Hingston v. Montgomery
| Decision Date | 05 November 1906 |
| Citation | 97 S.W. 202,121 Mo.App. 451 |
| Parties | BELLE BUTLER HINGSTON, Respondent, v. EMMA MONTGOMERY et al., Appellants |
| Court | Kansas Court of Appeals |
October 1, 1906;
Appeal from Jackson Circuit court.--Hon. W. B. Teasdale, Judge.
REVERSED AND REMANDED (with directions).
Judgment reversed and the cause remanded.
Lathrop Morrow, Fox & Moore for Samuel W. Sawyer, Administrator de bonis non.
(1) The contention of attorneys for respondent based upon the allegations in reference to speculative deals by the Montgomery Grain Company is so clearly without foundation in the evidence in the case to sustain it that it seems to us this could not have been the ground for setting aside the judgment of the court and granting a new trial. There was at best, under the evidence in regard to these dealings, merely a suspicion of wrongdoing on the part of the Montgomerys, and nothing can be added to the statement of the trial court that "suspicion will not support a finding." (2) Furthermore, as all of the pleadings in the first suit brought by plaintiff are in the record before the court, it clearly appears that the same issues raised in this case were adjudicated in that. It results that plaintiff is concluded by the judgment in that case, involving the question of salaries, option deals, and good or bad faith in the management of the company's affairs, as to all transactions prior to the time of trial in 1899. Donnell v. Wright, 147 Mo. 639; Bank v. Tracey, 141 Mo 252; Hamilton v. McLean, 139 Mo. 678; Barkhoefer v. Barkhoefer, 93 Mo.App. 373; Hill v. Chowing, 93 Mo.App. 620; Viertel v. Viertel, 99 Mo.App. 717; Jones v. Silver, 97 Mo.App. 231. (3) There is no doubt that our courts have held that if an officer's own vote is necessary to give life to his original contract of employment, this will prevent the contract from being upheld against the corporation, but such holding has always been in cases where the rights of the minority of the stockholders were injured by such officer's vote. This rule, however cannot be justly applied to a corporation where, as here, there were only three stockholders and directors, and where respondent, the minority, neglected and refused to make any effort to exercise her rights. If this doctrine were to be applied to this corporation, as respondent will claim, the corporation would have been unable to do a single act where the personal interest of either of the Montgomerys were involved. They could not have loaned it money, or have given it the benefit of their individual memberships in the board of trade. This would have immediately brought the company's business to a standstill, and above the right of any minority is the right of the corporation to continue its business and accomplish the objects for which it was formed. (4) Another unwarranted claim of the attorneys for respondent is their claim that as the secretary of the company was to keep the records and attend to the correspondence, no bookkeepers or stenographers could be employed by the company, no matter what its volume of business might be, but that the secretary was bound to do all this himself for the salary paid him as secretary. This is reasoning approaching the ridiculous, and is directly contrary to many decisions of our courts. Beach v. Stouffer, 84 Mo.App. 395; Coal Co. v. Watson, 107 Mo.App. 451.
Ellis, Cook & Ellis for appellants.
(1) All the issues which might have been raised and litigated in any case are as completely barred by the final decree therein as if they had been directly adjudicated and included in the verdict. Donnell v. Wright, 147 Mo. 639; Stone Co. v. Wall, 108 Mo.App. 495; Bank v. Tracey, 141 Mo. 252; Hamilton v. McLean, 139 Mo. 678; Barkhoefer v. Barkhoefer, 93 Mo.App. 373; Hill v. Chowning, 93 Mo.App. 620; Viertel v. Viertel, 99 Mo.App. 717; Jones v. Silver, 97 Mo.App. 231; Herman Estop., sec. 5, pp. 43, 44; Herman Estop., sec. 100, p. 101; Hamilton v. McLean, 169 Mo. 51; Railroad v. Levy, 17 Mo.App. 501; 21 Am. and Eng. Ency. Law (1 Ed.), 265; 24 Am. and Eng. Ency. Law (2 Ed.), 781.
