Exter v. Sawyer

• Court: Missouri Supreme Court
• Writing for the Court: Burgess, J.
• Citation: Exter v. Sawyer, 146 Mo. 302, 47 S.W. 951 (Mo. 1898)
• Decision Date: 21 November 1898
• Parties: Exter et al. v. Sawyer et al.; Sawyer, Appellant

47 S.W. 951

146 Mo. 302

Exter et al. v. Sawyer et al.; Sawyer, Appellant

Supreme Court of Missouri, Second Division

November 21, 1898 ^[*]

Appeal from St. Louis City Circuit Court. -- Hon. P. R. Flitcraft Judge.

Affirmed.

J. M Holmes for appellant.

(1) Appellant was under no obligation to disclose the nature or extent of his interest to the company or to its stockholders as he occupied no fiduciary relation to them, and was not accountable to them for his profits, not having done or said anything to create any such right on their part. Ladywell Mining Co. v. Brooks, 35 Ch. D. 400; Erlanger v. Phosphate Co., 3 App. 1218; In re Ambrose Lake Tin Co., 14 Ch. D. 390; In re Cape Breton Co., 29 Ch.D. 795; Densmore Oil Co. v. Densmore, 64 Penn. 43; Ely v. Hanford, 65 Ill. 267; Higgins v. Lansingle, 154 Ill. 301; Gover's case, 1 Ch. D. 182; Plaquemines Tropical Co. v. Buck, 52 N.J.Eq. 219; South Joplin Land Co. v. Case, 104 Mo. 572; Simons v. Vulcan Oil Co., 61 Penn. 202; Burbank v. Dennis, 101 Cal. 90; Denny v. Peak, 14 App.Cas. 337; Peek v. Gurney, L. R. 6, H. L. 377; Arkwright v. Newbold, 17 Ch. D. 301; Coil v. Pittsburgh College, 40 Penn. 439; Lawson on Contracts, sec. 220; Lindley on Companies [5 Ed.] 70; Lindsay Petroleum Co. v. Hurd, L. R. 5, P. C. 221; Clarke v. Dickson, 6 C. B. (N. S.) 453; Low v. Bouviere, 3 Ch. D. 105; Kounteze v. Kennedy, 147 N.Y. 124. (2) The right of action shown in the evidence, if any, is a right in favor of individual plaintiffs only, and the recovery in favor of plaintiffs as trustees for anything more than they had shown to be due to them as individuals was erroneous. Getty v. Devlin, 54 N.Y. 403; S. C., 70 N.Y. 504; Dole v. Woodridge, 135 Mass. 140; Brewster v. Hatch, 122 N.Y. 349; Teachout v. Van Hoesen, 76 Iowa 113; Dunphy v. Traveller Newspaper Co., 146 Mass. 497; McDougall v. Gardiner, 1 Ch. D. 13. (3) No cause of action as to the "Ramona" tract in favor of any one, either company or stockholder, has been shown; but, on the other hand, the evidence affirmatively shows that no cause of action as to such tract exists, and that portion of the decree allowing a recovery as to such tract is in conflict with the evidence and is erroneous. Parker v. Nickerson, 137 Mass. 487; Kimber v. Barker, 8 Ch. D. 56; Bentinck v. Fenn, 12 App. Cases, 652; Higgins v. Lansingle, 154 Ill. 378; Ely v. Hanford, 65 Ill. 267; In re Cape Breton Co., 29 Ch. D. 795.

Sim T. Price and D. D. Fassett for respondents.

(1) Sawyer having promoted the organization of the Edgefield Company for the expressed purpose of buying the two tracts of land, and having acted for the company as its agent for the purchase of the two tracts of land, occupied a fiduciary relation to the subscribers for stock and to the proposed company, and could make no profit out of the sale of said lands, without making full disclosure of the fact that he was the owner of the lands and was the proposed seller of the lands to the company to be organized. 1 Beach on Railway Corps., sec. 1-2 and 4; Emma Silver Mining Co. v. Lewis, 4 C. P. D. 407; Twycross v. Grant, 2 C. P. D. 541; Whaley Bridge C. P. Co. v. Green, 52 B. D. 109; Sidney & Wigpool Iron Ore Co. v. Bird, 31 Ch. D. 339; 1 Cook on Stockholders, sec. 651; New Sombrero Co. v. Erlanger, 5 Ch. D. W. 73; Simons v. Vulcan Oil Co., 61 Pa. St. 202; Brewster v. Hatch, 122 N.Y. 349; Eneau Rieger, 105 Mo. 675; South Joplin Land Co. v. Case, 104 Mo. 572; Alger on Promoters, secs. 28-30-32 and 33. (2) If Sawyer had purchased and paid for the two tracts of land, prior to taking any steps for promoting the Edgefield Company to take it off his hands, his acts and declarations in his subsequent relation of promoter of the Edgefield Company, made it his legal duty to treat the property as bought for the company and not for himself, and he is accountable to the company for the secret profit made out of the deal. Alger on Promoters, etc., sec. 51; Simons v. Vulcan Oil Co., 61 Pa. St. 292; Ex-Mission Land & W. Co. v. Flash, 97 Cal. 610; Burbank v. Dennis, 101 Cal. 90. (3) If the corporation is under the control of the guilty parties, or refuses to sue when requested by a stockholder to do so, then the stockholder himself may bring a suit in equity in his own behalf and in behalf of all other stockholders similarly situated, making the corporation and the guilty parties the defendants, and compel them to make good to the corporation the corporate money or property lost by the wrongful acts. 2 Cook-Stock & Stockholders, secs. 701, 735, 737, 738, 740, 741 and 743; 1 Morawetz, Corps. [2 Ed.], secs. 271 and 272; Alger on Promoters, sec. 122. (4) The rights of the innocent stockholders will be protected, although punishment can not be apportioned among the guilty. 1 Morawetz, Corps., sec. 294; Ex-Mission Land & Water Co. v. Flash, 97 Cal. 610. (5) The motive of a stockholders in instituting suit is immaterial. 1 Morawetz, Corps., sec. 259; 2 Cook on Stocks, etc., sec. 736.

Burgess, J. Gantt, P. J., and Sherwood, J., concur.

OPINION

Burgess, J.

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 one hundred acres in St. Louis county, submitted the following instrument of writing and another to be hereafter mentioned to the plaintiff and the individual defendants, and the Farmer's Co-operative club and induced them to become subscribers thereto for the amount 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 one hundred 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 ten 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 subscriptions 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 of the amount subscribed in cash at the time of signing, or when called for by C. H. Sawyer, and the remaining three fourths 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 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 and 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...