Hess Warming & Ventilating Company v. Burlington Grain Elevator Company
| Citation | 217 S.W. 493,280 Mo. 163 |
| Parties | HESS WARMING & VENTILATING COMPANY, Appellant, v. BURLINGTON GRAIN ELEVATOR COMPANY et al |
| Decision Date | 04 December 1919 |
| Court | United States State Supreme Court of Missouri |
Appeal from St. Louis City Circuit Court. -- Hon. William T. Jones Judge.
Reversed and remanded (with directions).
Eliot Chaplin, Blayney & Bedal for appellant.
(1) Plaintiff's contract for furnishing delivery and erection of the grain drier and cooler was a transaction in interstate commerce, and therefore plaintiff did not need a license to do business in Missouri. State ex rel. Hays v Robertson, 271 Mo. 485; Brownrig v. Waycross, 233 U.S. 16; York Manufacturing Co., 247 U.S. 21. That plaintiff's contract was in interstate commerce was res adjudicata by reason of the judgment plaintiff got on the same in the circuit court, and the matter cannot be re-opened in this case where plaintiff is suing as a judgment creditor by reason of said judgment. (2) Plaintiff sues as a judgment creditor. Plaintiff's purchase at the execution sale does not place plaintiff in the shoes of the Elevator Company. Bradshaw v. Halpin, 180 Mo. 667; Lionberger v. Baker, 88 Mo. 455; Rinehart v. Long, 95 Mo. 401. Although plaintiff, as purchaser at the execution sale, is entitled to recover the property itself, plaintiff in this case is offering to do equity by asking for only such judgment as will make plaintiff whole on the money due on its judgment gotten in the St. Louis Circuit Court. Oldham v. Wade, 273 Mo. 231. (3) Where the stockholders and directors of a corporation have authorized its officers to sell its bonds, this authorization does not include the power to pledge. Shaw v. Saranac Horse Nail Co., 144 N.Y. 220. (4) The bonds were void because (a) in excess of the authorized capital stock, or (b), if validly issued, because they were not issued with the consent of stockholders holding the larger amount in value of the stock. Sec. 2981, R. S. 1909; Art. 12, sec. 8, Mo. Constitution. (a) The object of the lawmakers in making such provisions was to make stocks and bonds of a corporation worth their face value. Peoria Railroad Co. v. Thompson, 103 Ill. 187; Mayfield W. & L. Co. v. Graves County B. & T. Co., 170 Ky. 86; Altenberg v. Grant, 85 F. 345. (b) The constitutional and statutory provisions being one and the same as to stocks and bonds, what this court has said as to stocks is likewise the law as to bonds. Mudge v. Black, 224 F. 923. (c) Repeated decisions of this court have established that the provision of the Constitution and statute (Art. 12, sec. 8, Constitution, and Sec. 2981, R. S. 1909) to the effect that no corporation shall issue stocks or bonds except for money paid, labor done or property actually received, and all fictitious increase of stock or indebtedness shall be void, make it indispensable to the issue of stock by a corporation that such money, labor or property be equal in value to the par value of the stock issued. Garrett v. Kansas City M. Co., 113 Mo. 330; Van Cleave v. Berkley, 143 Mo. 109; Berry v. Rood, 168 Mo. 316; Hunter v. Garanflo, 246 Mo. 131. (d) Other courts have so held in connection with similar constitutional or statutory provisions of other states. Lyon v. Bleeg, 240 F. 405; Progressive Wall Paper Corp., 229 F. 489; Chavelle Trust Co., 226 F. 400; Pacific Coast Pipe Co. v. Water Co., 237 F. 673; Farmers Loan & Trust Co. v. Car Co., 45 F. 518; Waterloo Organ Co., 134 F. 341; Rolapp v. Railroad Co., 37 Utah 540; Wyoming Valley Ice Co., 153 F. 787; Guarantee Title & Trust Co. v. Coal Co., 235 Pa. St. 594; Gunnison Gas & W. Co. v. Whitaker, 91 F. 191; Edgar v. Ames, 255 F. 835. (e) The seizure by the bank of the seventy-two bonds left with it on special deposit (safe keeping) and attempted application of them as further collateral was void and these bonds were never issued. 6 C. J. 1114, 1132; Smith v. State Bank, 30 L.R.A. (N.S.) 517; 7 C. J. 660; Reynes v. Dumont, 130 U.S. 354; Bock v. Gorrisen, 2 DeG. F. & J. 343. (5) Since the bank took the twenty-five bonds and Van Blarcom the three bonds as security for pre-existing indebtedness they are not bona-fide holders thereof, but hold the same subject to all infirmities. Johnson v. Grayson, 230 Mo. 401; Loewen v. Forsee, 137 Mo. 42; Board of Trustees v. Fry, 192 Mo. 563. Even if the purchaser at foreclosure under the second mortgage had been an innocent purchaser he would not have taken a good title. Coquard v. Cotton Compress Co., 7 S.W. 184; Hagerman v. Sutton, 91 Mo. 531; Jackson v. Johnson, 248 Mo. 681. (6) Where the sale on foreclosure was made on the theory that all of the 100 bonds of the second mortgage were outstanding and due, the sale should be set aside and the title passing under it invalidated even though some few bonds might be held to be outstanding and due. James v. Milwaukee Ry. Co., 6 Wall. 752; Edgar v. Ames, 255 F. 835. (7) The bank was a purchaser with notice. Progressive Wall Paper Corp., 229 F. 498; Board of Trustees v. Fry, 192 Mo. 522. (8) The syndicate for which George Lane Edwards was acting and the corporation subsequently formed by the syndicate are purchasers with notice. Kitchen v. Ry. Co., 69 Mo. 224; Berry v. Rood, 168 Mo. 316; Smith v. Farrell, 66 Mo.App. 11; Leonard v. Latimer, 67 Mo.App. 145; Stene Cettler v. Myers, 64 Mo.App. 527; Withers v. Bank, 67 Mo.App. 115, 125; Mechem on Agency (2 Ed.), p. 1421, secs. 1837, 1838 and 1839; Kelsay v. Farmers' Bank, 166 Mo. 157; Hendricks v. Calloway, 211 Mo. 563; Eoff v. Irwine, 108 Mo. 378; Zweigart v. Reed, 221 Mo. 33; McCaskill v. United States, 216 U.S. 514.
