Johnson v. United Railways Company of St. Louis
| Decision Date | 12 April 1910 |
| Citation | 127 S.W. 63,227 Mo. 423 |
| Parties | JAMES B. JOHNSON, Appellant, v. UNITED RAILWAYS COMPANY OF ST. LOUIS, et al |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Jas. E. Withrow Judge.
Affirmed.
Jno. A Gilliam for appellant.
(1) The quashing of the order of publication was error. The St. Louis Transit Company and the United Railways Company of St. Louis were both corporations of the State of Missouri, and this State was primarily and necessarily the State in which the ownership and disposition of that stock should be litigated and the courts of this State alone could adjudicate the ultimate right thereto, and this was the only State that could fully enforce its decrees therein. Armour Bros. v Smith, 113 Mo. 12; Stout v. Stout, 77 Ind. 539; Lippincott v. Carriage Co., 34 F. 575; O'Connell v. Taney, 16 Colo. 353; Abbott v. Goodall, 100 Me. 231; Fahrig v. Brewing Co., 113 Ill.App. 525; Patterson v. Railroad, 76 Conn. 635; Crichton v. Webb Press Co., 36 So. 931. (2) While in the case at bar, by reason of the unauthorized acts of the directors and some of the stockholders, the corporation was not formally dissolved, and is still in formal existence, yet its business was all closed out on October 31, 1904, by an alleged surrender of its lease and turning over all its assets either to its own stockholders by a gift of two shares of United Railways stock for each five shares of Transit stock held by them, or turning over to Brown Bros. & Co. on an alleged sale, or to the United Railways Co. All the Transit Co. debts were not paid. Hence plaintiff had a perfect right on that ground alone to refuse to take two shares of United Railways common stock for five shares of Transit stock, because he would immediately be liable to a suit by corporate creditors for the stock so received. Cook on Corp., sec. 641 (5 Ed.), p. 1436; R. S. 1899, sec. 1187. There were over 9,000 shares not voted at the so-called stockholders' meeting, and hundreds of thousands in debts were not paid. Dividends paid to stockholders out of assets are illegal as to corporate creditors whether paid before or after dissolution. Cook on Corp. (5 Ed.), sec. 546 and 642, p. 1445. As no provision whatever was made in the so-called tripartite agreement to pay negligence creditors, otherwise cripples, widows and orphans injured by the operations of the Transit Company, there was certainly no obligation on the plaintiff as a stockholder to accept stock in the United Railways Company for his stock in the Transit Company, and then be subject the next day to a suit for its value. Lamar v. Allison, 101 Ga. 270; Railroad v. Howard, 7 Wall. (74 U.S.) 392; Hastings v. Drew, 76 N.Y. 9; Gratz v. Redd, 4 B. Mon. (Ky.) 178; Vance v. McNabb, 92 Tenn. 47; Grant v. Southern Contract Co., 104 Ky. 781; Gill v. Balis, 72 Mo. 424; Alexander v. Relfe, 74 Mo. 495; Heman v. Britton, 88 Mo. 549; Hagemann v. Railroads, 202 Mo. 249; Marr v. Bank, 4 Cold. (Tenn.) 471; Missouri Lead M. & S. Co. v. Reinhard, 114 Mo. 218; Railroad v. Bee, 48 Cal. 398; Bridge Co. v. Fowler, 55 Kas. 17; Railroad v. Evans, 66 F. 809. Further, one of the conditions of the offer to plaintiff and other stockholders, which plaintiff refused, and declares in his petition was ultra vires, was that the United Railways stock he was to get was to be in a voting trust for five years under the absolute control of Brown Bros. & Co. Surely the law has never yet gone so far as to compel him to take stock in another corporation, in which he is forbidden to have any sort of control for five years. Barrie v. Railroad, 138 Mo.App. 557. The defendants, who are mostly directors, could not purchase the assets of the Transit Co. Bosworth v. Allen, 168 N.Y. 157; Cook on Corp. (5 Ed.), sec. 648; 120 F. 440; Port v. Russell, 36 Ind. 60; Rutland Co. v. Bates, 68 Ver. 579; Miner v. Ice Co., 93 Mich. 97; Fougeray v. Cord, 50 N.J.Eq. 185. Equity throws the burden on the director to show that purchase was proper, fair, made in good faith, and without any undue advantage of the corporation. Ryan v. Williams, 100 F. 172; Coombs v. Barker, 79 P. 1; Brewing Co. v. Flanner, 44 La. Ann. 22; Booth v. Land Co., 59 A. 767; 10 Cyc. 807-814; Jones v. Missouri-Edison Co., 144 F. 765. Complainant may pray for complete setting aside of transfer or for such other relief as equity under the circumstances can grant, and equity will grant him the relief to which he is entitled. Jones v. Missouri-Edison Co., 144 F. 765; Liese v. Meyer, 143 Mo. 547. The minority are entitled to a public sale. Cook on Corp. (5 Ed.), sec. 662, p. 1531 and sec. 671; Chicago Cab Co. v. Yerkes, 141 Ill. 320; Mason v. Pewabic Co., 133 U.S. 50; Keen v. Johnson, 9 N.J.Eq. 401; Ervin v. Oregon Nav. Co., 27 F. 625; Railroad v. Railroad, 13 R. I. 260; Morris v. Elyton Co., 125 Ala. 263; Forrester v. Boston Co., 21 Mont. 544; Feld v. Roanoke Co., 123 Mo. 603; Elyton Land Co. v. Dowdell, 113 Ala. 177; Carter v. Producer's Co., 164 Pa. St. 463.
