Duffy v. Barnhart Store Co.
| Decision Date | 20 May 1947 |
| Docket Number | No. 27036.,27036. |
| Citation | 202 S.W.2d 520 |
| Parties | DUFFY v. BARNHART STORE CO. et al. |
| Court | Missouri Court of Appeals |
Appeal from Circuit Court, Jefferson County; Norwin D. Houser, Special Judge.
"Not to be reported in State Reports."
Suit by M. J. Duffy against Barnhart Store Company and others to compel the transfer of shares of stock to plaintiff on books of the defendant corporation and to issue to plaintiff new certificates for the shares, wherein the defendants filed a third party complaint against Julius F. Bender to establish a lien against stock for amount of the third party defendant's indebtedness to the corporation. From a judgment adjudicating that the third party defendant was not indebted to the defendant corporation, the defendants and third party plaintiffs appeal.
Affirmed.
R. E. Kleinschmidt, of Hillsboro, for appellants.
Will B. Dearing and Moser, Marsalek, Dearing & Carpenter, all of St. Louis, for respondent.
BENNICK, Commissioner.
This is an appeal from the judgment of the Circuit Court of Jefferson County adjudicating that one Julius F. Bender, a third-party defendant, was not indebted to defendant Barnhart Store Company, a corporation, which had asserted an indebtedness on Bender's part of $4,359.13.
The litigation grows out of a controversy between certain officers and stockholders over the management of the affairs of Barnhart Store Company, which was organized as a corporation in 1928, and is engaged in the general mercantile business in Barnhart, Missouri.
The case originated when one M. J. Duffy, a director and former president of the corporation, filed a bill in equity seeking to compel Barnhart Store Company and William A. Cochran and James Macnish, its then president and secretary respectively, to transfer forty-four shares of stock to him on the books of the corporation, and to issue him new certificates for the shares in question.
The forty-four shares of stock had been owned by Bender, the third-party defendant, who had been manager of the store both before and after its incorporation, and for a part of the time at least had been a member of the board of directors.
Duffy alleged in his petition that on June 15, 1944, he had agreed to purchase the stock from Bender for the sum of $2,200, and had paid Bender $100 on account, with an agreement that the balance of $2,100 would be paid on June 27, 1944; that the corporation, at a meeting of its board of directors on June 23, 1944, attempted to place a lien upon the stock outstanding in Bender's name for the purpose of partially satisfying the company's purported claim against Bender in the sum of $4,359.13; and that Bender thereafter duly executed an assignment of and delivered his stock certificates to Duffy, with the understanding that Duffy should not be obligated to pay the balance of the purchase price if the company's lien should be found to constitute a valid lien against the stock.
Duffy asserted that the corporation's right to such lien or restriction had not been stated upon the certificates representing such forty-four shares of stock, and for that reason did not constitute a valid lien upon the stock or a valid restriction against its transfer and the issuance of new certificates therefor. He further asserted that the agreement between himself and Bender respecting the manner of payment for the stock had been entered into in order to protect himself in any event, and for the further purpose of protecting the corporation from any loss by making said funds available in his hands for attachment by the corporation to satisfy its claim against Bender.
It was further alleged by Duffy that after Bender's delivery of the stock certificates to him, he had presented the same to the corporation for cancellation, and had demanded of defendants Cochran and Macnish, the president and secretary of the corporation, that they transfer the stock to him on the books of the corporation and issue him new certificates therefor, but that said defendants refused to transfer the stock and issue him new certificates, thereby denying him all the rights and privileges to which he was entitled by virtue of his ownership of the stock.
