Hall v. M. B. O'Reilly Realty & Investment Company

Citation267 S.W. 407,306 Mo. 182
Decision Date30 December 1924
Docket Number24615
PartiesLAURA M. HALL et al., Appellants, v. M. B. O'REILLY REALTY & INVESTMENT COMPANY et al
CourtUnited States State Supreme Court of Missouri

Motion for Rehearing Denied December 30, 1924.

Appeal from St. Louis City Circuit Court; Hon. Moses Hartmann, Judge.

Reversed and remanded.

Taylor Chasnoff & Wilson and Hugo Monnig, Jr., for appellants.

(1) The words, "or her heirs," as used in the trust agreement mentioned in appellants' second amended petition, are words of purchase and not of limitation. Eckle v. Ryland, 256 Mo. 424. (2) The beneficial owners of corporate stock, the legal title to which is held by a trustee, may maintain a stockholders' bill, where the trustee fails and refuses to maintain the suit, by joining the trustee as a party defendant. Fisher v Patton, 134 Mo. 32; Baum v. Sporborg, 131 N.Y.S. 267.

Kinealy & Kinealy and George T. Desloge for respondents.

(1) Ordinarily suits to redress corporate wrongs must be brought in the name of the corporation by the directors. 14 C. J. p 875, sec. 1334; Vogeler v. Punch, 205 Mo. 558. (2) Where the directors are alleged to be the wrongdoers, the suit in a proper case may be brought by a stockholder, but he must be an actual owner of the stock at the time. Barnett v. Ground, 304 Mo. 593; 14 C. J. p. 874, sec. 1333; 6 Fletcher on Corp. p. 6889, sec. 4058; 4 Thompson on Corp. p. 1086, sec. 4630; Cantwell v. Lead Co., 199 Mo. 1; Hingston v. Montgomery, 121 Mo.App. 451; Roebling v. First Nat. Bank, 30 F. 744. (3) Before suit by a stockholder can be maintained, demand on the directors and refusal to right the wrong must be alleged and proven. 14 C. J. p. 879, sec. 1339; Canada v. Daniel, 175 Mo.App. 55; Thompson v. Stearns, 197 Mo.App. 344. (4) Where the title to the stock is vested in a trustee, he is the one to vote it and to bring all suits based upon ownership of the stock. R. S. 1919, sec. 10156; 39 Cyc. 446, tit. Trusts; Morrow v. Morrow, 113 Mo.App. 454; Whitaker v. Whitaker Iron Co., 238 F. 980. (5) The use in the trust agreement of the words "or her heirs" are words of limitation and not of purchase. 29 Cyc. 1505; Bouvier's Law Dictionary; Maguire v. Moore, 108 Mo. 273; Eckle v. Ryland, 256 Mo. 449; Garrett v. Wiltse, 252 Mo. 710. (6) The trustee cannot be deprived of his right to represent the trust stock except for some wrong conduct on his part. Shelton v. King, 229 U.S. 95; Easton v. De Muth, 179 Mo.App. 722; Wiegand v. Woerner, 155 Mo.App. 264. (7) Courts of equity will not dissolve a trust as long as its provisions may be carried out. Easton v. De Muth, 179 Mo.App. 728; Stevens v. De La Vaulx, 166 Mo. 20; Heady v. Crouse, 203 Mo. 100; McConnell v. Deal, 296 Mo. 275.

OPINION

James T. Blair, P. J.

This is an appeal from a judgment rendered against appellants following their declination to plead further after the trial court had sustained a demurrer to their amended petition. That petition (omitting caption and signatures) first states that plaintiffs Laura H. Hall and Charles F. O'Reilly and defendants Gerald B. O'Reilly, Joseph M. O'Reilly, Eugene B. O'Reilly and Louis B. O'Reilly are the only surviving children of Mary C. O'Reilly, and the other individual plaintiffs and defendants, except the trustee, Robert L. McLaran, are the surviving grandchildren of Mary C. O'Reilly, the children of daughters who predeceased her. Three of the grandchildren are minors and appear by guardian or next friend. The petition then proceeds:

"Plaintiffs further state that on and prior to the 24th day of June 1915, M. B. O'Reilly Realty & Invest ment Company was a going concern, successfully engaged in general real estate business in and near the city of St. Louis, Missouri; that it had a large clientele, and had the confidence of owners, buyers and sellers of real estate; that it had many clients for whom it managed properties, collected rents and negotiated loans, and many clients who were accustomed to making and who made investments in real estate and in real estate loans through it; that it had a repair department which supervised the making of repairs on improvements on real estate, belonging to its clients, and an insurance department, which placed insurance for its clients; that it had many clients who listed properties with it for sale, and that it itself owned numerous parcels of real estate in and about the city of St. Louis, Missouri; and that it had a considerable income from its clients, resulting from the foregoing and other activities of said company.

