J. B. Johnson v. United Railways Company

• Citation: 152 S.W. 362,247 Mo. 326
• Parties: J. B. JOHNSON et al. v. UNITED RAILWAYS COMPANY et al., Appellants
• Decision Date: 31 December 1912
• Court: United States State Supreme Court of Missouri

152 S.W. 362

247 Mo. 326

J. B. JOHNSON et al. v. UNITED RAILWAYS COMPANY et al., Appellants

Supreme Court of Missouri

December 31, 1912

Editorial Note:

This Pagination of this case accurately reflects the pagination of the original published, though it may appears out of sequence.

Appeal from St. Louis City Circuit Court. -- Hon. W. B. Homer Judge.

Affirmed (as modified).

Boyle & Priest for appellants.

(1) The plaintiff in this case should be denied relief because this action is tainted with champerty and maintenance, and the plaintiff has not come into a court of equity with clean hands. Champerty and maintenance are now recognized as prevailing in this State, with the same force and vigor as in England under the common law. Breeden v. Insurance Co., 220 Mo. 327; 5 Am. & Eng. Ency. Law (2 Ed.), p 815; Quigley v. Thompson, 53 Ind. 317. This lawsuit is the result of the efforts of the plaintiff and his attorney to intermeddle and stir up strife, and beget controversies in matters which are none of their business. It is champerty to buy a doubtful claim, or to instigate a person to litigate. The bare right to file a bill in equity for fraud practiced on an assignor, is not assignable. Wilson v. Railway, 120 Mo. 58. (2) This suit is fatally defective because Brown Brothers and Company are not made parties defendant, and they are directly affected by the decree. Plaintiff has left out necessary and essential parties, and before he can go on with his present action and have the trust created by the tripartite agreement set aside and declared a nullity, he must include the stockholders and Brown Brothers & Company in the cause, and the fact that Brown Brothers & Company are alleged to be non-residents does not change the rule. Shields v. Barrow, 17 How. 130; Ware v. Hollins, 14 Md. 158; Snodgrass v. Andrews, 30 Miss. 172; Randolph v. Daily, 16 N.J.Eq. 313; Boyd v. Hoyt, 5 Paige (N.Y.), 65; Bank v. Yuengling, 58 Hun, 474. (3) Plaintiff cannot recover because it is not shown from the evidence that defendant took the assets of Trasit Company without any or adequate consideration, or was guilty of any fraudulent conduct. The personnel of the directors of the Transit Company and Railways Company was practically the same, but the capital stock of each company was owned by vastly different persons. These companies were organized under the provisions of sec. 1187, R.S. 1899. They were granted express power to make contracts for the sale of their assets, which by a well-known rule of statutory construction, gave them the right to make contracts for the acquisition of such assets. Moorshead v. Railways, 119 Mo.App. 558. There was no statutory restriction upon this right to contract interdicting its exercise between corporations whose stockholders and managing officers were identical, and in the absence of any restriction, it would be judicial legislation for the courts to hold that such interdiction exists. The State having authorized them to contract with each other, regardless of whether their creators and managers were composed of the same or different persons, thereafter the courts cannot annul their contracts because of the identity of their managing officers. Noyes on Incorporate Relations, p. 279; Warfield v. Canning Co., 78 Iowa, 66; Pullman Co. v. Railroad, 115 U.S. 587; Bank v. Iron Co., 97 Mo. 38. The assumption of the liabilities of one corporation by another is sufficient consideration to make a transfer of its assets valid, and especially is this so when the liabilities assumed largely exceed the assets. Benesch v. Insurance Co., 72 N.E. 674; Baker v. Harpster, 22 P. 415; Fernschild v. Vedder, 49 N.E. 151. The knowledge that a seller is insolvent will not affect the purchase if a full compensation is made by the buyer. Show Co. v. Prickett, 84 Mo.App. 94. The dealings between the two companies were always fair and equitable, and authorized by law. Alexander v. Williams, 14 Mo.App. 13; Kitchen v. Railroad, 69 Mo. 224.

Marion C. Early for intervenors; A. R. & Howard Taylor, Albert E. Hausman, Earl M. Pirkey, Lon O. Hocker, William L. Bohnenkamp and William R. Gentry of counsel.

