Graeser v. Phoenix Finance Co. of Des Moines
| Decision Date | 15 May 1934 |
| Docket Number | 42208 |
| Citation | 254 N.W. 859,218 Iowa 1112 |
| Parties | MARY V. GRAESER, Appellant, v. PHOENIX FINANCE COMPANY of Des Moines, et al., Appellees. MARY V. GRAESER, Appellant, v. PHOENIX FINANCE COMPANY of St. Louis, et al., Appellees |
| Court | Iowa Supreme Court |
REHEARING DENIED DECEMBER 13, 1934.
Appeal from Polk District Court.--LOY LADD, Judge.
TWO actions in equity growing out of the sale and transfer of assets of the Phoenix Finance Company of Des Moines and Phoenix Finance Company of St. Louis to Phoenix Finance Corporation. The opinion states the facts. From a decree dismissing the petitions, plaintiff appeals.
Affirmed.
Howard L. Bump, George W. Graeser, and Allen & Whitfield, for appellant.
Bradshaw Schenk & Fowler, for appellees.
The two actions involved in this appeal were brought by the plaintiff, as the owner of certain shares of preferred stock in the defendant corporations, Phoenix Finance Company of Des Moines and Phoenix Finance Company of St. Louis. These two corporations belonged to what is referred to in the record as the Phoenix group of corporations. This group consisted of seven corporations, all organized under the laws of the state of Delaware and having many of the same persons as owners of their common stock and members of their boards of directors. Six of these corporations were organized for the purpose of carrying on a small short loan business, and the articles of incorporation of each of them were practically the same. The seventh, the Phoenix Finance System, Inc., was a holding company and owned a majority of the common voting stock of all the other corporations. A majority of the common voting stock of the Phoenix Finance System, Inc., was owned by John A. Thompson and his wife, M. K. Thompson, who were president and secretary, respectively, of all the corporations. The name of the Phoenix Finance Company of Des Moines was later changed to Phoenix Finance Company of Ohio, but for convenience this corporation will be referred to in this opinion as Phoenix Finance Company of Des Moines. The capital stock of the Phoenix Finance Company of Des Moines and of the Phoenix Finance Company of St. Louis comprised common voting stock, preferred stock, and participating stock. None of this stock had any par value. The preferred stock drew dividends of $ 6.00 per annum, was cumulative as to dividends, was preferred as to both earnings and assets, was redeemable at $ 105 per share, and entitled to receive $ 105 per share in case of liquidation, dissolution, or winding up of the corporation, together with all dividends accrued, before the holders of any other classes of stock would participate.
In the latter part of 1931, it was proposed that, instead of the seven corporations then existing, the business be taken over by one large corporation and the other corporations be discontinued. Pursuant to such proposal, a new Delaware corporation, being the defendant Phoenix Finance Corporation, was organized, and the assets of each of the other seven old Phoenix corporations were sold and transferred to the new Phoenix Finance Corporation. Seven separate contracts of sale were executed, one by each of the old corporations, and the consideration for the assets sold by each corporation was delivered to such selling corporation. In each sale, the consideration consisted partly of cash and partly of 8 per cent gold bonds and of preferred stock and participating stock in the purchasing corporation. At the time of the sales none of the corporations appears to have been operating at a loss, but in none of them were the assets then sufficient to pay the preferred stockholders in full. The book value of the preferred stock in the Phoenix Finance Company of Des Moines at the time of the sale and transfer was $ 71.48 per share, and the book value of the preferred stock in the Phoenix Finance Company of St. Louis was $ 63.13 per share. The amount of cash, bonds, preferred and participating stock of the Phoenix Finance Corporation given in payment to each of the old corporations was based upon the book value of the preferred stock then outstanding in such old corporations.
