Dorrah v. Pemiscot County Bank
| Decision Date | 04 December 1923 |
| Citation | 256 S.W. 560,213 Mo.App. 541 |
| Parties | CHARLES DORRAH, Respondent, v. PEMISCOT COUNTY BANK, a Corporation, F. J. CUNNINGHAM, J. A. CUNNINGHAM, S. P. REYNOLDS, H. C. SCHULT and A. C. TINDLE, Appellants |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of Ste. Genevieve County.--Hon. Peter Huck, Judge.
REVERSED.
Judgment reversed.
Arthur L. Oliver, C. G. Shepard, C. J. Stanton, Jno. A. Hope, and W M. Fitch for appellants.
(1) This court has jurisdiction in this cause for the reason that State and Federal constitutional questions have been timely raised and preserved upon the record. Suess v. Ins Co., 193 Mo. 564; Pav. Co. v. Ridge, 169 Mo 376; Andrus v. Ins. Co., 168 Mo. 151; Sec. 30, Art 2, Mo. Constitution; Sec. 1, 14th Amendment, Fed Constitution; Sec. 12, Art. 6, Mo. Constitution. (2) 1. Where directors have acted wrongfully or negligently and the corporation has suffered loss by reason of such acts, the corporation is vested with a right of action against the directors, or such of them as caused such loss, for the amount of the loss sustained. In case of failure to prosecute such cause of action by the corporation a stockholder may enforce said cause of action which has accrued to the corporation, provided the corporation, its officers or directors refuse to prosecute same, and provided further the stockholder cannot secure redress by appealing to the other stockholders to elect such officers as will enforce the cause of action. Where a stockholder sues by reason of above grounds, he must show the facts which will authorize him, in his own name, to prosecute the cause of action which vested in the corporation. Stone v. Rottmann, 183 Mo. 552; Vogeler v. Punch, 205 Mo. 558; Bank v. Hill, 155 Mo. 279; Utley v. Hill, 155 Mo. 282; Bank v. Hill, 148 Mo. 380; Briggs v. Spaulding, 141 U.S. 132; Porter v. Sabon, 149 U.S. 473; Chem. Co. v. Newrich, 169 Mo. 388; Securities Co. v. Belmont, 206 N.Y. 7; Weingreen v. Nickelbocker, 124 N.Y.S. 41; Bartlett v. R. R. Co., 221 Mass. 530; Moncrief v. Wilkinson, 93 Ala. 364; Kavanaugh v. Trust Co., 181 N.Y. 121; O'Connor v. Power Co., 181 N.Y. 46; Wallace v. Bank, 89 Tenn. 630; Minton v. Stahlman, 96 Tenn. 98. 2. "In order to maintain this action it devolved upon plaintiff to allege and prove that the corporation had refused to sue or that the defendant, Punch, was in control of the corporation." Vogeler v. Punch, 205 Mo. 558; Wallace v. Bank, 89 Tenn. 630, 7 R. C. L., sec. 475; Warner v. Penoyer, 33 C. C. A. 222. 3. The cause of action accruing to the corporation remains the same whether brought by the corporation or by a stockholder therein. 14a C. J., sec. 1931, pp. 154; Sec. 1936 and 1935; 3 Cook Corps., sec. 71-734; Morawetz Corps., sec. 271; Wallace v. Bank, 89 Tenn. 630. (3) The petition must state the facts to show that the cause of action is vested in the corporation, which would enable the corporation to sue and recover on the facts so stated. Conclusions of facts or of law in a petition will not sustain such action, whether brought by a stockholder or by the corporation. Sec. 1220, R. S. 1919; Vogeler v. Punch, 205 Mo. 558; Stone v. Rottman, 183 Mo. 552; Albers v. Exchange, 45 Mo.App. 206; Bank v. Barnett, 155 Mo. 569 (500 counts); Mason v. Moore, 73 Oh. St. 275; Bank v. Hill, 148 Mo. 380; Bank v. Hill, 155 Mo. 279; Utley v. Hill, 155 Mo. 282; Smith v. Baker, 197 F. 466; Williams v. Brady, 221 F. 118; Wynn v. Bank, 168 Ala. 469; Merchants & Planters Line v. Waganer, 71 Ala. 581; Moncrief v. Wilkinson, 93 Ala. 634; Decatur Land Co. v. Palm, 113 Ala. 531; Blair v. Newspaper Co., 172 Mass. 201; Gores v. Field, 109 Wis. 408; Hardin v. McKnight, 64 So. Rep. 965; O'Connor v. Power Co., 184 N.Y. 46; Quincy v. Steel, 120 U.S. 241. 2. The rule announced in the above cases hold that a stockholder cannot sue for himself for the depreciation in value of his stock measured by its value before the loss to the corporation and afterwards. Securities Co. v. Belmont, 206 N.Y. 7; Niles v. Railroad Co., 176 N.Y. 119; Kavanaugh v. Trust Co., 181 N.Y. 121. 3. Plaintiff alleges demand on officers of bank and trust company to bring suit. His proof shows no demand made on the officers or corporations, but only an indefinite agreement with Col. Oliver, attorney at law, who had generally represented the bank and trust company--(a) There was a complete failure of proof on this point; (b) Col. Oliver, as attorney, had no power and did not attempt, before suit was brought and his entry of appearance therein, to do anything that would affect in any way his clients' interests after such suit was brought. Such an act would require power of attorney from a corporation to him to waive its right An attorney at law has no such power before suit is brought. Peterson v. R. R. Co., 108 F. 561; Bradley v. Welch, 100 Mo. 258; Sec. 1267, R. S. 1919. (4) 1. There was a defect of parties. Plaintiff alleges the Citizens Trust Company had been appointed liquidating agent for the Pemiscot County Bank and the appointment approved by the bank commissioner. Defendants allege that the trust company was afterwards appointed, qualified and was then acting as receiver for said bank. In either case the trust company was a necessary party to the suit. Stone, Receiver, v. Rottmann, 183 Mo. 552; State ex rel. v. Tindle, 199 S.W. 1095; Trust Co. v. Ferguson, 195 Mo.App. 330; Mfg. Co. v. Wilhite, 233 S.W. 711; Gores v. Field, 109 Wis. 408; 14a C. J., sec. 1940. 