Hyde Park Amusement Co. v. Mogler

• Decision Date: 08 November 1948
• Docket Number: 40679
• Parties: Hyde Park Amusement Company, a Corporation, Appellant, v. Adele Mogler, Mogler Amusement Company, a Corporation, Marguerite A. Kaimann, William S. Kaimann, Mildred H. Kaimann, Arline J. Kaimann, and Kaimann Amusement Company, a Corporation, Respondents
• Court: Missouri Supreme Court

214 S.W.2d 541

358 Mo. 336

Hyde Park Amusement Company, a Corporation, Appellant, v. Adele Mogler, Mogler Amusement Company, a Corporation, Marguerite A. Kaimann, William S. Kaimann, Mildred H. Kaimann, Arline J. Kaimann, and Kaimann Amusement Company, a Corporation, Respondents

No. 40679

Supreme Court of Missouri

November 8, 1948

Appeal from Circuit Court of City of St. Louis; Hon. Robert L Aronson, Judge.

Affirmed.

Paul M Gerwitz, Jr., Donald Durbin, Francis R. Stout and Richard M Stout for appellant.

(1) Marguerite Kaimann owed a high fiduciary duty to plaintiff as an officer of plaintiff, and the evidence conclusively showed a conspiracy between all the defendants for her to violate that duty. Southwest Pump & Machinery Co. v. Forslund, 225 Mo.App. 262, 29 S.W.2d 165; Twin Lick Oil Co. v. Marbury, 91 U.S. 587, 23 L.Ed. 328; Pepper v. Littleton, 308 U.S. 295, 84 L.Ed. 281, 60 S.Ct. 238; Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545; Pike's Peak Co. v. Pfuntner, 158 Mich. 412, 123 N.W. 19; Tierney v. Coal Co., 85 W.Va. 545, 102 S.E. 249; Pacific Vinegar Works v. Smith, 145 Cal. 365; 2 University of Chicago L. Rev. 323; 4 Minnesota L. Rev. 513. (2) This case having been tried in equity without a jury, the Supreme Court will review it upon both the law and the evidence. Sec. 487.114(d) Mo. R.S.A.; Anderson v. Tietze, 354 Mo. 552, 190 S.W.2d 193; Dye v. School District No. 32, 195 S.W.2d 467. (3) Since Marguerite Kaimann was a fiduciary of plaintiff, fraud will be presumed and her dealings to the detriment of plaintiff will be closely scrutinized. The burden was upon her to disprove the presumption of fraud. Merger Mines Corp. v. Grismer, 137 F.2d 335; 3 Pomeroy, Equity Jur. (5th Ed.), sec. 922, p. 626; 3 Fletcher, Cyclopedia on Private Corp. (Perm. Ed.), sec. 918; Winger v. Chicago City Bank & Trust Co., 394 Ill. 94, 67 N.E.2d 265; Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545; Pike's Peak Co. v. Pfuntner, 158 Mich. 412, 123 N.W. 19. (4) If Clarence Kaimann had any fruaudulent intentions, such intentions would not render his hands unclean so long as they were unconsummated, and therefore as a matter of law the trial court could not have found against plaintiff on the "clean hands" doctrine, even if it had been justified by the evidence in finding that Clarence Kaimann schemed to purchase the theatre. Butte Inv. Co. v. Bell, 201 S.W. 880; Bante v. Bante Dev. Co., 27 S.W.2d 481; Hobbs v. Boatright, 195 Mo. 693, 93 S.W. 934; 30 C.J.S., sec. 95, pp. 483-4; 2 Pomeroy's Equity Jurisprudence (5th Ed.), sec. 399, p. 99; Moxie Nerve Food Co. v. Holland, 141 F. 202; Note: 4 A.L.R. 44, l.c. 58. (5) No matter what his intentions, if Clarence Kaimann had purchased the property personally, he would have held it as trustee for the plaintiff, and therefore his hands would not be unclean, because defendant would have been unhurt by such conduct. Winger v. Chicago City Bank & Trust Co., 394 Ill. 94, 67 N.E. 265; 3 Pomeroy's Equity Jur. (5th Ed.), sec. 399, p. 99. (6) The conclusion that defendants conspired to defraud plaintiff is an inescapable one. (7) Even if Clarence Kaimann's hands were unclean in a manner to bar him from seeking equitable relief, any taint on Clarence Kaimann cannot be imputed to plaintiff corporation. Courts will not pierce the corporate veil to further fraud -- only to prevent fraud. In re Collins, 75 F.2d 62; Council for Defense etc. v. International Magazine Co., 267 F. 390; Gordon v. Brucker, 208 Ill.App. 188; Note: 1 Prentice-Hall Corporation Service, para. 1014-1015; In re N.Y. Title & Mortgage Co., 172 N.Y. Misc. 73, 14 N.Y.S. (2d) 570.

Carl M. Dubinsky, Dubinsky & Duggan and Joseph Nessenfeld for respondents.

