Hill v. Atoka Coal & Mining Company
| Decision Date | 09 July 1894 |
| Citation | 25 S.W. 926,124 Mo. 153 |
| Parties | Hill v. Atoka Coal and Mining Company, Appellant |
| Court | Missouri Supreme Court |
Rehearing Denied 124 Mo. 153 at 177.
Appeal from St. Louis City Circuit Court. -- Hon. James E. Withrow Judge.
Reversed.
H. S Priest and J. S. Laurie for appellant.
(1) The objection to the introduction of testimony under the petition should have been sustained, because there is no averment therein, charging that a dividend had been declared by the board of directors of the defendant company. Until that is done, the relation of debtor and creditor does not subsist between the corporation and its stockholders. Cook on Stock and Stockholders, sec. 544. (2) The plaintiff can not recover, because the resolution declaring the dividend excepted from the benefits of such declaration, certificate number 14, for one hundred shares of stock, upon which this suit is brought. If a shareholder is not entitled to a dividend, according to the terms of the resolution declaring it, he can not recover in assumpsit; his claim must be against the corporation for a disregard of his rights as a shareholder by the improper action of the directors. State v. Railroad, 6 Gill, 363; Morawetz on Corp. [2 Ed.], secs. 450, 451. (3) Plaintiff can not recover, because he was, at the time he purchased the stock, as thoroughly familiar with its status, as was Crandall himself, and Crandall could not have recovered, because: First. He agreed by voting the assessment upon his own stock, and that of his associates, that the stock was not full paid and that it was assessable. Thus he is now estopped. Kansas City Hotel Co. v. Harris, 51 Mo. 465. Second. He is further estopped, because his official action as one of the directors in voting the assessment caused his associates to put up this assessment, and make the concern, then insolvent, a going one. Third. Because, rather than pay this assessment, he voluntarily surrendered his stock, which was accepted by his associates. He thus escaped what was then a burden of contribution to an enterprise of gloomy prospect. He can not now be heard to claim a share in the prosperity begotten by the toil and financial contribution of his associates, in which he refused to share. Imboden v. Ins. Co., 31 Mo.App. 321; Updyke v. City, 94 Mo. 240. Fourth. His letter was an actual surrender of the stock, and equity will consider that done which ought to be done. The certificate itself is of no value, save as an evidence of ownership. Any act of his indicating an unmistakable design upon his part to surrender the stock, if acted upon by the others, was equivalent to an actual surrender of the certificate itself. Budd v. Railroad, Oregon, 273; Glascow v. Nicholson, 25 Mo. 30; Ober v. Carson, 62 Mo. 214; Bass v. Walsh, 39 Mo. 192; Kimball v. Donald, 20 Mo. 577; Marion v. Wallis, 6 Ellis & Bl. 726; Chaplain v. Rogers, 1 East, 192; Leonard v. Davis, 1 Black, 476; Sabin v. Bank, 21 Vt. 353; Kessil v. Albertis, 56 Barb. 36; Spiker v. Nydeger, 30 Md. 315; Mitchell v. Mitchell, 1 Gill, 66; Crane v. Gough, 4 Md. 366; Noyes v. Brown, 33 Vt. 431; Newby v. Hill, 2 Metc. (Ky.) 530; Dunn v. Snell, 15 Mass. 485; Spain v. Hamilton, 1 Wall. 604; 1 Pom. Eq. Juris., sec. 364; Wiggins v. McDonald, 18 Cal. 126. Fifth. The surrender, while voluntary, was not without legal consideration. Crandall was relieved of the payment of the assessment which he voted as just and legal. It was this authority which compelled his associates, situated as he was, to contribute their assessments, and thus pull the insolvent company out of the financial quagmire, into which it had been plunged, and made it able to earn the dividends now sued for. A valuable consideration in the sense of the law may consist, either in some right, interest, privilege or benefit, accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. 3 Amer. Ency. of Law, p. 831, sec. 21; Conrad v. La Rue, 52 Mich. 83. (4) The plaintiff can not maintain this action until he shall have established his right to the shares of stock in a court of equity. He can not establish the title to the shares of stock by a suit for dividends upon the stock. The corporation having refused to recognize the stock, he should either have sued as for a conversion or have filed a bill in equity to establish his title to the stock. Hughes v. Vt. Cop., 72 N.Y. 207. (5) On the undisputed facts the defendant is entitled to a decree canceling the certificate and requiring the plaintiff to surrender it. Such a decree ought to be entered here upon the facts found by the court as well as upon the conceded facts. Perkins v. Union, etc., Co., 12 Allen, 273.