"That on said 24th day of June, 1915, said defendant corporation had a capital stock authorized, issued and outstanding of $ 100,000, consisting of shares of stock of the par value of $ 100 each, all of which stock then belonged to said Mary C. O'Reilly, but which with the exception of one share was then in the names of defendants Gerald B. O'Reilly and Joseph M. O'Reilly, one share being in the name of Eugene D. O'Reilly; that on or about the 24th day of June, 1915, a contract was entered into as of said date by and between defendants, Gerald B. O'Reilly and Joseph M. O'Reilly, as parties of the first part, and Mary C. O'Reilly, as party of the second part, and M. B. O'Reilly Realty & Investment Company, as party of the third part, and defendant Eugene D. O'Reilly, as party of the fourth part, whereby the parties of the first part, among other things, agreed to convey to Robert L. McLaran, as trustee, all the shares of stock of said M. B. O'Reilly Realty & Investment Company, except three shares of stock, which it was agreed should be nominally held to qualify three directors. Said stock so agreed to be conveyed to be held by said trustee 'in escrow as a trust fund, first for the benefit of the creditors' (of the M. B. O'Reilly Realty & Investment Company), 'and, second, for the benefit of Mary C. O'Reilly or her heirs.' Said agreement further provided that 'after all the creditors of said M. B. O'Reilly Realty & Investment Company have been fully paid and satisfied, then said trustee shall deliver the said stock to her or to her heirs and M. B. O'Reilly Realty & Investment Company shall cease active business, and the good will of said M. B. O'Reilly Realty & Investment Company shall inure to the benefit of said Gerald B. O'Reilly, Joseph M. O'Reilly and Eugene D. O'Reilly.'

"By the terms of said agreement it was contemplated that said corporation should be liquidated and until it was liquidated that it would enjoy the good will which it had theretofore created; that upon liquidation the creditors of said corporation were first to be paid, and the surplus assets, with the exception of the good will, were to belong to Mary C. O'Reilly, or in event she should die before liquidation then to her heirs, and that only after the affairs and finances of said corporation were fully liquidated, as above, was the good will of said corporation to inure to the benefit of said Gerald B. O'Reilly, Joseph M. O'Reilly and Eugene D. O'Reilly.

"Said agreement further provided that defendants, Gerald B. O'Reilly, Joseph M. O'Reilly and Eugene D. O'Reilly, should qualify or continue as directors and should control, operate and manage the business of the M. B. O'Reilly Realty & Investment Company as a going concern. That said directors should unanimously agree upon salaries amongst themselves, to be fixed from year to year, but that in no event should said salaries be greater than those then paid until all the creditors of the M. B. O'Reilly Realty & Investment Company should first be paid off and satisfied.

"Defendants Gerald B. O'Reilly and Joseph M. O'Reilly further agreed that 'all their operations, dealings and profits in real estate while connected with the M. B. O'Reilly Realty & Investment Company (except their private holdings or operations while connected with the M. B. O'Reilly Realty & Investment Company, if any) shall inure to the benefit of said M. B. O'Reilly Realty & Investment Company.'

"Plaintiffs further state that pursuant to said agreement all of the stock of said M. B. O'Reilly Realty & Investment Company was transferred to Robert L. McLaran, as trustee under said agreement, except that three shares remained in the names of Gerald B. O'Reilly, Joseph M. O'Reilly and Eugene D. O'Reilly, respectively. That defendants Gerald B. O'Reilly and Joseph M. O'Reilly, who were then directors of said defendant corporation, continued to act as such and that Eugene D. O'Reilly qualified and for a time acted as a director of said corporation.

"Plaintiffs further state that they and the individual defendants herein, except defendant Robert L McLaran, are the heirs of Mary C. O'Reilly, and that there are no other heirs of Mary C. O'Reilly who survived her at her death, and that she left no other heirs surviving her.

"Plaintiffs further state that for a time defendants Gerald B O'Reilly, Joseph M. O'Reilly and Eugene D. O'Reilly conducted the business of said corporation as a going concern, but that thereafter defendants Gerald B. and Joseph M. O'Reilly conspired together to convert to their own use the good will and clientele of said M. B. O'Reilly Realty & Investment Company and to convert to their own use all or a portion of the assets of the said M. B. O'Reilly Realty & Investment Company, without waiting for the performance of the conditions under which the same were to inure to their benefit, as provided in said agreement of June 24, 1915, and pursuant to said conspiracy said Gerald B. and Joseph M. O'Reilly began to transact business in the name of the G. B. & J. M. O'Reilly Real Estate Mortgage Co., which corporation theretofore had not actively engaged in the general real estate business, and had not engaged in the business in which the said M. B. O'Reilly Realty and...

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