Exter v. Sawyer

• Decision Date: 17 October 1898
• Citation: 47 S.W. 951,146 Mo. 302
• Court: Missouri Supreme Court
• Parties: EXTER et al. v. SAWYER et al.<SMALL><SUP>1</SUP></SMALL>

47 S.W. 951

146 Mo. 302

EXTER et al. v. SAWYER et al.¹

Supreme Court of Missouri, Division No. 2.

October 17, 1898.

CORPORATIONS — PROMOTER'S LIABILITY — FRAUDULENT SALE — RIGHT OF ACTION.

1. Where one formed a company for the purpose of purchasing land on which he had previously procured a personal option and acted for it in making the purchase, concealing from the subscribers and directors that he had purchased the land at a much less sum than that at which he sold it to the company, he is liable to the company for the profits of the sale thus made to it.

2. Where a corporation, on being informed by a stockholder of a fraudulent sale of land to it by a promoter, fails to sue him at the stockholder's request, the stockholder may sue him in his own behalf, and in behalf of all other stockholders.

3. Where a promoter made a fraudulent sale of land to a corporation, the fact that the sale was not fraudulent as to some of the stockholders is not a bar to an action by the corporation.

Appeal from St. Louis circuit court; P. R. Flitcraft, Judge.

Suit by Fred C. Exter and other stock owners of the Edgefield Land & Improvement Company against Charles H. Sawyer and others to cancel certain deeds of trust and notes of the company given to the defendant Sawyer, and to recover moneys paid him by the company, and wrongfully appropriated by him. From a judgment for plaintiffs, defendant Charles H. Sawyer appeals. Affirmed.

About the middle of March, 1890, the defendant Charles H. Sawyer having conceived the idea of forming a company for the purpose of buying a certain tract of land of about 100 acres in St. Louis county, he submitted the following instrument of writing, and another, to be hereafter mentioned, to certain parties, and induced the plaintiff and the individual defendants and the Farmers' Co-operative Club to become subscribers thereto for the amounts set opposite their respective names:

"Whereas, C. H. Sawyer is about to form a company for the purpose of buying a certain tract of land, of about 100 acres, in St. Louis county, lying on and south of the Wabash Railroad, opposite Woodland station, and being about 400 yards west of Jennings station, as shown by plat attached hereto; said land to be bought at the price of $500 per acre, or $50,000: Now, therefore, the undersigned hereby agree to bind ourselves to take stock in said company for the number of shares and amount set opposite our respective names; one-fifth of amount subscribed to be paid at the time of signing, or when called upon to pay by C. H. Sawyer; the other four-fifths to be paid in monthly installments equal to ten per cent. of the amount subscribed. Said company shall be incorporated and known as the Edgefield Land and Improvement Company, or some other suitable name."

Sawyer began procuring subscriptions to this list about the middle of March, 1890. It took a week or 10 days to get the necessary amount to buy the land subscribed. The subscriptions were all paid to Sawyer. As soon as a sufficient amount was subscribed to pay for this tract of land, Sawyer conceived the idea of enlarging the proposed company, increasing its capital, and selling to it a certain tract of land, known in this litigation as the "Ramona Tract," for which purpose he issued a second subscription list, which was in words and figures as follows:

"Whereas, C. H. Sawyer has secured subscriptions to the amount of $50,000 for the purpose of organizing and incorporating a stock company to be known as the Edgefield Land and Improvement Company, or some other suitable name, to purchase a tract of land, of one hundred (more or less) acres, situated on the Wabash Railroad, at or near Woodland station; the subscription to said stock to be paid as follows: One-fifth at time of signing, or when called for by C. H. Sawyer; the balance, four-fifths, to be paid in monthly installments (commencing thirty days from March 13), equal to ten per cent. of the amount subscribed. And, whereas, it is desired by a majority of the stockholders to increase the capital stock of said company to $100,000, for the purpose of purchasing an additional tract of land of 142 acres (more or less) at the sum of $350 per acre; said land situated on or near Narrow-Gauge Railroad, Carsonville, Mo., as shown by plat accompanying this instrument. Said subscribers to the original $50,000 of stock to be allowed to subscribe to the new stock an equal amount of their first subscription, and pay five per cent. on said new stock at time of signing, or when called for by C. H. Sawyer, and ten per cent. of amount subscribed every thirty days from date thereof until the remaining ninety-five per cent. shall have been paid. The new subscribers, or those not subscribers to the original stock, or original subscribers subscribing to more stock than their original shares, are to pay one-fourth (¼) of the amount subscribed in cash at the time of signing, or when called for by C. H. Sawyer, and the remaining three-fourths (¾) to be paid in monthly installments equal to ten per cent. of the amount subscribed: Now, therefore, we, the undersigned, hereby agree and bind ourselves to take stock in said company for the number of shares and amounts set opposite our respective names, subject to all the terms and conditions hereinbefore mentioned."