G. A. Finkelnburg for respondent.
(1) The shares of stock in controversy were issued to E. J. Crandall at the organization of the defendant company and have always stood in his name. They have never been legally forfeited nor voluntarily surrendered. (2) The stock has never been forfeited: First. Because of noncompliance with the terms of the Illinois statutes governing forfeiture of corporation stock. Sec. 7, chap. 32, Starr & Curtis' Illinois Stats. 1885; Klein v. Railroad, 13 Ill. 515. Second. Because, independent of the statute, a forfeiture can only take place in pursuance of a power given in the character and this power must be strictly pursued, otherwise the proceeding is ultra vires. Thompson on Stockholders, par. 196; Cook's Stockholders, par. 121, et seq.; 8 Am. and Eng. Encyclopedia, p. 450. Third. There was no cause of forfeiture. The so-called assessment was in the nature of a voluntary contribution by the holders of three fifths of the stock of this company. So far as the corporation was concerned the stock was all full paid and nonassessable. As between the corporation and the stockholder the former was estopped from disputing the full paid character of this stock. (3) The intention to surrender the stock in controversy at a future time, as expressed in Mr. Crandall's letter of December 6, 1882, was a mere expression of a purpose. He had a right to change his mind and he did so. There was no binding promise, no consideration, no agreement embodying the essential elements of a contract. (4) If Mr. Crandall was guilty of a breach of contract in the year 1882, the defendant company could ever since that time have sued for damages or specific performance, or if there was legal cause for forfeiture it might have proceeded to forfeit the stock according to law. It did neither, but allowed the stock to remain as the property of Mr. Crandall until the plaintiff bought it, nine years later. If defendant ever had any claim on this stock it has certainly lost it, both under the doctrine of laches and waiver. Schradski v. Albright, 93 Mo. 42; Burgess v. Railroad, 99 Mo. 496; Landrum v. Bank, 63 Mo. 48. (5) By allowing the Crandall stock to be voted in March, 1888, the defendant company recognized the fact that Mr. Crandall still owned the stock and that he was entitled to the rights of a stockholder. (6) The defendant company had no right to discriminate against this particular stock in its declaration of a dividend or to exclude it from participation therein. Such an attempt was void. See Cook's Stockholders, par. 542; Alling v. Wenzell, 27 Ill.App. 514; Ryder v. Railroad, 13 Ill. 516, 520. (7) If the plaintiff in this case was the owner of the stock when this suit was brought, then he had a right to sue for any dividend in which said stock was properly entitled to participate, and this without first compelling a transfer on the books by an equitable proceeding. The right of ownership to stock may be tested by a suit for dividends. Robinson v. National Bank, 95 N.Y. 638, 644; Merchants' Nat'l Bank v. Richards, 6 Mo.App. 454, 462; (affirmed, 74 Mo. 37).
OPINION
In Banc
This was a suit to recover $ 3,000, the same being dividends on one hundred shares of stock in the defendant corporation, which stock had been issued to E. J. Crandall and by him assigned to the plaintiff, James A. Hill. The defendant filed a long answer setting up various matters as an equitable defense, with a prayer that the one hundred shares be adjudged to be the property of the defendant, and for other and further relief. As to this answer, it is sufficient to say that it is broad and comprehensive enough to give the defendant the benefit of whatever rights may flow from the following facts.
The defendant, the Atoka Coal and Mining Company, is a corporation organized in 1881, under the laws of the state of Illinois, with a capital stock of $ 500,000 divided into five thousand shares of $ 100 each. At the time of the organization of the company, the directors purchased certain coal leases and mining claims in the Indian Territory, and caused the entire stock of the corporation to be issued as full paid up stock in the payment for such property. Shortly thereafter the directors, with the consent of the persons to whom the stock had been issued, passed a resolution setting apart $ 250,000 of their full paid stock to be used for carrying on the work and purposes of the association. That amount of stock was transferred to the plaintiff Hill to be by him sold. He sold two thousand shares to various persons at $ 30 per share and it seems he sold the same as "paid up stock." The money thus raised constituted the only means with which the company commenced business. The other three thousand shares were held by James Hill, E. J. Crandall, R. S. Hays, A. A. Talmage, and a Mr. Folsom. Hill and Crandall and probably Folsom held their shares in their own right, but the other persons represented...
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