(1) Marguerite Kaimann did not violate any fiduciary duty owing by her to the Hyde Park Amusement Company. Whether a duty is owing in a particular situation is largely a question of fact. Clarence Kaimann, the only officer of plaintiff whose duty it was to negotiate for the theatre on behalf of the corporation, failed and refused to make the purchase for plaintiff. Under the circumstances of this case, the trial court was justified in finding that there was no breach of any duty on the part of Marguerite Kaimann to act for the corporation. Clubb v. Davidson, 95 Mo. 467, 8 S.W. 545; 3 Fletcher Cyc. Corp. (Perm. Ed.), sec. 862. (2) Clarence Kaimann does not come into court with clean hands and is not entitled to relief. His bad-faith scheme and attempt to purchase the theatre secretly through a straw party for his benefit in order to deprive Mrs. Kaimann of her interest therein is reprehensible and directly related to the matter in controversy. His unconscionable conduct makes his hands unclean, so that the trial chancellor properly refused to grant him affirmative relief. Moore v. Carter, 201 S.W.2d 923; Little v. Cunningham, 116 Mo.App. 545, 92 S.W. 734; Prim v. White, 162 Mo.App. 594; 142 S.W. 802; McCaw v. O'Malley, 298 Mo. 401, 249 S.W. 41; Union Electric L. & P. Co. v. DeGraffenreid, 229 Mo.App. 622, 78 S.W.2d 571; Wainscott v. Strode, 237 S.W. 196; Rose v. Houser, 296 S.W.2d 571; Ledirk Amusement Co., Inc., v. Schechner, 33 A.2d 894, 37 A.2d 823; Sano Petroleum Corp. v. Shell Oil Co., 3 F.R.D. 181; Mas v. Coca-Cola Co., 163 F.2d 505; Cleveland-Cliffs Iron Co. v. Artic Iron Co., 261 F. 15; 30 C.J.S., Equity, sec. 95; 2 Pomeroy's Equity Jur. (5th Ed.), sec 397. (3) Misconduct bars an action in equity where, as here, the party seeking relief has been guilty of inequitable conduct in the very matter about which relief is sought, even though the inequitable conduct has not resulted in actual fraud. In view of Clarence Kaimann's moral intent and his efforts to consummate his fraudulent scheme, the mere fact that it was frustrated by the alert action of Mrs. Kaimann, taken in selfdefense, does not prevent the application of the "clean hands" doctrine. Moore v. Carter, 201 S.W.2d 923; Margolies v. Burke, 53 N.Y.S. (2d) 157; David Adler & Sons Co. v. Maglio, 200 Wis. 153, 228 N.W. 123; 30 C.J.S., sec. 95, p. 483; 2 Pomeroy's Equity Jur. (5th Ed.), sec. 404. (4) The wrongful conduct of Clarence Kaimann was directly responsible for the good-faith action of Marguerite Kaimann to protect herself against the loss of her interest in the property. The trial chancellor, therefore, properly refused to grant him relief against the consequences of his own wrongdoing. David Adler & Sons Co. v. Maglio, 200 Wis. 153, 228 N.W. 123; Heylandt Sales Co. v. Welding Gas Products Co., 180 Tenn. 425, 175 S.W.2d 557. (5) Since Clarence Kaimann is not entitled to equitable relief, he cannot obtain such relief by the device of bringing suit in the name of the corporation for his sole benefit. The action was brought by Clarence Kaimann without any authority granted by the stockholders or directors of the corporation. The corporation is not properly before the court. Arkansas River Land, T. & C. Co. v. Farmers L. & T. Co., 13 Colo. 587, 22 P. 954. (6) Equity regards the substance, not the form, and looks behind the corporation to the persons who are the real beneficiaries of any recovery. Where, as here, the stockholder beneficiary of the judgment sought has no standing in equity and is not equitably entitled to the remedy sought, he cannot obtain such relief by proceeding in the name of the corporation. Landa v. Whitfield, 131 S.W.2d 310; Erickson-Hellekson-Vye Co. v. A. Wells Co., 217 Minn. 361, 15 N.W.2d 162; Home Fire Ins. Co. v. Barber, 67 Neb. 64, 93 N.W. 1024; Cleveland-Cliffs Iron Co. v. Arctic Iron Co., 261 F. 15; Arkansas River Land, T. & C. Co. v. Farmers L. & T. Co., 13 Colo. 587, 22 P. 954; Peltzer v. Gilbert, 260 Mo. 500, 169 S.W. 257. (7) The fiction of corporate entity will be disregarded in equity where necessary to prevent fraud or avoid an inequitable result and in cases not within the reason and policy of the fiction. The parties themselves treated the corporation as a mere shell and operated as a partnership. Under the circumstances, it would be improper to permit Clarence Kaimann to utilize the device of corporate entity to obtain relief to which he is not equitably entitled. State ex inf. McKittrick v. Koons, 201 S.W.2d 446; Ruckels v. Pryor, 351 Mo. 819, 174 S.W.2d 185; Whitfield v. Kern, 182 A. 48. (8) This court should defer to the findings of the trial chancellor who observed the demeanor and appearance of the witnesses and had a better opportunity to determine their credibility. The judgment was for the right parties under the evidence and should be affirmed. Moore v. Carter, 201 S.W.2d 923; Steinhoff v. Kinder, 186 S.W.2d 600; Colquitt v. Lowe, 184 S.W.2d 420; Sec. 114(d), Mo. R.S.A.

Bradley, C. Dalton and Van Osdol, CC., concur.

OPINION

BRADLEY

Action for a declaratory judgment to the effect that whatever title or interest defendants (respondents) have in a theater building and certain personal property equipment therein at 1929 Bremen Avenue, St. Louis, is held in trust for plaintiff (appellant) and is in law the property of appellant. The trial court found for respondents; held that the property, both real and personal, was the property of respondent Kaimann Amusement Company and that appellant had no interest therein.

Respondent Adele Mogler, prior to July 20, 1946, owned the theater lot and building thereon and the Mogler Amusement Company owned the equipment therein. Appellant, by its manager, Clarence H Kaimann, operated a motion picture show in the building which was known as the Bremen Theater. Clarence and respondent Marguerite A. Kaimann owned a 10 year lease, given by respondent Adele Mogler, on the theater building and equipment, which lease expired July 31, 1946. The lessees named in the lease were Clarence H. Kaimann and his brother, William J. Kaimann. William died and his widow, responden...