All of the payments for stock called for by the subscription lists were made to Sawyer, and by him deposited to his personal account, and used by him in the acquisition of the two tracts of land for the acquirement of which he secured the organization of the Edgefield Land & Improvement Company. Sawyer first contemplated purchasing the Jennings tract in January or February, 1890, and about the same time procured an option upon it in writing from Jennings at $300 an arpent. On March 15, 1890, Sawyer and Jennings entered into a further agreement in regard to the same tract, at which time Sawyer paid him the sum of $1,000 earnest money. This contract is as follows:

"McLaren Real-Estate and Investment Co., Rooms 224 and 225 Commercial Building. St. Louis, March 15, 1890. Received of McLaren Real-Estate and Investment Company the sum of $1,000 on account of the purchase of a certain parcel of unimproved property lying in St. Louis county, and being a part of the Jennings survey by Solomon and Schultz, and bounded on the east by the land of Mrs. Duryea, on the west by estate of D. A. January, on the north by Woodland station, and on the south by Mary E. McCleny, containing 100 arpents or more, known as the northern part of lot fourteen, being the same conveyed by Robert Jennings to the Connecticut Mutual Life Insurance Company to secure the incumbrance of $10,000 herein mentioned, on which is situated tenant houses, which property is this day sold to Mr. C. H. Sawyer for the total sum of $300 per arpent, payable on terms of $20,000 in cash, and the balance to be assumed, $10,000 now standing against the property, and due May 17, 1891, with six per cent. interest; possession given when deeds are passed, and said Sawyer is hereby authorized to collect rents for 1890 now due. The title of said property to be perfect, and to be conveyed by warranty deed, free from liens and incumbrances, except as to the taxes for the year 1890, which the undersigned purchaser agrees to pay. If, upon examination, the title proves to be defective, and cannot be made good within a reasonable time, the sale shall be off, and the earnest money returned, as also a reasonable fee for the investigation of title. The said C. H. Sawyer is accorded thirty days' time from this date to close the above purchase and have the title investigated. I agree to the above terms and conditions. [Signed] C. H. Sawyer. [Seal.] Robert M. Jennings. [Seal.] McLaren Real-Estate and Investment Company, Theodore De Forest, President. Witness: T. W. Copening."

On April 14, 1890, Jennings and wife conveyed the Jennings tract to C. H. Sawyer; the nominal consideration in the deal being $50,000, and the real consideration being $35,100. The nominal consideration was inserted at Sawyer's request. On April 28, 1890, Sawyer and wife conveyed to the Edgefield Land & Improvement Company the Jennings tract reciting in the deed a consideration of $80,283. Sawyer says he took the first steps towards acquiring the title to the Ramona tract in December, 1889. His efforts to acquire the Ramona tract at that time resulted in the execution of the following agreement between Sawyer and the owners of said Ramona tract:

"St. Louis, December 31, 1889. M. M. Fitzgerrell, Esq., No. 9 North Eighth Street, City — Dear Sir: I hereby propose to trade for the 142 88/100 acres located at Carsonville, on the Narrow-Gauge Railroad, and running along the Natural Bridge road, in St. Louis county, Mo., as shown by plat now in my possession, on the following terms, to wit: I will give my 1,200-acre place, located in Ellis county, Texas, and known as the `Brown Farm' (of which you have plat), with an incumbrance of eighty-five hundred ($8,500) dollars, with $850 interest due the 18th day of March, 1890, balance due in one and two years from 18th of March, 1890, and turn over to you or your party rent notes amounting to $1,023, due 15th day of September, 1890, with twelve per cent. interest after maturity, and hay contract, also all implements now on the place belonging to me, and represented in description I gave Mr. Sass, and will take the 142 88/100 acres above mentioned, subject to incumbrance of $14,000, due in three years, at six per cent. interest, and also give an additional incumbrance on said 142 88/100 acres of $8,500, one-half with ten per cent. interest, due 18th of March, 1890, balance due in one and two years from 18th of March, 1890, with ten per cent. interest from date. Title of both properties to be good, with the exception of the incumbrances herein named. You to furnish certificate of title by Sterling and Webster Abstract Co. and Aug. Gehner...