Garrett v. Kansas City Coal Mining Company

• Decision Date: 31 December 1892
• Citation: 20 S.W. 965,113 Mo. 330
• Parties: Garrett v. The Kansas City Coal Mining Company, et al., Appellants
• Court: Missouri Supreme Court

20 S.W. 965

113 Mo. 330

Garrett v. The Kansas City Coal Mining Company, et al., Appellants

Supreme Court of Missouri, Second Division

December 31, 1892

Appeal from Jackson Circuit Court.--Hon. James Gibson, Judge.

Reversed.

Warner Dean & Hagerman for appellants.

(1) The clear preponderance of the testimony is, that Garrett had failed to carry out his agreements with Perry, Smith and Long, and that he and Wilson had lost all rights under their original agreement made with the former. This was established by not only the testimony of each and all of the defendants but by the unquestioned evidence of several disinterested witnesses. For this reason the plaintiff is not entitled to recover. (2) The plaintiff acted in bad faith in obtaining the agreements upon which he founds his action for equitable relief. For this reason, he is not entitled to any consideration in a court of equity. His statements to the defendants, in order to induce them to unite with him in making the agreements declared on, were so manifestly incorrect and untrue that, for that reason the agreements ought not to be enforced. (3) The question then resolves itself in this shape: A agrees with B, C and D to purchase certain lands, and, when acquired, to convey them to a corporation with a definite amount of capital stock, which capital stock is to be distributed in an agreed proportion between them. Subsequently B, C and D refuse to carry out this agreement, and they organize a corporation of their own and convey whatever interest they then have or thereafter acquire in the land to that corporation. Does this state of facts make A in equity a stockholder in a corporation thus formed? See the following authorities: Morrison v. Mining Co., 52 Cal. 306; Penn Match Co. v. Hopgood, 141 Mass. 145; Hawkins v. Mining Co., 52 Cal. 513; Cormody v. Power, 60 Mich. 26; Gent v. Ins Co., 107 Ill. 659; Stowe v. Flagg, 72 Ill. 397.

Lipscomb & Rust for respondent.

(1) A court of equity will enforce the specific performance of a contract to deliver shares of stock, where, as in this case, the value of the property is undeveloped, the value of the stock not definitely ascertainable, and where plaintiff cannot procure other shares of the same stock. Morawetz on Private Coporations [2 Ed.] sec. 218, 219; Cook on Stocks and Stockholders [2 Ed.] sec. 338. (2) Plaintiff had a right, even aside from the question of fraud, to sue this corporation, by reason of his contracts with its promoters. Morawetz on Private Corporations, sec. 549; 79 Pa. St. 54. (3) The evidence showed that the corporation was formed and the property conveyed to it with full knowledge by its officers and the other defendants of plaintiff's claims. "He who takes the benefit of a contract must assume its burdens." Redfield on Railways [5 Ed.] p. 18. In Railroad v. Perry, 37 Ark. 187, the court say: "Whenever a third party enters into a contract with the promoters of a railroad, which is intended to inure to the benefit of the corporation, and it takes the benefit of the contract, it will be bound to perform it." Bommer v. The American Co., 81 N.Y. 473; Titus v. Railroad, 5 Phil. 172; Low v. Railroad, 45 N.H. 375; 10 Barr (Pa.), 278. (4) As to the effect of the answer, in the nature of equitable bill of interpleader filed by the coal company in case at bar, see Williams v. Harbor Co., 2 De Gex and Jones, 547.

OPINION

Macfarlane, J.

This is a suit in equity to compel the defendants, a corporation, and its shareholders and directors, to issue to plaintiff certain shares of stock in said corporation and to register the transfer of such shares in the books of the corporation.

The petition charges that on the twentieth day of April, 1888, he and defendants, Perry, Smith and Long, owned and held contracts on large quantities of coal land in Morgan county, comprising the "Stover Coal Mines" and other land; that on that day he, said Perry and Smith entered into contract with one E. E. Wilson, by which it was agreed that Wilson should organize a corporation with a paid up capital of $ 1,000,000, for the purpose of completing the purchase of said land and developing the mines. That Wilson for his services was to have $ 440,000 of the stock and plaintiffs, Perry and Smith, the balance of $ 560,000.

The petition charged further that said Wilson had organized the corporation under the laws of the state of Kansas, and he is president, and said Perry, Smith and Long, together with B. P. McNair and said Wilson, are shareholders and directors, and hold a controlling interest therein; that by a contract dated April 17, 1888, it was agreed that plaintiff was to have out of the $ 560,000 of the stock shares of the face value of $ 425,606.72 and that said Perry, Smith and Long were to have the balance of shares of the face value of $ 134,393.28; that defendants refused to issue said stock to him, but threaten to issue the whole to the said Perry, Smith, Long and said McNair.

The answer of defendants Perry, Smith, Long and McNair charged that plaintiff had agreed to advance one half the money to make payments on the land to avoid forfeiture of contracts, that they paid $ 15,400 in cash towards payment of the land, and plaintiff had neglected and refused to pay any part; that when they went into the enterprise with Garrett, he represented that he already had a corporation organized with a capital of $ 250,000, to purchase said lands, all of which was subscribed, which representations were false; that afterwards plaintiff represented that he had made arrangements with E. E. Wilson to organize a corporation with $ 1,000,000 capital and would issue and sell lands sufficient to repay them for their advances and for the purchase and payment for other land amounting in all to ten thousand acres; that on the strength of these representations, and a promise by plaintiff that he would assume the payment of $ 15,000 due to Anthony Arnold as commission for the purchase of some ten thousand acres of land, they entered into the contract mentioned in the petition. They charged that plaintiff wholly failed to perform and carry out his undertakings, and in order to protect themselves from loss of the money they had advanced they entered into the organization of a new corporation.

The defendant corporation admitted that it was a corporation organized under the laws of Kansas, with a capital stock of $ 1,000,000, that Perry, Smith, Long and McNair claim the same stock demanded by plaintiff; had no information in regard to the contracts and asks the court to adjudicate as to the ownership of the stock.

We are asked in this suit to enforce the specific performance of a contract, made among the promoters of a corporation before, but in contemplation of, its organization. The corporation is asked to issue to complainant paid up capital stock of the face value of about $ 325,000. The first written agreement found in the record is made by plaintiff and defendants, Long, Perry and Smith, and bears date April 17, 1888. It provides that Perry, Long and Smith are "to have in full for their payment and services in the matter of the Morgan county land, comprising about ten thousand acres, bought as contemplated, $ 160,000, out of the capital stock of a company to be organized; said stock to be issued under the Wilson agreement, subject to proposed incumbrance." It was "further agreed that all money expended in the purchase and development of said land is to be refunded to the persons having paid the same, if the Wilson agreement is consummated. Said Wilson agreement is that said Wilson is to assume the contracts and obligations of the parties hereto and organize a coporation with a paid up capital stock of $ 1,000,000, said land representing the entire assets of the corporation; and said Wilson is to have $ 333,300, of said stock and $ 300,000 in bonds, for which he is to furnish said corporation $ 300,000."

The Wilson agreement referred to as the basis of this one was reduced to writing and signed by Wilson Smith, Perry and plaintiff at Kansas City, Missouri, April 25, 1888. This is the contract, a specific performance of which is...