Feld v. Roanoke Investment Company

• Decision Date: 30 June 1894
• Parties: Feld, Appellant, v. Roanoke Investment Company, et al
• Court: Missouri Supreme Court

27 S.W. 635

123 Mo. 603

Feld, Appellant, v. Roanoke Investment Company, et al

Supreme Court of Missouri, Second Division

June 30, 1894

Appeal from Jackson Circuit Court. -- Hon. J. H. Slover, Judge.

Affirmed.

Lathrop Morrow, Fox & Moore for appellant.

(1) The power of a trustee to release a deed of trust can only be a power to release upon payment. There was no payment of the indebtedness secured by the first deed of trust on the ninety-one acre tract. The release made by Winant's trustee, was, therefore, void. Lakenan v. Robards, 9 Mo.App. 179; Armstrong v. Robards, 81 Mo. 445; Ferguson v. Glassford, 68 Mich. 36; S. C., 35 N.W 820. (2) A board of directors does not have authority to wind up the business of a corporation. Such a step can only be taken by the stockholders or be binding upon its ratification by them. The sale of the thirty-six acres and release of all claims against the Roanoke company by the interstate fair was never ratified by plaintiff and is, therefore, inoperative and void as to him. Cook on Stock and Stockholders and Corporation Laws [2 Ed.], secs. 629, 667; Abbott v Rubber Co., 33 Barb. 578; Kean v. Johnson, 9 N.J.Eq. 401; Ervin v. Oregon R'y & Nav. Co., 27 F. 625; Buford v. Packet Co. 3 Mo.App. 159. (3) One corporation has no power to buy the stock of another, unless to do so be within the scope of the business for which the corporation purchasing was organized. The release of the deeds of trust and sale of the thirty-six acre tract was therefore void, or the defendant could at most, hold it only in trust for the benefit of the interstate fair stockholders. Cook on Stock and Stockholders and Corporation Law [2 Ed.], secs. 315, 317, 63; Trustees v. Woodward, 4 Wheat. 518; Bank v. Janes, 95 N.Y. 115; Dairy Co. v. Mooney, 41 Mo.App. 665; Franklin County v. Bank, 68 Me. 43; Mutual Savings, etc., Ass'n v. Meriden Agency, 24 Conn. 159; Matthews v. Skinker, 62 Mo. 329; Talmage v. Peel, 7 N.Y. 328; Railroad v. Tanner, L. R. 8 Ch. App. 152; Perry on Trusts, sec. 334; Pearce v. Railroad, 21 How. 441. (4) The transfer attempted between the board of directors of the interstate fair and defendant company was in violation of plaintiff's rights under his contract with the latter company and entitles him to the relief prayed for. Plaintiff had all the rights of a shareholder in the interstate fair under his contract with defendant. Bissell v. Railroad, 22 N.Y. 258; Solomon v. Laing, 12 Beav. 339; Baldwin v. Canfield, 26 Minn. 43; Harris v. Piatt, 64 Mich. 105; Taylor v. Scoville, 3 Hun, 301; Railroad v. Shirley, 45 Tex. 355. (5) Plaintiffs cause of action accrued upon discovery of the fraud and not before. Lane v. Latimer, 41 Ga. 171. (6) Plaintiff is the proper party to bring this action and is entitled to have the contract between the two companies set aside at his suit. Bacon v. Robertson, 18 How. 480; Linn v. Robertson, 6 Wall. 277; Nathan v. Tompkins, 82 Ala. 437; Rothwell v. Robinson, 39 Minn. 1; Board v. Railroad, 50 Ind. 85; Kean v. Johnson, 9 N.J.Eq. 401; Story on Equity Pleading, sec. 542.

C. O. Tichenor for respondents.

(1) The old company dying gave birth to the new. The land became so valuable that the stockholders could not resist the temptation to convert it into money; the old company had to end so soon as it sold and the new company was organized to subdivide and sell; the Roanoke got all the lands of the Fair Company and none other, and platted them in order to sell to the best advantage. To say that this could be done is not to announce any startling proposition, for it often happens. Railroad v. Georgia, 98 U.S. 363; Railroad v. Georgia, 92 U.S. 673; Transportation Co.'s Appeal, 101 Pa. 582; Powell v. Railroad, 42 Mo. 66; Thompson v. Abbott, 61 Mo. 177. (2) When a corporation ends without creditors, the assets must be sold, unless they are of such a kind as to be divided, so that in schemes of dissolution sometimes the stock in the new company is issued to the old company, which divides it up among its stockholders, and sometimes it is issued directly to them by the new company. (3) Selling land and releasing a deed of trust for part of the purchase money can not be considered ultra vires. Railroad v. Railroad, 145 U.S. 408. (4) Even if plaintiff was not present at the meetings of the directors of the corporation, he, being a director of the Roanoke company, is presumed to know what was done. See Kitchen v. Railroad, 69 Mo. 226. (5) Had he originally been protesting against, instead of promoting, the scheme of winding up the Fair Company, he could not win this suit, for he has acquiesced in the state of affairs of which he is complaining. Kitchen v. Railroad, 69 Mo. 225; Brewing Co. v. Schneider, 110 Mo. 90; Combs v. Sullivan Co., 105 Mo. 234; Bank v. Alden, 129 U.S. 372. (6) Even a corporation may ratify by acquiescing. Supervisors v. Schenck, 5 Wall. 782; Bank v. Fricke, 75 Mo. 178. (7) And this court will take notice that others will be affected by the litigation, although they are not parties to the suit. Goodin v. City, 113 Mo. 272.