Boyle & Priest and T. E. Francis for respondents.
(1) The appeal should be dismissed for the reason that no final judgment has been rendered disposing of all the parties to the cause. Eighteen of the thirty defendants demurred, and upon the demurrer being sustained, final judgment was rendered for them, but no judgment in favor of the other defendants was rendered, and the cause is still pending in the court below as to them. Rock Island Imp. Co. v. Marr, 168 Mo. 252; Baker v. St. Louis, 189 Mo. 375. (2) The court did not err in quashing the order of publication against the non-resident defendants. The only relief that could be granted as to said defendants, under the averments of the bill, would be to order an accounting, and any judgment that might be rendered thereon would necessarily be in personam. In such a case, jurisdiction cannot be obtained by publication. Beyer v. Trust Co., 63 Mo.App. 521; Wilson v. Railroad, 108 Mo. 588; Moss v. Fitch, 212 Mo. 484; Pennoyer v. Neff, 95 U.S. 714. (3) Plaintiff cannot maintain this suit, because he had not registered his stock nor obtained recognition from the corporation as a stockholder, at the time it was filed. Brown v. Railroad, 53 F. 889; Hodge v. U. S. Steel Corp., 53 A. 601. (4) Plaintiff cannot maintain the action because he was guilty of laches. Tanner v. Railroad, 180 Mo. 18 Hanchett v. Blair, 100 F. 827; Field v. Roanoke Inv. Co., 123 Mo. 603; Sheldon Hat Co. v. Eixkemeyer Co., 90 N.Y. 611; 1 Thompson on Corp., sec. 80; 4 Thompson on Corp., sec. 4534; Zabriskie v. Railroad, 23 How. (U.S.) 398; 5 Notes U. S. Rep. 1000; Commonwealth v. Cullen, 53 Am. Dec. 467 (note); Stokes v. Detrick, 76 Md. 226; Tash v. Adams, 10 Cush. 252. (5) (a) A suit by a stockholder of a corporation to set aside a transfer of the corporation's property is essentially a suit on behalf of the corporation. 26 Am. & Eng. Ency. Law, p. 972; Exeter v. Sawyer, 146 Mo. 324. (b) It necessarily follows that where the corporation itself has no valid cause of action, a stockholder cannot maintain any such suit in its behalf. 26 Am. & Eng. Ency Law, p. 972; Waymire v. Railroad, 112 Cal. 646; Miller v. Magazine Co., 10 Misc. (N. Y.) 311; Hart v. Railroad, 89 Hun (N. Y.) 316; Hutchison v. Simpson, 92 A.D. 382. (c) Where suit is brought for the rescission of a contract, the plaintiff has no cause of action unless he tenders back whatever of value he has received and places the other contracting party in statu quo. Buford v. Packet Co., 69 Mo. 611; Robinson v. Sipple, 129 Mo. l. c. 220; Melton v. Smith, 65 Mo. 315; Donovan v. McDermott, 108 Mo.App. 533; 12 Enc. Pl. & Pr., 831. (d) The Transit Company would have no standing in court to rescind the tripartite agreement and to recover back the property it had disposed of in pursuance thereof, unless it first restored the status quo by returning to the other contracting parties that which they paid out and assumed as consideration for the transfer of said property. And plaintiff in suing for Transit Company stands in precisely the same position as that company would, were it the plaintiff. The petition does not, therefore, state a cause of action, inasmuch as it does not allege or show any offer, willingness or ability to restore the status quo either by plaintiff or the Transit Company. Buford v. Packing Co., 69 Mo. 611. Authorities cited under subdivision c, supra. (6) If facts were pleaded that would justify a decree of rescission, such rescission would not be granted, because it would be productive of more injury than would result from a refusal of it. Tanner v. Railroad, 180 Mo. 1; Bailey v. Culver, 84 Mo. 540; Railroad v. Payne, 49 F. 114; Swift v. Jenks, 19 F. 643; Morris v. Pruden, 20 N.J.Eq. 530; Railroad v. Strauss, 37 Md. 237; Sheldon v. Rockwell, 9 Wis. 166; Cobb v. Smith, 16 Wis. 166; Gray v. O. & P. Co., 1 Grant's Cas. 412; Van Rance v. College, 4 Hun 620; Meredith v. Sayer, 32 N.J.Eq. 557; Southard v. Canal Co., 1 N.J.Eq. 518; Sprague v. Rhodes, 4 R. I. 301; Wood v. Sutcliffe, 8 Eng. L. & E. 217 (7) In the tripartite agreement, set out in the bill, Transit Company admits that it had no way of paying a shortly maturing indebtedness of $ 6,711,000, most of which was secured by a pledge of the securities sold to Syndicate, except by the sale of those securities as provided in that agreement. This admission of inability to pay this huge sum was a confession of insolvency, and it is not alleged in the bill to be untrue. Neither is it alleged that this sale was brought about through clandestine methods, nor that any other person offered to or would have paid more for the securities than Syndicate did, nor that any other person was prohibited from making an offer for them. Under these facts, the sale of said securities was not fraudulent in law.
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