Hequembourg v. Edwards
| Decision Date | 27 March 1900 |
| Citation | 56 S.W. 490,155 Mo. 514 |
| Parties | HEQUEMBOURG, Appellant, v. EDWARDS et al |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Thomas A. Russell Judge.
Affirmed.
Joseph T. Tatum for appellant.
(1) The declaration of law is erroneous. It is not necessary to show that the money actually came into the treasury of the corporation, and was then taken out and converted by the defendants. By proceeding to do business as a corporation under the statutes, the articles of association and certificate of Secretary of State, the defendants were at once obligated to account to the corporation for the one-half of the capital. 1 R. S. 1889, secs. 2768, 2770, 2492, 2499; Mo. Con., art. 12, sec. 8. (2) The possession by defendants of the money, or money's worth, was a condition precedent to incorporation. State ex rel. v. Woods, 13 Mo.App 139. (3) Defendants are estopped from claiming they did not have in their joint possession and control the whole $ 10,000. Bank of Canada, 25 Can. L. J. 238; Bank v Barr, 24 Me. 256; Casey v. Galli, 94 U.S. 673; Thompson v. Lake, 19 Nev. 103; Cook on Stock (3 Ed.), sec. 184; Thomp. Corp., secs. 247, 248, 1242, 2974, 2984, 2990, 4098; 1 R. S. 1889, secs. 2492, 2768, 2770. (4) This one-half the capital, required and acknowledged to be paid up and in their custody, is a trust fund in the hands of defendants as joint trustees for the benefit of the corporation and all creditors. Van Cleve v. Berkey, 143 Mo. 109; Sawyer v. Hoag, 84 U.S. 610; Land Co. v. Birmingham Co., 92 Ala. 407; Haskell v. Sells, 14 Mo.App. 91; Griswold v. Seligman, 72 Mo. 110; Bent v. Priest, 86 Mo. 475; Kraft, etc., Co. v. Crow, 36 Mo.App. 297; Hill v. Coal Co., 124 Mo. 153; Donham v. Hahn, 127 Mo. 439; Cook on Stock, sec. 199. (5) The defendants not having put into the treasury of the corporation all of the one-half of the paid-up capital, the corporation could have maintained action against them for the remainder. 1 R. S. 1889, sec. 2516. (6) The balance due from defendants passed to the assignee, plaintiff. Shockley v. Fisher, 75 Mo. 498; Joy v. Manion, 28 Mo.App. 55; Boeppler v. Menown, 17 Mo.App. 447; Haskell v. Sells, 14 Mo.App. 91; Haskell v. Worthington, 94 Mo. 560. (7) Actions may be maintained against directors jointly. Thomp. Corps., sec. 4098. (8) Having embarked as a corporation with less money in the treasury than required by law, the defendants are jointly liable for the amount acknowledged to be in their custody. Thomp. Stockholders, sec. 5; 3 Thomp. Corps., secs. 2969, 2974, 2975; Haslett v. Witherspoon, 1 Strobh. Eq. 209; Mastin v. Fennell, 79 Mo. 401; Burns v. Beck, 83 Ga. 471. (9) The "understanding" or agreement between defendants to do business with but $ 3,000 can not release the defendants from their obligation to pay the remaining $ 7,000. It was a fraud and void. Haskell v. Sells, 14 Mo.App. 91; Patterson v. Arnold, 45 Pa. 410; Van Cleve v. Berkey, supra; Fisher v. Seligman, 75 Mo. 13; Ramsey v. Thompson Mfg. Co., 116 Mo. 313; Liebke v. Knapp, 79 Mo. 22; Ins. Co. v. Floyd, 74 Mo. 286; Gill v. Balis, 72 Mo. 424. (10) Secret, verbal agreement to scale the capital, not even entered on records of the corporation, can not be effective to reduce the capital. If defendants' act be upheld, then it will be lawful to capitalize for ten millions, and secretly reduce to one thousand cash. The statute points out the method of reduction. R. S. 1889, sec. 2779.
Theodore Rassieur for respondents.
(1) An action for conversion can not be maintained, unless the property of the plaintiff has been converted. Sparks v. Purdy, 11 Mo. 219; 26 Am. & Eng. Ency. of Law, p. 714; Cooley on Torts, 517. (2) A corporation, or its assignee, can only maintain an action on the covenant. A separate action must be brought against each subscriber to collect the balance unpaid upon his subscription. Railroad v. Patrick, 2 Abbott's App. Dec., 72. (3) The acknowledgment of receipt contained in the articles of agreement is a mere admission. Admissions are not conclusive against the parties unless the elements of estoppel exist. State ex rel. v. Branch, 112 Mo. 661; Duncan v. Matney, 29 Mo. 368; Monks v. Belden, 80 Mo. 639; Greenleaf on Ev., secs. 212 and 305; 19 Am. & Eng. Ency., p. 1115.