Defendants Barnhart Store Company and Cochran, by their joint answer, charged that Bender, while he was manager of the store, had become indebted to the company by reason of shortages in his accounts in the sum of $4,359.13; that the forty-four shares of stock had not been sold to Duffy in good faith, but in furtherance of a fraudulent scheme and design on the part of Duffy and Bender to deprive the company of a lien against the stock for the amount of Bender's indebtedness; that it was provided by a by-law of the corporation that the indebtedness of a stockholder should be subject to full satisfaction and payment to the corporation, without notice, by a first lien upon any and all shares of stock and dividends thereon, and that the board of directors and officers were authorized to withhold the transfer of shares of stock, or the payment of dividends, until all indebtedness of the stockholder to the corporation had been paid in full; that both Duffy and Bender had voted for and accepted said by-law, and Bender had been permitted to continue as manager of the store because the company and its officers were of the opinion and honestly believed that any indebtedness to the company on his part would constitute a lien upon his stock; and that Duffy was estopped to claim that he was the owner of the shares in question free and clear of any lien in favor of the company on account of Bender's indebtedness.
Defendants Barnhart Store Company and Cochran prayed that Duffy's bill be dismissed, and that Duffy be ordered and directed to surrender the stock certificates in question into court so that the same might be sold in order to discharge the corporation's lien.
Defendant Macnish answered separately, alleging that when Duffy presented the certificates for cancellation and requested the issuance of new certificates, he, as secretary of the corporation, was ready and willing, and had always since been ready and willing, to transfer the stock on the books of the corporation, cancel the original certificates, and issue Duffy new certificates.
It is thus apparent that in the controversy between the two groups of officers and stockholders, Macnish was associated with the group to which Duffy and Bender belonged, and as a matter of fact he subsequently testified as a witness for Bender upon the issue raised by the third-party petition.
Thereafter defendants Barnhart Store Company and Cochran, along with Mrs. Louise Reutermann, filed a motion asking, first, that inasmuch as Macnish had meanwhile resigned as secretary of the corporation and Mrs. Reutermann had been elected secretary in his stead, she should be substituted as a party defendant in lieu of Macnish; and, second, that since it appeared that Bender was a necessary party to the complete determination of the issues raised between the parties, they be permitted to file a petition against Bender and bring him into the case as a third-party defendant.
The motion was sustained by the court, whereupon defendants Barnhart Store Company, Cochran, and Mrs. Reutermann filed their petition alleging that Bender was indebted to the corporation as already set out; that Bender's purported sale of the forty-four shares of stock to Duffy for the sum of $2,200 was not a bona fide sale, and that the agreed price was grossly inadequate; that the said shares were actually worth $4,189.24; and that the purported sale of the stock to Duffy at a grossly inadequate price was made in collusion, and in an effort to defraud the corporation and deprive it of its lien against the stock on account of Bender's indebtedness to the corporation.
The defendants prayed that they be given the opportunity to prove the exact amount of Bender's indebtedness to the corporation; that the court decree that Barnhart Store Company had a valid lien against the stock to the amount of Bender's indebtedness to the corporation; that the certificates be returned to the corporation for sale under order of the court; and that out of the proceeds of the sale, the amount of Bender's indebtedness to the corporation be first deducted together with the costs and expenses of the suit, and the remainder of the proceeds, if any, be paid to Bender.
In due time Bender filed his answer, denying that the sale of his stock to Duffy was not a bona fide sale, and alleging that it was a bona fide transaction which he had at all times been disposed to carry out; denying that he was indebted to the corporation in any amount; denying that the corporation had a lien against the stock in his name, or that he was a party to any understanding or agreement that the corporation should have such a lien; and denying that the price Duffy had agreed to pay for his stock was grossly inadequate, or that the sale of the stock was the result of collusion between himself and Duffy in an effort to defraud the corporation and deprive it of a lien against the stock.
He prayed that the court find and declare that Barnhart Store Company had no legal claim against him and no valid lien upon the stock previously sold to Dutty, and that he be dismissed with his costs and have such other and further relief as to the court should seem meet and proper.
At this point in the case an order appears which figures prominently in connection with the matters complained of on this appeal.
It has of course been noted that the transfer of Bender's stock on the books of the company and the issuance of new certificates to Duffy therefor had been opposed by the company and those in control of its affairs upon the ground that to comply with Duffy's request for a transfer would deprive the company of the possibility of satisfying its claim against Bender by enforcing a lien upon his stock so long as the same stood in his name....
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