Johnson v. United Rys. Co. of St. Louis

• Decision Date: 31 December 1912
• Citation: 247 Mo. 326,152 S.W. 362
• Parties: JOHNSON et al. v. UNITED RYS. CO. OF ST. LOUIS et al.<SMALL><SUP>†</SUP></SMALL>
• Court: Missouri Supreme Court

152 S.W. 362

247 Mo. 326

JOHNSON et al. v. UNITED RYS. CO. OF ST. LOUIS et al.^†

Supreme Court of Missouri.

December 31, 1912.

1. COSTS (§ 172)—ALLOWANCE OF ATTORNEY'S FEES.

Where, in an action in equity to subject to the payment of debts property which the debtor had transferred in fraud of creditors, there was a general money judgment for plaintiff, a motion of his attorney for an allowance of attorney's fees was properly denied.

2. APPEAL AND ERROR (§ 1078)—PRESENTATION FOR REVIEW—REPLY BRIEF.

The Supreme Court need not review the sufficiency of the petition, where the question, though presented below, is first presented on appeal in the reply brief.

3. CORPORATIONS (§ 548)—CREDITORS' SUITS —PLEADINGS.

Plaintiff's bill in a suit to reach property transferred by the debtor corporation to another corporation in fraud of creditors need not set forth in its exact words the tripartite contract between the two corporations and another, pursuant to which the transfer was made, but it was sufficient, under Rev. St. 1909, §§ 1813, 1818, 1831, making it sufficient to plead substantive facts without stating the evidence and stipulating that pleadings shall be liberally construed, to plead such of the substance of such contract as he relied upon.

4. CHAMPERTY AND MAINTENANCE (§ 4) —PLEADINGS—DEFENSES.

Where a bill in equity did not on its face savor of champerty or maintenance, defendants could not avail themselves of this defense without having pleaded it.

5. CHAMPERTY AND MAINTENANCE (§ 5)— ELEMENTS—CONTINGENT ATTORNEY'S FEE.

In view of Rev. St. 1909, § 965, authorizing contracts for contingent attorney's fees, the fact that the fee of a judgment creditor's attorney in an action to subject to the payment of judgments fraudulently transferred assets of the debtor corporation was contingent on success did not show champerty or maintenance.

6. CORPORATIONS (§ 548)—CREDITORS' SUIT—RIGHT OF ACTION.

The rule that a suitor in equity must come with clean hands did not preclude plaintiff from maintaining a creditor's suit to subject to the payment of personal injury judgments assigned to him property which had been transferred by the debtor corporation in fraud of creditors.

7. CORPORATIONS (§ 548)—CREDITORS' SUITS —PARTIES.

In a suit to reach assets which the debtor corporation had transferred in fraud of creditors, it was not necessary to join the stockholders of the debtor corporation where the corporation was itself a party.

8. CORPORATIONS (§ 548)—CREDITORS' SUITS —PARTIES—JOINT WRONGDOERS.

In a suit to subject to judgments assets which the debtor corporation had transferred to another corporation in fraud of creditors, a syndicate which had acted as the conduit or agency through which the transfer was made was not a necessary party; the presence of the syndicate in the transaction as a joint wrongdoer not being available to in any way relieve the other wrongdoers.

9. PARTIES (§ 75) — DEFECT — OBJECTION — WAIVER.

Under Rev. St. 1909, §§ 1800, 1804, providing that a demurrer shall lie for defect of parties apparent on the face of a pleading, and that, when such defect does not so appear, objection must be taken by answer, or shall be waived, defendants waived any defect of parties where they answered a bill in equity by general denial only.

10. CREDITORS' SUIT (§ 7)—FRAUD.

Since fraud must concur with damages to be actionable, constructive or actual fraud without damage will not support a creditor's bill.

11. CORPORATIONS (§ 230) — LIABILITY OF STOCKHOLDERS—PAID-UP STOCK.

Individual shareholders of paid-up shares of stock are not personally liable for corporate debts, nor is their stock liable or subject to any limitations as to transfer or voting power by reason of any such debts.

12. CORPORATIONS (§ 523)—DEBTS—LIABILITY OF CORPORATE ASSETS.

All the assets of a corporation were subject to levy and sale under a judgment against the corporation, though this would wipe out stock values.

13. CORPORATIONS (§ 548)—CREDITORS' SUITS —TRANSFER OF CORPORATE PROPERTY.

The fact that corporate debts do not limit the right of stockholders to vote in corporate elections does not license them to vote without regard to the result upon the rights of creditors of the corporation, nor does it take away the right of a creditor of the corporation to attack a transfer of corporate assets by vote of the stockholders to another corporation in fraud of creditors.