J. C. Rosenberger and J. L. Lorie for respondents.
(1) The issue of accounting not being determined by reason of the decree turning on plaintiff's rights as a stockholder, there is no estoppel in this case as to the accounting. 24 Am. and Eng. Ency. Law (2 Ed.), 776, and note 1; Lumber Co. v. Nickey, 89 Mo.App. 270; Warden v. Busbee, 89 Mo.App. 116; Clemens v. Murphy, 40 Mo. 121; Wright v. Salisbury, 46 Mo. 26; Spradling v. Conway, 51 Mo. 51. (2) The salaries drawn were unlawful and excessive. Cook on Stock and Stockholders (2 Ed.), sec. 700a; Carroll v. Bank, 8 Mo.App. 253; Trust & Savings Co. v. Lumber Co., 118 Mo. 457; Ward v. Davidson, 89 Mo. 445; Mill Co. v. Bennett, 39 Mo.App. 460; 21 Am. and Eng. Ency. Law (2 Ed.), 877, 910; Bennett v. Roofing Co., 19 Mo.App. 349; Patrick v. Gas Light Co., 17 Mo.App. 462; Butts v. Wood, 37 N.Y. 317; Adams v. Burke, 102 Ill.App. 148; Pfeiffer v. Brake Co., 44 Mo.App. 59; R. S. 1899, sec. 973; Adlets v. Shoe Co., 84 Mo.App. 288; Hughes v. Cash Register Co., 112 Mo.App. 91; 2 Cook on Corporations (4 Ed.), secs. 731, 732, 733 and notes; Ellis v. Ward, 137 Ill. 509. (3) The defendants are liable on account of the breach of trust of the Montgomerys as directors in bucketshop gambling with the corporate funds. Scott v. Brown, 54 Mo.App. 607; Crawford v. Spencer, 92 Mo. 498; Robinson v. Smith, 3 Paige Ch. 222; Trust Co. v. Weed, 2 F. 24; Harding v. Newton, 14 Blatch. 376; Smith v. Rathbun, 22 Hun 150; London Credit Co. v. Lord, 17 W. R. 562; Cook on Stockholders, sec. 682, note and sec. 816. (4) The defendants are liable on account of the failure of P. H. and W. N. Montgomery to pay for their stock in the company.
--This is an action in equity brought on behalf of a business corporation by one of its stockholders against its managing officers for an accounting and for the recovery of funds belonging to the corporation alleged to have been unlawfully diverted. A trial of the cause resulted in a decree in favor of defendants but the court sustained the motion for a new trial filed by plaintiff on the ground "that the finding and judgment was for the wrong party" and defendants appealed.
On or about July 1, 1897, plaintiff (then Miss Belle Butler) bought 33 1-3 shares of the capital stock of the Montgomery Grain Company of the par value of $ 100 per share and paid par therefor. This company had been incorporated in 1892 as a business corporation. Its capital stock was $ 10,000 divided into one hundred shares and the purpose for which it was created was to engage in the grain business in Kansas City as a commission dealer. When plaintiff purchased the stock mentioned the company was in the enjoyment of a large and profitable commission business and its assets exceeded liabilities by more than $ 10,000 the amount of its capital stock. Its managing officers were P. H. Montgomery, president, W. N. Montgomery, secretary, and H. S. Downs, vice-president. All of the stock, except one or two shares, was owned by the two Montgomerys. Plaintiff was a stenographer employed by a competing dealer. She had some money to invest and was induced by the representations of Downs to purchase the stock. To avoid injury to her position with her employers, she gave the money to Downs who paid for the stock and had a certificate issued in the name of H. D. Smithson--his father-in-law--who on the same day indorsed and delivered it to plaintiff. Soon thereafter the Montgomerys expelled Downs from the corporation on the ground of misconduct and claimed he owned the company about $ 1,500.
After this plaintiff who was at the time indebted to the company on a note of about $ 100 presented the certificate; offered to pay the amount of her debt and requested the Montgomerys to issue a new certificate to her in her own name. This request was refused, except on condition that plaintiff discharge the debt Downs was owing to the company. Thereupon plaintiff about July 1, 1898, brought a suit in equity against the corporation and its officers, the principal object of which was to establish her status as a stockholder and to obtain proper recognition as such by the officers of the company without first being compelled to pay the Downs indebtedness. Plaintiff in that case was unsuccessful in the circuit court, but on appeal we held she was entitled to a transfer of the stock on the books of the company and that no lien existed thereon for the Downs indebtedness and reversed and remanded the judgment. [Butler v. Montgomery Grain Co., 85 Mo.App. 50.] Judgment afterwards was entered in favor of plaintiff in accordance with the mandate and to comply therewith the defendants on August 10, 1900, caused a new certificate for the stock to be issued and delivered to plaintiff.
On September 5, 1900, the stockholders of the company held a meeting for the purpose of electing a director to fill a vacancy on the board. The two Montgomerys were directors and owned all of the stock, except that owned by plaintiff and one other share. The board of directors consisted of three members. Plaintiff was present at the meeting with her attorney and protested that the meeting was illegal but notwithstanding her protest she was elected to fill the vacancy. She refrained from exercising the functions of that office, but demanded and obtained permission to examine the books and records of the company and employed an accountant who made the examination for her. She then brought this present action on February 19, 1901, in which the corporation and the two Montgomerys are joined as defendants. After the suit was brought W. N. Montgomery died and sometime thereafter P. H. Montgomery died. The cause stands revived in the names...
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