Kretzer v. Cole Brothers Lightning Rod Co.

• Decision Date: 04 January 1916
• Parties: HENRY F. KRETZER, Respondent, v. COLE BROTHERS LIGHTNING ROD COMPANY et al., Appellants
• Court: Missouri Court of Appeals

181 S.W. 1066

193 Mo.App. 99

HENRY F. KRETZER, Respondent, v. COLE BROTHERS LIGHTNING ROD COMPANY et al., Appellants

Court of Appeals of Missouri, St. Louis

January 4, 1916

Appeal from St. Louis City Circuit Court.--Hon. Daniel D. Fisher Judge.

AFFIRMED.

Judgment affirmed.

R. M Nichols for appellants.

The power of suspension of sale is not absolute; it is limited only to competitors; it is not repugnant to the estate created; as to all others than competitors it is untrammeled. A partial restraint, as to persons to whom alienation may be made, is not void as against public policy. Coke on Littleton; In re Macleay, L. R. 20 Eqt. 186; Dugal v. Freyer, 3 Mo. 40; Clemorgan v Lowe, 9 Mo. 455; Lampert v. Haydel, 96 Mo. 439; Jackson v. Schutz, 18 John. (N.Y.) 184; Cowell v. Col. Springs Co., 100 U.S. 55, 25 L.Ed. 547; Plumb v. Tubbs, 41 N.Y. 442; Langdon v. Ingram, 28 Ind. 360; Ferris v. Am. Brew. Co., 155 Ind. 539, 52 L. R. A. 305; Kean v. Kean, 18 S.W. 1032, 13 Ky. L. 956; Hatcher v. Andrew, 68 Ky. 561; Wallace v. Smith, 113 Ky. 263; Miller v. Denny, 99 Ky. 53; Collins Mfg. Co. v. Marcy, 25 Conn. 542; O'Brien v. Wethrell, 14 Kan. 616; Blackstone Bank v. Davis, 21 Pick. 42; McCullough v. Gilmore, 11 Pa. St. 379; Overton v. Lee, 108 Tenn. 505; Kamp v. Cleary, 76 Va. 140; Smith v. Barre, 56 Mich. 314; Estate of Hugh Porter, 13 Ont. L. Rep. 399; Earls of McAlpin, 6 Ont. App. 145.

Richard A. Jones for respondent.

Appellant is a corporation organized under what is now article 7, chapter 33, Rev. Stat. of Missouri of 1909, having reference to the incorporation of manufacturing and business companies. Its right and authority and that of its stockholders is to be tested by the law of its organization, which nowhere contains authority for the enactment of by-laws of the character sought to be sustained by appellant; to the contrary, the decisions of our courts of last resort, expressly negative any such assumption of corporate right. Chouteau Spring Co. v. Harris, 20 Mo. 382; Moore v. Bank of Commerce, 52 Mo. 377; Bullard v. Bank, 18 Wallace Reports, 85 U.S. 589; Bank v. Durfee, 118 Mo. 431; Brinkerhoff-Farris Trust & Savings Co. v. Home Lbr. Co., 118 Mo. 447; O'Brien v. Cummings, 13 Mo.App. 197; Crenshaw v. Mining Co., 110 Mo.App. 355; Senn v. Mercantile Company, 115 Mo.App. 685; In re Klaus, 67 Wisconsin, 401; Feckheimer v. National Exchange Bank, 79 Va. 80; Byron v. Carter, 22 La. Ann. 98.

NORTONI, J. Reynolds, P. J., and Allen J., concur.

OPINION

NORTONI, J.

--This is a suit in equity to compel defendant and its officers to transfer certain shares of stock to plaintiff on the books of the company, and issue certificates therefor. The finding and decree were for plaintiff, and defendants prosecute the appeal.

The principal defendant, a Missouri concern, is a corporation organized under the provisions of article 7, chapter 33, Revised Statutes 1909, relating to manufacturing and business companies. It is engaged in the lightning rod business, and it appears that plaintiff is also engaged in that business; moreover that he is a competitor of defendant. Plaintiff purchased nine shares of stock in defendant corporation from the legal owner thereof, and, though they were duly assigned to him, defendant refused to recognize such transfer of ownership, or to enter it on the books of the company, and issue new certificates of stock to him therefor. It appears plaintiff presented the several certificates of stock so purchased by him from the former owner to defendant's president and secretary, offered to surrender the same and requested the transfer of the shares of stock to him to be entered on the books of the company and also that new certificates be issued to him in lieu of those surrendered. Plaintiff's demand was denied by defendant and it is sought to be justified under a by-law theretofore adopted by it.

Defendant's by-law referred to is No. 9, as follows:

"By-law Nine.

"No stock of this corporation shall be sold or transferred to a corporation, firm or person interested in a competitive line of business. If any stockholder does sell or dispose of stock to competitors, such sale or transfer shall be absolutely void and shall not be recognized by the officers of this company, and the books of this corporation shall not be open to the inspection of persons holding such stock, if the officers of this company deem that the information thus obtained may be used to the detriment of the business of this corporation."

The sole question presented for consideration here relates to the validity of this by-law--that is, the power of defendant to enact and enforce it. It is argued that it is competent for defendant to prescribe a rule inhibiting the sale of stock to one situate as plaintiff, engaged in a similar business and as a competitor, for that he may use his position as a stockholder in defendant company to the detriment of its business. But we regard the latter phase of the question as beside the case in judgment here. If plaintiff as a stockholder should seek information touching defendant's business to use it to its detriment, it may be that relief would otherwise be available to defendant on that score. But be that as it may, the question presented here relates alone to the power of defendant corporation to enact and enforce the by-law above copied, which restricts the free alienation of property.

It may be, where the charter of a corporation in terms authorizes such a by-law, it would be enforced. At any rate, the Supreme Court declared, in the early case of St. Louis Perpetual Ins. Co. v. Goodfellow, 9 Mo. 149, where the special charter of the insurance company there involved authorized it, a by-law by which a lien was retained on the stock of the shareholder was valid and enforceable. To the same effect is the more recent case of Mechanics' Bank v. Merchants' Bank, 45 Mo. 513, in which the court found authority for the by-law involved there in the special charter of the bank. But it is said in more recent cases, in which the authorities last cited are referred to and distinguished, that such restrictions attempted to be cast on the transfer of corporate stock through by-laws enacted by the corporation must find their source in a legislative enactment--that is to say, the corporation, itself without legislative authority to that effect, is not competent to create such impediment in respect of the alienation of property. [See Bank v. Durfee, 118 Mo. 431, 444, 24 S.W. 133; Carroll v. Bank, 8 Mo.App. 249.]

No provision in our statutes under which defendant is incorporated appears to authorize a by-law so stringent as that invoked here. Indeed, the only statutory authority suggested by defendant as even touching upon this matter is to be found in section 2990, Revised Statutes 1909, relating to the powers of private corporations....