OPINION
In Banc.
-- The Builders Iron Works, a business corporation, on September 15, 1894, made a voluntary assignment of all its assets for the benefit of its creditors. The plaintiff is the assignee under that deed of assignment. The defendants were the directors of the corporation and for alleged dereliction in that capacity they are here sued. The suit is to recover $ 7,000 of the capital stock which the petition essays to allege came into the hands of the defendants as directors, and for which they have failed to account. According to the petition it appears that the capital stock of the corporation was $ 20,000, divided into 200 shares of the par value of $ 100 per share, of which defendant Edwards subscribed for 100 shares and defendants Kilpatrick and Hunlet, for 50 each, so that those three composed the list of stockholders, and the entire board of directors, that the articles of association, which were signed by those three, certified that the entire stock was subscribed and one-half paid up in cash, and then in the hands of the board of directors, but that the defendants had accounted to the corporation for only $ 3,000, leaving $ 7,000 unaccounted for, which the petition says is required to pay the debts of the concern and therefore, to recover which, this suit is brought. The answer is a general denial. On the trial the evidence on the part of the plaintiff showed that the company was incorporated in 1893, with a nominal capital stock of $ 20,000, the articles of association which were signed by the defendants did certify that the whole amount of stock was subscribed, and one-half actually paid up in cash, and was then in the hands of the board of directors. The evidence also showed that in point of fact, although all the stock was subscribed as stated, yet only $ 3,000 was in fact ever paid in; that Edwards paid $ 1,500 on his subscription and Kilpatrick and Hunleth $ 750 each, and that is all of the capital stock that was ever paid into the corporation.
Appellant in his statement filed herein, says: "No more than this $ 3,000 was ever contributed to the funds of the corporation, nor accounted for by the defendants." So there is no dispute on that point. At the close of the plaintiff's evidence the trial court gave an instruction to the effect that the plaintiff was not entitled to recover, thereupon he took a nonsuit with leave and failing in his motion to have the same set aside, brings this appeal.
I. There is some discussion in the briefs as to the nature of the cause of action stated in the petition. Counsel for respondents treat the petition as stating an action for conversion, but appellant's counsel says that that is a misconception, that the action is debt, yet in the same connection, immediately adds that it is assumpsit on an implied promise. Measured by the rules of good pleading the petition does not state a cause of action of any kind. It states argumentatively that $ 10,000 of the capital stock came into the hands of the board of directors; that is to say, it states that which is evidence tending to prove that fact, but refrains from stating the ultimate fact. Defendants' counsel and the trial court put the most favorable construction on the petition of which it was susceptible, that is, by accepting the statement that the defendants in their articles of agreement acknowledged the receipt of that much money as equivalent to a statement that they did receive it; but the plaintiff's counsel in his reply brief says that it is a misconception of his petition to say that it states as a fact "that there was then and there in the custody of said defendants the sum of $ 10,000 as the property and assets of said corporation," that whilst it is true that the petition does contain those words, yet he says it is stated as a deduction only, that is, in this connection: "That by the terms and acknowledgments of said articles of agreement there was then and there in the custody," etc. Putting the pleader's own construction on his petition it leaves it as a declaration to the effect that the defendants have accounted for only $ 3,000 of the capital stock of the corporation whereas there is evidence to show that they received $ 10,000; and that is really its correct construction. It is all that the pleader himself says he intended to say, and it is all that his evidence justified him in saying.
It is also to be observed that the petition does not attempt to state a cause of action against the defendants as stockholders to recover the amounts severally due from each on his stock subscription. The pleader recognized that each subscriber as such, was liable only for the unpaid balance due on his own subscription, but that the directors were liable jointly for the amount of the capital stock actually paid into the treasury. If instead of three stockholders there had been a hundred, these three directors would have been jointly and severally liable for all the money that actually came into their hands from the whole number of stockholders, but they would not be responsible, ex contractu, in a suit by the corporation, or its voluntary assignee, for the various balances that might be due on the stock subscriptions of the hundred subscribers. Each subscriber is liable for the unpaid balance of his own subscription, but not for that of the other subscribers. Whether the plaintiff's object was to avoid...
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