(1) It being clearly established that there was a concurrent ownership and control at all times between appellant and the St. Louis Transit Company, it follows that they were utterly incapable of entering into a valid contract with each other. There could be no mutual assent -- therefore, no binding agreement. The one is a mere shell for the other. Barrie v. Railways, 138 Mo.App. 557; Milford v. Water Co., 3 L.R.A. 122; Day v. Tel. Co., 66 Md. 354; Bank v. Trebein Co., 59 Ohio St. 316. (2) The assets of a corporation are impressed with a trust in favor of creditors, and no distribution can be made among stockholders until all debts and liabilities have been satisfied. Nor could the same men vote a "sale" to themselves of the assets of either company. Cotton Seed Oil Co. v. Refining Co., 108 La. 74; Berry v. Row, 168 Mo. 316; 2 Morawetz on Corp., 790. (3) When the directory and principal officers of two corporations are substantially identical, all transactions between them are prima facie fraudulent as to creditors. Such being admittedly true here, all attempted transactions between appellant and Transit Company are prima facie fraudulent as to creditors. Barrie v. Railways, 138 Mo.App. 557; Noyes on Intercorporate Relations, sec. 124, pp. 194, 195; Farnum v. Railroad, 150 N.Y. 430; Railroad v. Evans, 66 F. 810; In re Pulp Co., 139 F. 546. (4) They cannot sell at a valuation fixed by themselves under such circumstances. Moson v. Pewabic Min. Co., 133 U.S. 50. (5) When one corporation acquires all the assets of another corporation, which it controls, issues its stock in exchange for the stock of the old company, and the old company ceases to be a going concern and the new company continues the business, the new company receives the assets of the old company, burdened by its liabilities. The effect of such transaction is to distribute the assets of the old company to the exclusion of creditors. This cannot be done. In the case at bar both companies were at all times controlled absolutely by the same owners and officers, and the property "taken over" was subject to the payment of all liabilities of Transit Company. Berthold v. Lumber Co., 91 Mo.App. 333; Furniture Co. v. Hall, 107 N.W. 117; Laws 1907. (6) Sec. 1187, R.S. 1899, never contemplated a destruction of the elementary principles of the law of contracts, nor to in any manner enlarge the powers or lessen the liabilities of street railway companies in dealings with their creditors. The statute has no application here.

John A. Gilliam for respondents.

(1) Gilliam's contracts have been approved both by the statutes and the decisions of the courts of Missouri. R.S 1909, sec. 965; Wait v. Railway, 204 Mo. 491; Curtis v. Railway, 118 Mo.App. 341, 125 Mo.App. 369; Boyd v. Mercantile Co., 135 Mo.App. 115; Beagles v. Robertson, 135 Mo.App. 306; Taylor v. Transit Co., 198 Mo. 715; O'Connor v. Transit Co., 198 Mo. 622; Lipscomb v. Adams, 193 Mo. 530; Yonge v. Transit Co., 109 Mo.App. 235. The transfer of the judgments seems to have been plain assignments, without any understanding or agreement that the original plaintiffs were to receive anything further for the judgments than the amount paid for the same at the time of their transfer. (a). The defenses of champerty and maintenance are not set up in the answer. Kelerher v. Henderson, 203 Mo. 498. Champerty or maintenance cannot be raised except where the contract made illegal by champerty or maintenance is an issue in the case on trial. Kelerher v. Henderson, 203 Mo. 515; Bent v. Priest, 86 Mo. 490; Pike v. Martindale, 91 Mo. 284; Euneau v. Rieger, 105 Mo. 682. The right of attorneys to contract for a contingent fee has been unquestioned in Missouri since 1877. Duke v. Harper, 66 Mo. 51. (b). An assignment by a judgment creditor of his rights under the judgment entitles the assignee to file a creditor's bill in his own name. Diamond v. Rogers, 203 Ill. 464. The purchase of a final judgment is not the purchase of a litigious right. McMicken v. Perin, 59 U.S. 507; Bispham's Prin. of Equity (6 Ed.), sec. 166; Emmons v. Barton, 109 Cal. 662; 2 Am. & Eng. Ency. Law (2 Ed.), 1024; Lionberger v. Baker, 14 Mo.App. 353; Whitney v. Roberts, 22 Ill. 381. Judgment for tort is assignable. 17 Am. & Eng. Ency. Law 874; Moore v. Nowell, 94 N.C. 265; Charles v. Haskins, 11 Iowa, 329; Stewart v. Lea, 46 Atl. (N.H.) 31. The absolute assignment of a judgment passes all the assignor's assignable rights therein to the assignee, and gives to the latter the right to use every remedy, lien or security available to the assignor as a means of enforcement or indemnity, unless expressly excepted or reserved in the transfer. 17 Am. & Eng. Ency Law (2 Ed.) 882; Schlieman v. Bowlin, 36 Minn. 198; Kimble v. Cummins, 3 Metc. (Ky.) 327; Brooks v. Sanders, 110 Ill. 453; Applegate v. Mason, 13 Ind. 78; Wilson v. Wilson, 3 Del. Ch. 183; R.S. 1899, secs. 3745 and 3748; R.S. 1909, secs. 2156-2159; Lionberger v. Baker, 14 Mo.App. 353, 88 Mo. 447; Burns v. Bangert, 16 Mo.App. 22; Bank v. Burkley, 68 Mo.App. 327; Benne v. Schnecko, 100 Mo. 250. (2) The fact that the principal debtor in a creditor's bill is a nonresident and cannot be served does not oust the jurisdiction of the court to decree against resident defendants such relief as may be proper as against them alone. State ex rel. v. Bradley, 193 Mo. 43; Manufacturing Co. v. Baldwin, 87 F. 785. Persons who have parted with their title to the land involved in a proceeding in aid of execution are not necessary parties thereto. Andrews v. Scott, 211 Ill. 612; Jackman v. Robinson, 64 Mo. 289. (a). The charge being that the St. Louis Transit Company's...