Denny v. Guyton, No. 28922.

• Court: United States State Supreme Court of Missouri
• Writing for the Court: Atwood
• Citation: 40 S.W.2d 562
• Decision Date: 27 May 1931
• Docket Number: No. 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.

40 S.W.2d 562 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. Court en Banc, May 27, 1931.^*

[40 S.W.2d 564]

Appeal from Jackson Circuit Court. — Hon. Ralph S. Latshaw, Judge.

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 Pac. 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 Pac. 952; In re Taub, 4 Fed. (2d) 993; Elliott v. Timber Co., 117 Ore. 387, 244 Pac. 93; Boles v. Akers, 116 Okla. 266, 244 Pac. 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 Pac. 96; O'Hara v. Harman, 43 N.Y. Supp. 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 Pac. 1045; Forman v. Lumm, 212 N.Y. Supp. 487; Joring v. Harriss, 292 Fed. 974; Schaefer Const. Co. v. Jones, 3 S.W. (2d) 288; Dolan v. Dolan, 107 Conn. 342, 140 Atl. 745; Modlin v. Licht, 224 App. Div. 614, 231 N.Y. Supp. 265; Darling v. Buddy, 1 S.W. (2d) 169; Dexter & Carpenter, Inc., v. Houston, 20 Fed. (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 Pac. (Wyo.) 1089; 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 Pac. (Okla.) 1067; Salem-Fairfield Tel. Assn. v. McMahan, 153 Pac. 788; Gehlhar v. Konoske, 195 N.W. 588, 60 N.D. 256; Dexter & Carpenter v. Houston, 20 Fed. (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 Pac. 788; Boyd v. Am. Carbon Black Co., 182 Pa. St. 206; Livingston v. Lewis, 109 Kan. 298, 198 Pac. 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. Supp. 285; Halsted v. Schmelzel, 17 Johns. (N.Y.) 80; Joring v. Harriss, 292 Fed. 981; Reece v. Rhoades, 165 Pac. 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 Fed. (2d) 993; 33 C.J. 847; Crawford v. Forrester, 108 Kan. 222, 194 Pac. 635; Anderson v. Blair, 202 Ala. 209; Hoge v. George, 27 Wyo. 423, 200 Pac. 96; 33 C.J. 848, sec. 20; 33 C.J. 851; Dolan v. Dolan, 107 Conn. 342, 140 Atl. 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 Pac. 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 Pac. 449; Allan v. Hargadine Co., 286 S.W. 16; Dexter & Carpenter v. Houston, 20 Fed. (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 Fed. 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 App. Div. 614, 231 N.Y. Supp. 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 Fed. (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 Fed. 583, 114 C.C.A. 419; McMullen v. Harris, 165 Iowa, 703, 147 N.W. 164; Botsford v. Van Riper, 33 Nev. 156, 110 Pac. 705; Reece v. Rhoades, 165 Pac. 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. Supp. 13; Spier v. Hyde, 92 App. Div. 467, 87 N.Y. Supp. 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 App. Div. 29, 149 N.Y. Supp. 929; Knudson v. George, 157 Wis. 520, 147 N.W. 1003; Rich v. Teasley, 194 Fed. 534; 39 Cyc. 182; Moe v. Lowry, 194 Pac. 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 Pac. 1004; Salem-Fairfield Tel. Assn. v. McMahan, 153 Pac. 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 App. Div. 614, 231 N.Y. Supp. 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 Fed. (2d) 10; Totten v. Burhans, 51 N.W. (Mich.) 1119; Lynch v. Mercantile Trust Co., 18 Fed. 486; Marsh v. Falker, 40 N.Y. 562; Crawford v. Lugoff, 220 N.W. (Minn.) 823; Modlin v. Licht, 224 App. Div. 614, 231 N.Y. Supp. 265; Dexter & Carpenter v. Houston, 20 Fed. (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 Fed. 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 Fed. (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. Supp. 338; Dexter & Carpenter v. Houston, 20 Fed. (2d) 647; Monmouth College v. Dockery, 241 Mo. 522. (6) The defendants are in equity...