bryan & Co. v. Scurlock. 184 Iowa 378, 168 N.W. 144; Gehlhar v. Konoske, 195 N.W. 558, 50 N.D. 256; O. K. Boiler & Welding Co. v. Lumber Co., 229 P. 1047, 103 Ok. 226; Fewell v. Am. Surety Co., 80 Miss. 782; Senneff v. Healy, 155 Iowa 82, 135 N.W. 27; Irvine v. Campbell, 121 Minn. 192, 141 N.W. 108; Reece v. Rhoades, 165 P. 449; Allan v. Hargadine Co., 286 S.W. 16; Dexter & Carpenter v. Houston, 20 F.2d 647. (2) Where the wrongful acts of officers against a corporation are also a violation of a duty owed by such officers to stockholders, whether such duty arises from contract or otherwise, a right of action will inure to the stockholders from such wrongful acts. Seehorn v. Hall, 130 Mo. 257; Knapp v. Hanley, 108 Mo.App. 353; Berry v. Colburn, 65 Va. 493; Wannell v. Kem, 57 Mo. 492; Ball v. Grismore, 210 Mo.App. 26; Ritchie v. McMullen, 79 F. 522, 25 C. C. A. 50; Smith v. Hurd, 12 Metc. (Mass.) 371; Oliver v. Oliver, 118 Ga. 362; Rutherford v. Williams, 42 Mo. 24; Modlin v. Licht, 224 A.D. 614, 231 N.Y.S. 265. As joint adventurers, the five parties were in privity with each other, and each owed to the others the utmost good faith and full disclosures respecting the business and its profits. Dexter & Carpenter v. Houston, 20 F.2d 647; Selwyn v. Waller, 212 N.Y. 507, L. R. A. 1915B 160; Merritt v. Joyce, 117 Minn. 235, 135 N.W. 820; Kent v. Costin, 130 Minn. 450; Sickelsteel v. Edmonds, 158 Wis. 122, 147 N.W. 1024; Maas v. Lonstorf, 194 F. 583, 114 C. C. A. 419; McMullen v. Harris, 165 Iowa 703, 147 N.W. 164; Botsford v. Van Riper, 33 Nev. 156, 110 P. 705; Reece v. Rhoades, 165 P. 449; 39 Cyc. 182; Goss v. Lanin, 170 Iowa 57, 152 N.W. 43; Berry v. Colburn, 65 Va. 493; Boqua v. Marshall, 88 Ark. 373; King v. Wise, 43 Cal. 628; Hamburg v. Lotz, 4 Cal.App. 438; Hambleton v. Rhind, 84 Md. 456, 40 L. R. A. 216; Calkins v. Worth, 215 Ill. 78; Runkle v. Burrage, 202 Mass. 89; Church v. Odell, 100 Minn. 98; Seehorn v. Hall, 130 Mo. 257; Knapp v. Hanley, 108 Mo.App. 353; Getty v. Devlin, 54 N.Y. 403; Marston v. Gould, 69 N.Y. 220; Bradley v. Wolff, 83 N.Y.S. 13; Spier v. Hyde, 92 A.D. 467, 87 N.Y.S. 285; King v. Barnes, 109 N.Y. 267; Schantz v. Oakman, 163 N.Y. 156; Merritt v. Joyce, 117 Minn. 235; Kent v. Costin, 130 Minn. 450; Brady v. Erlanger, 165 A.D. 29, 149 N.Y.S. 929; Knudson v. George, 157 Wis. 520, 147 N.W. 1003; Rich v. Teasley, 194 F. 534; 39 Cyc. 182; Moe v. Lowry, 194 P. 363; Nelson v. Lindsey, 179 Iowa 862, 162 N.W. 3; Goldman v. Pryor, 172 Wis. 462, 179 N.W. 673; 33 C. J. 851, sec. 36; 33 C. J. 857, sec. 50; Gamble v. Loffler, 28 S.D. 239, 133 N.W. 288; 33 C. J. page 867, sec. 84; Perry v. Morrison, 118 Okla. 212, 247 P. 1004; Salem-Fairfield Tel. Assn. v. McMahan, 153 P. 788; 23 Cyc. 455; Crawford v. Lugoff, 220 N.W. 822; Kelly-Howe-Thompson v. Loan & Trust Co., 199 N.W. 233; Modlin v. Licht, 224 A.D. 614, 231 N.Y.S. 265. (3) Each being in a fiduciary relationship to the others, misrepresentations respecting the business or its profits, or concealments and failures to disclose on the part of the defendants toward Wolcott constituted fraud. Acts of omission, i. e. concealments, were as culpable a breach of duty as acts of commission, i. e. false representations. Hamlin v. Abell, 120 Mo. 188; Pomeroy v. Benton, 57 Mo. 531, 77 Mo. 64; Dunn v. Oldham's Admr., 63 Mo. 181; Converse v. Blumrich, 14 Mich. 109; Knappen v. Freeman, 47 Minn. 491; Rothschild v. Mack, 115 N.Y. 1; Burgert v. Borchert, 59 Mo. 80; Massey v. Young, 73 Mo. 260; Cooley on Torts, 476; Elbro Knitting Mills v. Schwartz, 30 F.2d 10; Totten v. Burhans, 51 N. W. (Mich.) 1119; Lynch v. Mercantile Trust Co., 18 F. 486; Marsh v. Falker, 40 N.Y. 562; Crawford v. Lugoff, 220 N. W. (Minn.) 823; Modlin v. Licht, 224 A.D. 614, 231 N.Y.S. 265; Dexter & Carpenter v. Houston, 20 F.2d 647. (4) The agreement set up in the petition and proved in the evidence was not ultra vires. (a) The corporations, as such, did not enter the joint adventure, but if they had, such relationship would have been intra vires under authorities heretofore set forth. Corporations can enter joint adventures. (b) Equity will not permit a corporation or individuals to receive unlawful profits and then plead ultra vires to avoid disgorging them. This is an unconscionable defense. Cass Co. v. Ins. Co., 188 Mo. 3; Lysaght v. Assn., 55 Mo.App. 538; Bowman Co. v. Mooney, 41 Mo.App. 665; Winscott v. Guarantee Co., 63 Mo.App. 367; City of Goodland v. Bank, 74 Mo.App. 365; Lewis v. Assn., 98 Wis. 203, 224; First Natl. Bank v. Guardian Trust Co., 187 Mo. 494; Luhrig Collieries Co. v. Interstate Co., 281 F. 271; Thompson on the Law of Corporations (2 Ed.) sec. 8380; Boyd v. Am. Carbon Black Co., 182 Pa. St. 206; Dexter & Carpenter v. Houston, 20 F.2d 647. (c) Ultra vires cannot be raised in a collateral proceeding. The State alone can question acts as ultra vires excepting where the contract is against public policy and good morals. Cass County v. Ins. Co., 188 Mo. 3; Drug Co. v. Robinson, 81 Mo. 19; Ins. Co. v. Smith, 117 Mo. 261; Welsh v. Brewing Co., 47 Mo.App. 608; Glass v. Brewing Co., 47 Mo.App. 639; Lysaght v. Assn., 55 Mo.App. 547. (5) The plaintiff was not guilty of laches. The action was timely brought after the discovery of the fraud. Limitations and laches commence with the discovery of fraud. 33 C. J. 867, sec. 85; Munson v. Fishburn, 183 Cal. 206; Seligson v. Weiss, 227 N.Y.S. 338; Dexter & Carpenter v. Houston...