Hunter v. Garanflo

• Decision Date: 30 November 1912
• Citation: 151 S.W. 741,246 Mo. 131
• Parties: HUNTER v. GARANFLO.
• Court: Missouri Supreme Court

151 S.W. 741

246 Mo. 131

HUNTER v. GARANFLO.

Supreme Court of Missouri, Division No. 1.

November 30, 1912.

1. CORPORATIONS (§ 376) — PURCHASE OF CORPORATE STOCK — POWER OF CORPORATION.

In view of Const. art. 12, §§ 7, 8, respectively providing that no corporation shall issue stock except for money, labor done, or property actually received, and that it shall engage in no business other than that expressly authorized, and Rev. St. 1909, §§ 3339, 3354, providing that at least one-half of the funds represented by the capital stock of a business corporation shall consist of lawful money and that it can only be diminished by certain formalities, a business corporation whose capital was $20,000 is without authority to purchase one-half of its shares at a premium, and hence a deed of trust given for that purpose is void.

2. CORPORATIONS (§ 484) — POWERS OF CORPORATIONS — ACTING AS SURETY.

As business corporations are expressly forbidden by Const. art. 12, § 7, to engage in business other than that authorized by their charters, such a corporation has no power to act as surety of its stockholder and pledge its credit for his purchase of its stock, and therefore a deed of trust executed by it in pursuance of such a plan is void and unenforceable.

Appeal from Circuit Court, Ste. Genevieve County; Chas. A. Killian, Judge.

Action by Lee Hunter against W. H. Garanflo, as assignee. From a judgment for defendant, plaintiff appeals. Affirmed.

John A. Hope, of St. Louis, for appellant. W. H. Miller, of Cape Girardeau, for respondent.

BROWN, C.

This is a suit by appellant against the respondent as assignee under the insolvent laws of the state of Missouri of the Mathewson Mercantile Company, a Missouri business corporation, engaged in the business indicated by its name. Its object is to enforce the lien of a mortgage executed by the corporation February 17, 1902, in which A. G. Mathewson, Lizzie Mathewson, and Mabel Mathewson join, conveying the real estate of the corporation to secure the payment to the plaintiff of three notes aggregating $11,700, of the same date and signed by the same parties, and also other notes of the same parties to the People's Bank, aggregating $5,947.26. This bank was a private bank owned by plaintiff and one Albert Hunter. This suit involves the three Hunter notes only.

The Mercantile Company was incorporated in 1901 with a capital stock of $20,000, $10,000 of which was subscribed by the plaintiff, $9,000 by A. G. Mathewson, and $1,000 by his wife, who is one of the makers of the notes and mortgage in question. The grantors in the mortgage, other than the corporation, are described as "all the stockholders of the said corporation." The Hunter notes were given in payment for the $10,000 of stock subscribed and owned by Hunter, and which were in this transaction transferred to A. G. Mathewson. Although other questions of interest were raised upon the trial, the case is submitted here upon the sole question as to whether or not the mortgage constitutes a valid lien upon the real estate of the corporation for the security of the Hunter notes, so that, if that question can be answered in the affirmative, this judgment should be reversed, and such judgment entered here as should have been entered in the trial court, or the cause remanded for further proceedings. If it be answered in the negative, the judgment should be affirmed.

The object and effect of the Constitution and laws of this state with reference to corporations seem to be to permit and encourage the investment of the money of the people in business enterprises under corporate management, without the incurring of any personal liability beyond the full payment for the stock subscribed or otherwise owned by the members of the association. That this plan has been of great benefit to the state, permitting as it does the free employment of the private means of all, including the helpless classes, in active business...