2. The plaintiff does not attempt to bring the cause of action which vested in the bank, if said bank had a cause of action. Plaintiff does not sue for the benefit of the bank or its unpaid creditors, or for all stockholders, or for any stockholder outside of himself. The suit is solely for the personal benefit of the individual plaintiff for the alleged loss of the value of his stock by reason of the failure of said bank. See authorities, points 2 and 5. 3. The right of creditors is superior to the right of stockholders and until creditors are paid stockholders can secure no personal benefit by any cause of action which accrued to or vested in the corporation. Niles v. Railroad Co., 176 N.Y. 119; Daugherty v. Poundstone, 120 Mo.App. 308; Cases points 2 and 5. 4. In case the directors should not bring the suit, it is jurisdictional for plaintiff to allege in detail the facts that authorize the plaintiff stockholder to prosecute the suit in his own name, the reason for his prosecuting same and the purpose thereof. Saunder v. Bank, 113 Va. 656; Steiner v. Parsons, 103 Ala. 215; Bartlett v. Railroad Co., 221 Mass. 530. And the stockholder should not stop after requesting the directors to act, but if the remedy can be procured by an appeal to the stockholders, he must pursue that remedy before equity will open its doors to him. Vogeler v. Punch, 205 Mo. 558; Kavanaugh v. Trust Co., 181 N.Y. 121; Merchants & Planters Line v. Waganer, 71 Ala. 581; Bartlett v. Railroad Co., 221 Mass. 530; Moncrief v. Wilkinson, 93 Ala. 364. (5) 1. Directors are not liable for errors of judgment exercised in good faith, nor for wrongful acts of others without their knowledge. Briggs v. Spaulding, 141 U.S. 132; Holmes v. Camp, 154 N.Y.S. 513; Mason v. Moore, 73 Oh. St. 275; Stone v. Rottman, 183 Mo. 552. 2. A by-law passed by the board of directors may be waived by the board, and its waiver by long continued action is not negligence per se. Dresser v. Bates, 250 F. 525 (C. C. A.); Briggs v. Spaulding, 141 U.S. 132. 3. The secretary of a corporation is a ministerial officer without power to waive process of summons, notices or other process necessary to bring his corporation under the jurisdiction of the court. Development Co. v. Oil Co., 229 S.W. 88 (Ky.). 4. Plaintiff having relied on the authority of Col. Oliver to waive notice to the corporations or rights of the corporations, assumes the burden of proving that Col. Oliver had authority to act for the corporations in question. Bank & Trust Co. v. Dry Goods Co., 238 S.W. 474. (6) 1. It was error for the court to require the defendant to assume the burden of showing that Col. Oliver did not have power before suit was brought to waive jurisdictional notices running to the defendant corporation. 2. Plaintiff's proof utterly fails to support the allegation of the petition wherein it is alleged that plaintiff demanded of the corporation and its officers to bring suit, and evidence produced failed to sustain the finding of referee where the referee finds that notice was given to the corporation. Such finding was against the evidence, and was in such general terms as to constitute no finding of fact in the premises. 3. Plaintiff fails to state any fact authorizing equity to assume jurisdiction in his behalf and having alleged that his corporation is insolvent, unable to pay its debts, absolutely bars himself from entering equity for the purpose of procuring his individual claim against the directors on an assumed cause of action vesting in the corporation, while he admits the creditors are unpaid. 4. The petition does not ask interest. The finding of the referee recommends interest in behalf of plaintiff from June--, 1913, to date of judgment at six per cent per annum. Judgment includes interest from June--, 1913 to June 11, 1921. The finding and judgment are erroneous as to interest. (7) 1. If there be any possible theory for plaintiff's recovery for any purpose whatever under his petition (which is denied), then judgment must be reversed as to all defendants, except possibly the defendant Tindle, because plaintiff failed to prove the fact of a single loss of the assets of the bank flowing from any wrongful or negligent act of any director save the director Tindle; and even as to him, we cannot conceive of any theory of law or of equity on which p...
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