OPINION

Burgess, J.

On the ninth day of May, 1882, the Kansas City Interstate Fair was duly incorporated under the laws of this state for the purpose of encouraging agriculture, and on May 25, 1882, one McGee and wife conveyed to it ninety-two and three-tenths acres of ground for $ 39,227.50. It also acquired by purchase a smaller tract of thirty-six acres for the same purpose, fair grounds.

The property having largely increased in value the stockholders determined to wind up the affairs of the corporation and as it could not engage in selling lands under its charter, a new company, called the Roanoke Investment Company, was organized June 24, 1887, to plat and sell the lands and to this company the large tract was sold on July 2, 1887, for $ 606,337.14. A part of the purchase money was paid in cash, the balance $ 429,820.75 was secured by deed of trust in which defendant Winants was made trustee. The plaintiff received his part of the cash, which amounted to about $ 26,000. Out of a total of four hundred and eighty-eight shares of stock in the Kansas City Interstate Fair, plaintiff owned one hundred and three of a par value of $ 100, but the stock was at a premium. He sold all except seventy-four shares which are involved in this controversy.

After the sale of the land to the Roanoke Investment Company, for convenience, Winants, the trustee in the deed of trust, released the same and accepted in lieu thereof, separate deeds of trust upon the land as it had been subdivided into lots but amounting, in the aggregate, to the amount secured by the original deed of trust. Of this arrangement plaintiff claims that he had no knowledge or information until within a few days before the commencement of this suit, and he also claims that the evidence shows that it was without authority from the board of directors.

The original capital stock of the Roanoke Company was $ 500,000 but in order to enable it to obtain the remaining thirty-six acres of land belonging to the Interstate Fair it increased its capital stock $ 500,000, the increase being in the nature of preferred stock. The common stock was afterwards by consent of the stockholders reduced to $ 250,000. The Roanoke Investment Company entered into separate agreements with the various stockholders of the Interstate Fair by which those stockholders transferred their stock to the Roanoke Investment Company in exchange for preferred stock in that company by which nine shares of the preferred stock were exchanged for one share of the Interstate Fair stock.

Plaintiff on the twenty-fifth day of July, 1889, made the following agreement in writing with the Roanoke Investment Company and Witten McDonald, trustee, to wit:

"This tripartite agreement, executed in triplicate, made and entered into by and between J. Feld, first party, and the Roanoke Investment Company, second party, and Witten McDonald, third party, witnesseth: That first party has this day exchanged with second party, seventy-four shares of Interstate Fair Association stock, for six hundred and sixty-six shares of the preferred stock of the Roanoke Investment Company, of the par value of $ 66,600.

"That said exchange is made by the first party in consideration of said Roanoke Investment Company agreeing, and the distinct understanding and agreement with second party, its board of directors and stockholders, that first party shall be chosen to, placed and kept in the board of directors of said Roanoke Investment Company, immediately upon him becoming a stockholder therein and the further understanding and agreement between the parties thereto, that the said Interstate Fair stock, so exchanged, shall be transferred to and held by the said Witten McDonald in trust for first and second parties, and for the purposes hereinafter recited.

"First. For the use and benefit of second party, as the consideration paid for said Roanoke stock by first party and the covenants and agreements herein made to first party by second party.

"Second. In escrow as a pledge for the fulfillment of the second party's undertaking with first party.

"Third. That the title and possession of said stock be held by said third party until the affairs of the said Interstate Fair Association are wound up, and said association is ready to pass out of existence, when so determined by its board of directors, in which event said stock shall by said third party, with the mutual consent of first and second parties in writing, be delivered up to and canceled by the board of directors of the Interstate Fair Association.

"It is further agreed by and between first and second parties that in consideration of the exchange and sale of said Interstate Fair stock for said Roanoke Investment...