O'Kell v. Chama Valley Lands & Irrigation Co.

• Decision Date: 06 July 1914
• Docket Number: No. 11145.,11145.
• Citation: 168 S.W. 887,181 Mo. App. 466
• Parties: O'KELL v. CHAMA VALLEY LANDS & IRRIGATION CO. et al.
• Court: Missouri Court of Appeals

168 S.W. 887

181 Mo. A. 466

O'KELL v. CHAMA VALLEY LANDS & IRRIGATION CO. et al.

No. 11145.

Kansas City Court of Appeals. Missouri.

July 6, 1914.

1. CORPORATIONS (§ 30) — STOCKHOLDERS — LIABILITY.

A plaintiff, employed by defendants to render services for a corporation not legally organized by defendants for failure to pay any part of the corporate stock, may sue defendants under Rev. St. 1909, §§ 3004, 3006, on the theory that they are the real incorporators and owners of the stock which has not been paid, and that the amount of their stockholders' liability is sufficient to pay plaintiff's demand.

2. CORPORATIONS (§ 29) — PARTNERSHIP (§ 41) — ORGANIZATION — COLLATERAL ATTACK.

A plaintiff may not, in a collateral suit, assail the legal existence of a corporation and charge the stockholders with liability as partners doing business in the name of a fictitious corporation.

3. CORPORATIONS (§ 254) — STOCKHOLDERS' LIABILITY — ACTIONS.

The statutes give a creditor of a defunct corporation an action at law against the stockholders where the corporation has ceased to be a going concern, has disposed of all of its tangible assets, has no means or hope of resuscitation, and the statutory liability of the stockholders is sufficient to discharge unpaid debts.

Appeal from Circuit Court, Jackson County; Frank G. Johnson, Judge.

Action by W. D. O'Kell against the Chama Valley Lands & Irrigation Company and others. From a judgment for plaintiff, defendants appeal. Affirmed.

George L. Davis, of Kansas City, for appellants. Haff, Meservey, German & Michaels, of Kansas City, for respondent.

JOHNSON, J.

This is a suit for commissions plaintiff alleges he earned pursuant to a contract of employment with the defendant corporation, in the name of which the individual defendants, attempted to sell a tract of land lying in Colorado and New Mexico. The tract contained almost 500,000 acres, and was a part of a still larger body known as the "Tierra Amarilla Grant" which was owned by the Arlington Land Company, a corporation subject to a mortgage of $705,000. Martin & Borders, who were partners doing business in Kansas City as land speculators, and whose operations had been most extensive and profitable, were the owners of 40 per cent. of the capital stock of the Arlington Company, as well as of a large part of the mortgage indebtedness against the lands, and were employed by that company to dispose of its lands to investors for a commission of 5 per cent. They had in their service a large and well-organized corps of agents, through whom they had successfully promoted other sales as extensive as that contemplated. Plaintiff was one of their agents, and had been in charge of their selling operations in the western half of the state of Iowa. The record is very voluminous and the method pursued by Martin & Borders in placing the lands on the market is intricate and not clearly outlined in the evidence, but as we understand the case the successive steps in the proceeding were as follows:

Martin & Borders and their associates in the Arlington Company procured the incorporation of another company under the name of the Mosota Land Company, and a contract was drawn by which the Arlington Company, in consideration of the surrender by Martin & Borders of their interest as stockholders, agreed to convey the tract of 500,000 acres to the Mosota Company. A contract was entered into between the Mosota Company and Albert D. Hart, Elmer E. Auchmoody, and Wm. Kent, by the terms of which these men, who really were acting for Martin & Borders, were granted an option to purchase the tract at $3.10 per acre on "liberal terms of payment." Thereupon Hart, Auchmoody, and Kent, as incorporators, but acting under the direction and for the benefit of Martin & Borders, procured the incorporation of the defendant company under the laws of Missouri, and "paid in full" its capital stock of $100,000 by the transfer to the corporation of the option contract with the Mosoto Company, which the incorporators valued at "more than $100,000." An elaborate plan for the sale of the land was adopted, and the agency department of Martin & Borders was employed. Shortly after the organization was completed and the selling operations in augurated, Hart, Auchmoody, and Kent, who held certificates for all the captial stock, "sold out" to Martin & Borders, who assumed open control of the corporation and its affairs.

For some reason the contract between the Arlington and Mosota Companies was not signed, but was abandoned, and a new contract was entered into between the Arlington Company and the defendant company. This contract is not in evidence, but we gather from the testimony of the witnesses that it imposed a number of conditions and restrictions on the defendant company, the performance of which would cost that company about $2,000,000, for which it would receive the tract of 500,000 acres. During all this time Martin & Borders had not surrendered their stock or other interests in the Arlington Company, and consequently they had interests on both sides of the transaction between the two companies. For the purposes of sale the plan adopted by the defendant company and advertised and exploited in its name contemplated the division of the irrigable parts "into tracts larger than 10 acres, the size of the track to be determined by the character of the soil and the distance from transportation, but to be as nearly as possible of the sale value as 10 acres of irrigable land."

The "contracts" the agents were employed to sell were valued at $250 each, and the agents were allowed a gross commission of $50 on each contract sold. The purchase price of a contract could be paid in monthly installments, and the contract was not for the sale of a particular lot, but for an undivided interest in the whole body of land. There was to be an "opening" or auction sale of the various tracts, conducted under the auspices of trustees to be selected by the contract holders, at which no one but such holders would be permitted to bid. Before the auction sale the defendant company was to set aside a fund of $1,000,000 out of the proceeds of sales of contracts for the purpose of establishing "a thoroughly modern system of irrigation." It was represented in the advertising literature and by the agents that the company controlled water rights that were sufficient for the requirements of the...