Fisher v. Patton

• Decision Date: 31 March 1896
• Citation: 34 S.W. 1096,134 Mo. 32
• Parties: Fisher, Appellant, v. Patton et al
• Court: Missouri Supreme Court

34 S.W. 1096

134 Mo. 32

Fisher, Appellant, v. Patton et al

Supreme Court of Missouri, First Division

March 31, 1896

Appeal from Ray Circuit Court. -- Hon. E. J. Broaddus, Judge.

Reversed and remanded.

James L. Farris, Jr., for appellant.

(1) Stockholders may protect their individual rights in corporate property, and prevent by equitable action unauthorized acts of officers, the issuing of shares, misappropriation of funds -- in fact any departure from the chartered purposes of the corporation. R'y v. Collins, 40 Ga. 582; Kemp v. Mining Co., 78 N.Y. 159; Chetlain v Insurance Co., 86 Ill. 220; Terwilliger v. Co., 59 Ill. 249. 10 Am. and Eng. Encyclopedia of Law, sec. 41, at page 953, and authorities cited in footnote "a." (2) A stockholder is entitled to restrain officers of bank from commission of acts contrary to law. Manderson v Bank, 28 Pa. St. 376. (3) Injunction is the proper remedy. Directors and managing officers of a private corporation are clothed with a double character of agent and quasi trustee. Upon this trust relation depends the equitable remedies which may be invoked against them by the corporation, or the stockholders thereof. Railroad v McPherson, 35 Mo. 13; Beach on Private Corporations, secs. 41 and 42. (4) The protection of rights of shareholders in incorporated companies against the improper or illegal actions of officers or other stockholders is the favorite branch of the jurisdiction of equity, and courts of equity will restrain the commission of rights which are contrary to law, as well as the improper management of the business of the company. 2 High on Injunction, secs. 1203 and 1225. And equity will also restrain officers from acting in excess of their corporate power. Same author, secs. 1226 and 1227. (5) Injunction was the proper remedy in this case. Amer v. Building Loan Association, 24 A. 552; Fulton v. Building Loan Association, 46 Minn. 190; People v. Lowe, 47 Hun, 577; Barton v. Building & Loan Association, 16 N.E. (Ind.), 486. (6) It was error to sustain the demurrer under the allegations in the petition. Sullivan v. Building & Loan Association, 12 So. Rep. 590. (7) Where a company is formed under the general act of incorporation the articles of association are as immutable as a charter granted by a special legislative act. Beach on Priv. Corp., sec. 44, page 83. (8) The laws subsisting at the time of making a contract enter into and form a part of it, as if they were expressly referred to or incorporated in its terms. Holbrook v. Ives, 7 West. Rep. (Ohio) 201. (9) A member of the corporation is bound by the laws, rules, and regulations, etc., and his duties, rights, and privileges are to be measured thereby. They embody the terms of a contract between the company and its members; the binding effect of the bylaws is derived from the assent of its members; such assent will be presumed from his act to become a member. 1 Beach on Private Corp., sec. 321. And neither the trustees nor members, against the wish of their number, can dissolve or terminate the business of an association, except pursuant to agreements and by-laws. People v. Lowe, 47 Hun, 577. High on Injunction, sec. 40, and footnotes "4 and 5." (10) Statutes are to be construed prospectively, unless a contrary intention appear. State ex rel. v. Auditor, 41 Mo. 35; State ex rel. v. Hayes, 52 Mo. 578; State v. Grant, 79 Mo. 113; State ex rel. v. Walker, 80 Mo. 633; Leete v. Bank, 115 Mo. 184; In re Elliott's Estate, 27 Mo.App. 229; Constitution, art. 3, sec. 15. (11) W. C. Patton, T. N. Lavelock, J. A. Anderson, and W. M. Allison, being borrowers of the association, in the same series attempted to be affected by the resolution aforesaid, were disqualified by the by-laws of said association, as well as from general laws of 1879, from taking any part in voting upon said proposition.

Lavelock, Kirkpatrick & Divelbiss for respondents.

