Hannerty v. Standard Theater Co.

• Citation: 19 S.W. 82,109 Mo. 297
• Parties: HANNERTY v. STANDARD THEATER CO. et al.
• Decision Date: 28 March 1892
• Court: United States State Supreme Court of Missouri

19 S.W. 82

109 Mo. 297

HANNERTY v. STANDARD THEATER CO. et al.

Supreme Court of Missouri, Division No. 1.

March 28, 1892.

CORPORATION — MISCONDUCT OF DIRECTORS — RIGHTS OF STOCKHOLDER.

1. Where a corporation holds a leasehold interest in land, with the privilege of purchasing the fee, an assignment of such privilege to one of the directors, and his purchase of the fee by means of it, are valid as against the corporation, where it appears that it had neither the money nor the credit necessary for making the purchase.

2. In an action by a stockholder to recover, on behalf of the corporation, property rights which have been lost by the fraudulent conduct of the directors, it is unnecessary for plaintiff to allege that he has requested the corporation to bring the suit, where it appears that the same directors are still in office.

3. A corporation, whose board of directors

was entirely under the control of a former director, who had purchased land of which the corporation held a 100-year lease, allowed the lease to be forfeited for non-payment of rent. The company's books were missing, but it appeared that on the day before the rent fell due the company drew out of the bank a sum larger than the amount of the rent. Held, that the forfeiture could be set aside at the suit of a non-assenting stockholder.

Appeal from St. Louis circuit court; L. B. VALLIANT, Judge.

Bill by James J. Hannerty against James Butler, Edward Butler, Jr., Edward Sullivan, Edward Butler, Sr., and the Standard Theater Company, to reinstate a forfeited lease, and for other relief. Defendants obtained a decree. Complainant appeals. Reversed.

Young & Young and D. P. Dyer, for appellant. Chester H. Krum and Thos. J. Rowe, for respondents.

BLACK, J.

The plaintiff is a shareholder in the Standard Theater Company, and the defendants are James Butler, Edward Butler, Jr., and Edward Sullivan, directors, and Edward Butler, Sr. The corporation is also a defendant. The petition, in general terms, prays for a decree reinstating a forfeited lease; that Edward Butler, Sr., be required to convey the fee in the leased property to the corporation; for an accounting; and the appointment of a receiver, etc. The Standard Theater Company was incorporated on the 12th May, 1883, with a capital stock of $30,000, which stock was increased to $50,000. Edward Butler, Sr., became the owner of 240 shares, and Joseph H. McIntyre became the owner of 150 shares, of the par value of $100 each; the other 110 shares were not sold. On the 15th May, 1883, the company procured a lease from John H. and Charles H. Bobb for a term of 100 years, on a lot in the city of St. Louis, subject to various conditions. Among other things, the lessee, the theater company, agreed to pay rents for the first five years at the rate of $2,500 per annum; the rents for the first year to be paid at the end of that year, and thereafter quarterly. The lease provides further that the rent for the second and each subsequent period of five years shall be fixed at 6 per centum per annum on the value of the ground, excluding buildings thereon, but never to be less than $2,500 per annum. Stipulations are then made concerning the appointment of appraisers, should the parties not agree upon the value of the land. The lease secures to the lessee the right to purchase the property at any time within five years next after June 1, 1883, at the price of $50,000. The lessors have the right to declare a forfeiture of the lease for the non-performance of any of the conditions, and in case of forfeiture the lessors or their assigns become entitled to the possession of the premises and buildings thereon free from any claim of the lessee or its assigns, provided, however, that no forfeiture shall be had for non-payment of rent until the same shall have been due for 30 days. The theater company erected a building on the leased lot, and conducted a theater business there. McIntyre became dissatisfied with the business, and in 1885 sold his 150 shares of stock to the plaintiff, Hannerty, for $3,500. Hannerty became a director and the treasurer, and took an active part in the management of the business. At this time the directors were Edward Butler, Sr., Hannerty, and James J. Butler. The latter then held 10 shares of stock, which had been transferred to him by his father, Edward Butler, without any money consideration paid therefor. Some time prior to the 29th June, 1887, Edward Butler transferred 10 shares of stock to his son Edward Butler, Jr., and 10 shares to his clerk, Edward Sullivan. Both of these transfers were without consideration paid for the stock so assigned. The directors elected on the last-mentioned date were Edward Butler, Sr., James J. Butler, and Edward Sullivan. The following resolution was adopted at a special meeting of the stockholders, held on the 21st May, 1888: "It appearing to the stockholders that the company was not in a condition to purchase said property, on motion of Jas. J. Butler, duly seconded and carried, the right, power, and authority was conferred by the stockholders on the board of directors to use their discretion in disposing of said option, and to take any action with reference to the same that they might believe to be for the best interest of the company, and to do what they thought right and proper in the premises; and, if they saw fit, to sell and dispose of said option to any stockholder in said company who would pay the highest price for same." The record made of this meeting shows that Hannerty was present. He testified that he received notice of the meeting; that the meeting was called to order by Edward Butler; that he then asked Sullivan, the secretary, whether there was enough money on hand to pay the rent; that Sullivan smiled, and said, "No;" that he waited about two minutes longer, and they said the meeting was adjourned, and he left; and that no such a resolution was passed before the adjournment was proclaimed; but several of the defendants say he was present during the entire meeting. The proof, all considered, satisfies us that Hannerty was present when this resolution was adopted. On the same day — May 21, 1888 — the board of directors met, and made an order transferring the company's option for the purchase of the property to Edward Butler, Sr., for the consideration of $50. At this time Edward Butler, Sr., James J. Butler, and Edward Sullivan constituted the board, all of whom were present. On the same day Edward Butler, Sr., handed to the secretary his resignation as president and director, which was accepted on the 28th of the same month; and the other members of the board elected Edward Butler, Jr., to fill the vacancy. Thereupon Edward Butler, Sr., purchased the property at the price of $50,000, and received a deed therefor from the lessors and their grantees, "subject to said lease and to all the covenants" therein contained. On the 30th of the same month the directors entered into an agreement with Edward Butler, Sr., fixing the value of the lot at $65,000 for the period of five years beginning on the 1st June, 1888, and the rental at $3,500 per annum. The stockholders, at a meeting held on the 28th June, 1888, elected the following directors: James J. Butler, Edward Butler, Jr., and Edward Sullivan. At this election the stock was voted as follows: Edward Butler, Sr., 210 shares; James J. Butler, 10 shares; Edward Butler, Jr., 10 shares; Edward Sullivan, 10 shares; and James Hannerty, 150 shares. Hannerty voted for himself, but was defeated. The new board met on the same day, and elected James J. Butler president, with an annual salary of $2,500, and Sullivan secretary and treasurer, with a salary of $1,200 per year. This new board of directors failed to pay the $625 rent due on the 31st May, 1888, and the $875 rent due on the 31st August, 1888. In the following October, Edward Butler, Sr., as lessor and owner of the land, declared a forfeiture, and thereupon obtained a judgment against the corporation by default in a forcible detainer suit before a justice of the peace. He was placed in possession with due solemnity under a writ issued upon this judgment, and the officers and agent of the corporation then became his agent in the conduct of the theater.

1. We may here dispose of that branch of the case which seeks to compel Edward Butler, Sr., to convey the reversion in the leased property to the corporation, the corporation assuming the payment of the purchase price. This relief is asked on the averments that the corporation had the means to purchase the property, but that the directors, conspiring with him, fraudulently assigned to him the company's option to purchase the fee, secured by the lease. This...