The Phoenix Finance Company of Des Moines and the Phoenix Finance Company of St. Louis received from the Phoenix Finance Corporation the consideration for the assets sold by each of said corporations respectively. In the case of the Phoenix Finance Company of Des Moines this consideration consisted of $ 2,740 cash, Phoenix Finance Corporation bond No. 3 for $ 74,000 of 8 per cent registered bonds, certificate No. 3 for 2,741 shares of preferred stock, and certificate No. 3 for 1,827 shares of participating stock of the Phoenix Finance Corporation. The consideration to the Phoenix Finance Company of St. Louis was $ 2,617.50 cash, Phoenix Finance Corporation bond No. 5 for $ 70,000 of the 8 per cent registered bonds, certificate No. 5 for 1,745 shares of preferred stock, and certificate No. 5 for 1,745 shares of participating stock of the Phoenix Finance Corporation. After the bonds and certificates of stock had been received by the selling corporations and receipted for by them, letters were sent to each of the preferred and participating stockholders telling them what had been done, asking them to send in their preferred and participating stock, and stating that they would receive in exchange therefor their proportionate amount of the cash, bonds, preferred and participating stock received from the Phoenix Finance Corporation.
Some time later, letters were sent to the Phoenix Finance Corporation by both the Phoenix Finance Company of Des Moines and the Phoenix Finance Company of St. Louis asking that the single bond and the single certificates for the preferred and participating stock which had been issued to the selling corporations be voided, and that in place thereof the Phoenix Finance Corporation issue numerous certificates to names to be supplied from time to time, but in the aggregate amount totaling exactly the same as had been tendered. The reason given for this letter is that, by having the bonds and certificates issued directly from the Phoenix Finance Corporation to the holders of the preferred stock in the Phoenix Finance Company of Des Moines and the Phoenix Finance Company of St. Louis, large savings were made in transfer taxes. Both the Phoenix Finance Company of Des Moines and the Phoenix Finance Company of St. Louis adopted resolutions for the cancellation of all of the participating stock and preferred stock in these companies which should be delivered to them by the owners thereof in exchange for their proportionate amount of the cash, bonds, preferred and participating stock of the Phoenix Finance Corporation. At meetings of the common stockholders of said two selling corporations it was resolved that the consideration received for the sale of their assets be distributed among the preferred stockholders in the proper pro rata proportion as a liquidating dividend, and that, when all of the assets of the corporations have been distributed among the preferred stockholders, and all liabilities satisfied, the president and secretary are authorized and instructed to execute and file proper reports, applications, and other instruments necessary to dissolve the corporations.
In 1928, one J. H. Beers became the owner of four shares of preferred stock and four shares of participating stock of the Phoenix Finance Company of Des Moines, and of 5 shares of preferred and 5 shares of participating stock of the Phoenix Finance Company of St. Louis. This stock was owned by him until the time of his death on the 7th day of February, 1932. It appears that in a will left by said Beers his wife was named as the executrix. This will was probated and letters testamentary issued to the widow, Anna M. Beers, as executrix. On August 1, 1932, certificates for the preferred and participating stock which stood in the name of J. H. Beers were indorsed by Anna M. Beers, as executrix, assigning all of the stock represented by such certificates to Mary V. Graeser, the plaintiff herein.
On the 26th day of August, 1932, these actions in equity were commenced by said Mary V. Graeser in the district court of Polk county, Iowa. The relief asked was that the Phoenix Finance Company of Des Moines and the Phoenix Finance Company of St. Louis, respectively, be required to account; that the court fix the value of plaintiff's shares of preferred stock as of January 1, 1932; that the court give plaintiff a judgment against Phoenix Finance Corporation for the value of such stock, and that the amount found due be impressed as a lien upon the assets acquired by said corporation from the Phoenix Finance Company of Des Moines and the Phoenix Finance Company of St. Louis, respectively. The defense, in substance, was that plaintiff had no right to maintain the action, because she was not a stockholder of record in the defendants Phoenix Finance Company of Des Moines and Phoenix Finance Company of St. Louis; that the sales and transfers were made pursuant to the provisions of the laws of the state of Delaware under which the defendant corporations had been organized; and that the determination of the issues involved required an interference with the internal affairs of the defendant corporations and the exercise of visitorial powers, and the courts of this state should not, therefore, assume jurisdiction. The two cases were consolidated and tried together, and the district court entered a decree dismissing both cases and assessing the costs to the plaintiff. From this decree and judgment the plaintiff appeals.
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