(1) A bill for injunction should be positive and specific in its averments, showing a clear, prima facie right to the relief demanded. 1 High on Injunctions [3 Ed.], sec. 34; 2 High on Injunctions [3 Ed.], sec. 1581; 2 Beach on Mod. Eq. Juris., secs. 641, 642, 643; 3 Pomeroy's Eq. Juris., sec. 1405; McKinzie v. Matthews, 59 Mo. 99; Mastin v. Halley, 61 Mo. 196; Paris v. Haley, 61 Mo. 453; Strange v. Crowley, 91 Mo. 287; Veth v. Gierth, 92 Mo. 97; Taylor v. Von Schroeder, 107 Mo. 206; Pub. Co. v. Tel. Co., 83 Ala. 498; Guadalupe Co. v. Johnston, 20 S.W. 833. (2) The instrument of writing, on which complainant's alleged right was founded, or a verified copy thereof, should have been filed with the bill. R. S. 1889, sec. 2088; Dyer v. Murdock, 38 Mo. 224; Burdsal v. Daviess, 58 Mo. 138; Railroad v. Knudson, 62 Mo. 569. (3) Equity will not enforce specific performance of a contract unless there be mutuality both as to the obligation and the remedy. Pomeroy on Contract, sec. 162; Fry on Specific Performances, sec. 286; 22 Am. and Eng. Encyclopedia of Law, p. 1019; Mastin v. Halley, 61 Mo. 196; Glass v. Rowe, 103 Mo. 513; Benedict v. Lynch, 1 Johns. Ch. 370; 7 Am. Dec. 484. (4) There is a fatal defect of parties defendant. 2 Beach on Private Corporations, secs. 607, 604, 599; 1 Morse on Banks and Banking [3 Ed.], sec. 128 b., pp. 262, 263; 1 Cook on Stock Companies, sec. 547; 2 High on Injunctions [3 Ed.], sec. 1217; 1 Morawetz on Private Corporations [2 Ed.], sec. 450. (5) The complainant is not the real party in interest, and can not maintain this action. R. S. 1889, sec. 1990; Pomeroy's Code Remedies [3 Ed.], sec. 132; Bliss on Code Pleading [2 Ed.], sec. 45; Colebrooke on Coll. Security, sec. 280; Webb v. Morgan, 14 Mo. 430; Beattie v. Lett, 28 Mo. 596; Simmons v. Belt, 35 Mo. 461; Savings Ass'n v. Morrison, 48 Mo. 273; Cummings v. Kohn, 12 Mo.App. 585; Saulsbury v. Corwin, 40 Mo.App. 373; Thayer v. Campbell, 9 Mo. 280; Williams v. Smith, 52 Mo.App. loc. cit. 134; Spears v. Bond, 79 Mo. 467. (6) The bill is not properly verified. 2 High on Injunctions [3 Ed.], secs. 1567, 1568, 1569; 1 Beach on Mod. Eq. Prac., secs. 85, 86, 598, 600; Maxwell on Code Pleading, pp. 195, 196; Perkins v. Collins, 3 N.J.Eq. 482; Holdridge v. Gwinn, 18 N.J.Eq. 26; Youngblood v. Schamp, 15 N.J.Eq. 42; Gilroy's Appeal, 100 Pa. St. 5; Bullard v. Eckman, 20 Fla. 661; Landers v. Globe, etc., Co., 73 Ga. 176; Baily v. Baily, 16 S.E. 90; Brooks v. O'Hara, 8 F. 529. (7) The defendant association, being organized under a general incorporation act, is subject to subsequent legislation. Constitution, art. 2, sec. 15; 1 Beach on Private Corporations, sec. 37, p. 70; Endlich on Building Associations, sec. 272; Cooley on Const. Lim. [6 Ed.], p. 710; Shrick v. House Building Ass'n, 34 Mo. 423; Allen v. Life Ass'n, 8 Mo.App. 52. (8) The by-laws of a private corporation must be consistent with both existing and subsequent legislation. Endlich on Building Ass'n, sec. 272; 1 Beach on Private Corporations, sec. 312; Building Ass'n v. Dorsey, 15 S.C. 462; Allen v. Life Ass'n, 8 Mo.App. 52. (9) The act of the legislature of Missouri, approved March 31, 1887, repealed the former law in relation to building and loan associations. Smith v. State, 14 Mo. 152; State v. Roller, 77 Mo. 129; State ex rel. v. McGrath, 95 Mo. 193; Berkshire v. Railroad, 28 Mo.App. 225; Young v. Railroad, 33 Mo.App. 509; Bartlet v. King, 12 Mass. 536; Rogers v. Watrous, 8 Tex. 62; Hogane v. Hogane, 22 S.W. 167; State v. Mines, 38 W.Va. 125; State v. Brookover, 38 W.Va. 141. (10) The act of the legislature, approved March 31, 1887, did not impair the obligation of any contract between complainant and defendant association. Sutherland on Stat. Const., sec. 471; Cooley on Const. Lim., p. 343; Sherman v. Smith, 1 Black. (U.S.) 587; Curtis v. Whitney, 13 Wall. 68; Penn. Coll. Cas., 13 Wall. 190, loc. cit. 216; Miller v. State, 15 Wall. 478; Edwards v. Kearzen, 96 U.S. 595. (11) The act of 1887 did not disturb vested rights. Anderson's Law Dictionary, p. 907; Sutherland on Stat. Const., secs. 163, 164; Cooley on Const. Lim. [6 Ed.], pp. 343, 437 to 442; Leete v. Bank, 115 Mo. 184. (12) There can be no vested right in a general statute or the common law. Cooley on Const. Lim. [6 Ed.], pp. 345, 359, 437, 438, 439, 710; Myer on Vested Rights, pp. 27, 28, 30; Covington L. & R. Co. v. Kenton Co. Ct., 12 B. Mon. 144; Butler v. Palmer, 1 Hill, 324.

OPINION

In Banc.

DIVISION ONE.

Robinson J.

This is a proceeding in equity upon the following bill:

"Plaintiff for his amended statement of cause of action, states: That the Richmond Building and Loan Association, one of the defendants herein, was incorporated under the laws of the state of Missouri, article 9, entitled 'Mutual Fund, Loan and Building Associations,' Revised Statutes, 1879, in the month of October, A. D. 1886, and has ever since its organization been transacting business in Ray county, Missouri; that W. C. Patton, Jas. A. Davis, William Bernard, Jas. E. Ball, John W. Shotwell, Jr., W. W. Brown, J. A. Anderson, T. N. Lavelock, W. M. Allison, and John T. Patton were the duly elected and legally constituted board of directors of said Richmond Building and Loan Association at the institution of this suit on August 21, 1894, and as such were intrusted by law with the management of the affairs of the association; and that said directors, since the filing of the original petition in this case, were reelected as directors of said Richmond Building and Loan Association, and as such are by law intrusted with the management of the affairs of the association; that W. C. Patton was the president thereof, and that Geo. W. Schweich is secretary of said Richmond Building and Loan Association.

"Plaintiff further states that at the date of its incorporation as aforesaid, the capital stock of said association, defendant was one hundred...