Geo. L. Edwards, Edward D'Arcy and D'Arcy & Neun for respondents.
(1) The contract under which appellant claims to have obtained its judgment, and the judgment obtained thereon, was illegal, and, therefore, appellant has no right to equitable relief in this court. Secs. 3038, 3039 and 3040, R. S. 1909; In re Springfield Realty Co., 257 F. 785; Amusement Co. v. Amusement Co., 192 Mo. 405; Roades v. Robertson, 202 Mo. 535; Zinc & Lead Co. v. Zinc Mining Co., 221 Mo. 12. (2) The judgment in favor of the appellant in its former suit against the Burlington Elevator Company is not res adjudicata as to the validity of appellant's contract, as against these respondents. Clark v. Bettelheim, 144 Mo. 271; Graves v. Ewart, 99 Mo. 13; 23 Cyc. 1068, note 92; 23 Cyc. 1207, note 40. (3) The certificate of the Secretary of State to the effect that the capital stock of the Burlington Elevator Company was increased from $ 150,000 to $ 200,000 is conclusive upon the parties to this action. Sec. 3356, R. S. 1909; Bank v. Rockefeller, 195 Mo. 15; Boatmens' Bank v. Gillespie, 209 Mo. 217; Wells v. Gastonia, 198 U.S. 177; Scott v. Abbott, 160 F. 573. (4) The bonded indebtedness of the Elevator Company was, as a matter of fact, increased, and the second mortgage bonds issue in compliance with the law. Sec. 2981, R. S. 1909. (5) Knowledge which Van Blarcom, as president of the Elevator Company, may have had concerning irregularities in the issuance of the bonds, cannot be imputed to the Bank of Commerce. The bank was an innocent holder of the second mortgage bonds, and as such is not affected by any defects in the bonds arising out of informality in their issuance. Benton v. German-American Bank, 122 Mo. 332; 2 C. J. 864, note 93; 3 Cook Corp. (7 Ed.) pp. 2464, 2571, 2572, 3023; Louisville Ry. v. Louisville Tr. Co., 175 U.S. 552; Secs. 10026, 10027, R. S. 1909. (6) A pre-existing debt constitutes value, since the law on that subject was changed in 1905. Sec. 9996, R. S. 1909; Worth v. Marshall Field Co., 240 F. 395. (7) Even where there are irregularities in the issuance of bonds, nevertheless where the corporation receives and retains benefits derived from the disposition made of the bonds, the validity of the bonds cannot be questioned, either by the corporation or those claiming through it, until the benefits received have been repaid. First Nat. Bank v. Trust Co., 187 Mo. 494; Fidelity Co. v. Western Pa. R. Co., 138 Pa. St. 494, 21 Am. St. 911; Wood v. Corry Water Works Co., 44 F. 146, 12 L.R.A. 168; Wright v. Hughes, 119 Ind. 324, 12 Am. St. 412; Osmer v. Brokerage Co., 155 Mo.App. 211; Re Waterloo Organ Co., 134 F. 345; Hitchcock v. Galveston, 96 U.S. 341, 24 L.Ed. 659; Zabriskie v. Cleveland R. Co., 64 U.S. 381, 16 L.Ed. 488. (8) Statutory provisions requiring a meeting of stockholders, and the giving of their consent to corporation action, are for the benefit of the stockholders. The corporation or its stockholders alone can take advantage of the non-compliance with such statutes. Creditors of the corporation cannot raise the issue. 3 Cook Corp. (7 Ed.) p. 3015, note 2; Campbell v. Argenta Mining Co., 51 F. 1; Farmers Loan & Tr. Co. v. Ry., 68 F. 412; Hamilton Tr. Co. v. Clemes, 17 A.D. 152, 163 N.Y. 423. (9) Outsiders cannot raise the question of ultra vires. The State alone, and not corporate creditors, can raise this issue. First Natl. Bank v. Trust Co., 187 Mo. 535; Wood v. Corry Water Works Co., 44 F. 146, 12 L.R.A. 168; Columbia National Bank's Appeal, 16 W. N. C. 357; Union Natl. Bank v. Matthews, 98 U.S. 621, 25 L.Ed. 188; Fritts v. Palmer, 132 U.S. 282, 33 L.Ed. 317; Hill v. Rich Hill Mining Co. 119 Mo. 31; Sears, Corp. pp. 268, 269; Mt. Vernon Bank v. Porter, 52 Mo.App. 244; Cass Co. v. Ins. Co., 188 Mo. 15. (10) A creditor who, like appellant, purchases the property of his debtor, at execution sale, is in privity of estate with the debtor, and stands in his shoes, in relation to the property purchased. Jones v. Hubbard, 193 Mo. 162, 165; Mechanics' Bank v. Bank, 45 Mo. 513; Foster v. Potter, 37 Mo. 525; 17 Cyc. 1289, note 27.
RAILEY, C. White and Mozley, CC., concur.
On May 19, 1911, plaintiff filed, in the Circuit Court of the City of St....
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