14. CORPORATIONS (§ 544)—RIGHTS OF CREDITORS—STOCKHOLDERS.

The assets of a corporation are, in equity, a trust fund in which creditors have a right superior to stockholders.

15. CORPORATIONS (§ 547)—LIABILITIES.

Corporations may be held liable, their transactions scrutinized, and transfers of property between corporations set aside as fraudulent, the same as though they were natural persons.

16. EQUITY (§ 56)—NATURE.

17. CORPORATIONS (§ 548)—CREDITORS' SUITS —PROPERTY FRAUDULENTLY TRANSFERRED.

Where a railroad corporation against whom numerous personal injury judgments had been obtained transferred, under a tripartite agreement, all its assets to another corporation having practically the same directors and stockholders, so that the assets, in effect, remained in the hands of the same persons under another corporate name, stock in the new corporation being exchanged for that of the old on a basis to protect the old stockholders from loss, and where the debts of all creditors except those having personal injury judgments were assumed and paid by the new corporation, and the policy was adopted of shaving down and settling, as a pretended act of grace, such personal injury claims as corporate counsel should recommend, a court of equity properly held such assets liable for the personal injury judgments.

In Banc. Appeal from St. Louis Circuit Court; W. B. Homer, Judge.

Action by J. B. Johnson and others against the United Railways Company of St. Louis and others. From a judgment for plaintiffs, defendants appeal, and John A. Gilliam, attorney for one of the plaintiffs, appeals from the disallowance of an attorney's fee. Affirmed.

See, also, 147 S. W. 1077.

Boyle & Priest, of St. Louis, for appellants. John A. Gilliam, of St. Louis (A. R. & Howard Taylor, A. E. Hausman, Earl M. Pirkey, Lon Hocker, W. L. Bohnenkamp, and W. R. Gentry, all of St. Louis, of counsel), for respondents. Marion C. Earley, of St. Louis, for interveners.

LAMM, J.

Equity. From an omnibus decree against them, defendants Transit Company and Railways Company appeal. Mr. Gilliam appeals from an order refusing him an allowance of an attorney's fee.

Shortly, the record shows that at a certain time Railways Company became owner of the street railways of St. Louis. The consolidation was born in 1899 of the efforts of two syndicates, headed by Maryland Trust Company and Brown Bros. and Patrick Calhoun, respectively. Presently, for reasons left to be conjectured, the men who control Railways Company organize Transit Company. There were some new stockholders, more at one time than at another, but the official and directorate power was the same in each, mutatis mutandis. The stockholding power in Railways Company was held by Transit Company. These twin or allied companies were chartered to sit in the same corporate nest in a figurative sense; for, to all intents and purposes, the one (Transit Company) controlled the other through its stockownership, as said. So they were destined to perform the same or similar public functions. To that end, under this record, each had its finger in the other's affairs. They marked time or kept step together for each other's purposes until the voluntary death of one ostensibly parted them. At a stroke of the clock, Transit Company took over the cash and all other properties, together with the public duties and contractual obligations, of Railways Company (barring its bare franchise to exist as a corporation) by a contract known as a 40-year lease. From thence on Transit Company is well designated by one of the chief witnesses as the "operating company." After five years of Transit control— a control to be summed up (even in the sober language of judicial discourse) as picturesque, singular, and stormy—Railways Company, at another stroke of the clock, in turn, takes over (together with its leased property, public duties and contractual obligations) the cash and all other assets of Transit Company in pursuance of a contract, known as the tripartite agreement. Thereby the 40-year lease is canceled, and it was intended, in final effect, that the debts of Transit Company should be taken care of, except claims sounding in tort for personal injuries, amounting to a very great sum, then in suit or being pressed as a thorn in the side of Transit Company by such claimants.

(Nota bene.—That there may be no question about the effect of what was done on this head, we copy a bit from appellants' brief, referring to the funds supplied by the agreement. That brief says: "* * * Whereby all the debts secured and unsecured then admitted and recognized as existing could be paid in full, only, and excepting the claims for personal injuries urged by parties against Transit Company, the merits of which were denied." We will recur to this feature again.)

Thenceforward, on the performance of that agreement (which happened), Transit Company on the surface was bereft of all substance. It became less than a dry shell, to wit, a mere phrase or curious reminiscence, and not a whit more. It had left to it neither debt-paying power or debt-paying disposition. The instant suit is to test the validity of that transaction as to such claimants, and the liability of Railways Company in equity to them for judgments rendered on such claims. To that end J. B. Johnson files his creditors' bill in the circuit court of the city of St. Louis against Transit Company, United Railways Company, and National Bank of Commerce of St. Louis, whereby he seeks as assignee of two judgment creditors of ...