Luehrmann v. Lincoln Trust & Title Co.

• Decision Date: 20 February 1917
• Docket Number: No. 18162.,18162.
• Citation: 192 S.W. 1026
• Court: Missouri Supreme Court
• Parties: LUEHRMANN et al. v. LINCOLN TRUST & TITLE CO. et al.

192 S.W. 1026

LUEHRMANN et al. v. LINCOLN TRUST & TITLE CO. et al.

No. 18162.

Supreme Court of Missouri, Division No. 1.

February 20, 1917.

Motion to Modify Judgment and for Rehearing Overruled March 12, 1917.

Appeal from St. Louis Circuit Court; J. Hugo Grimm, Judge.

Suit by George E. W. Luehrmann and another against the Lincoln Trust & Title Company and the Title Guaranty Trust Company. From a judgment for defendants, plaintiffs appeal. Judgment reversed, and cause remanded for further proceedings.

This suit was instituted September 19, 1912, after the dismissal, without prejudice, of a bill for injunction to prevent the consummation of the deal out of which it grew. The final judgment in that suit was entered July 29, 1912.

The defendants are trust companies organized under the laws of this state authorizing such corporations. Both were at the time of the transaction in question engaged in the title guaranty business. The Lincoln Trust & Title Company, which we shall hereinafter call the Lincoln Company, had an authorized capital of $1,500,000, divided into shares of the par value of $100, only $500,000 of which had been issued, and was then outstanding. It was carrying on its books a "title plant," used in its business, at $180,000. The Title Guaranty Trust Company, which we shall call the Guaranty Company, was capitalized at $1,500,000, divided into shares of the parvalue of $100 each, all of which had been issued and was outstanding. It was at the time the story of this transaction opens carrying upon its books a title plant or plants for the transaction of its business, at the value of $1,675,962.87. After the transactions involved in this suit the Guaranty Company charged down its entire plant investment to about $1,200,000. Mr. J. C. Van Riper, president of the Guaranty Company, testified for the defendants that the Lincoln Company's plant was of no value to his company.

The plaintiff George E. W. Luehrmann is, and ever since the organization of the Lincoln Company has been, the owner of 244 shares of its capital stock, 39 shares of which are held in the name of his coplaintiff, Guy B. Fulton, and during all that time has been a director of that company. On June 9, 1909, the Lincoln Company had met with losses, on account of which it had charged off $150,000 of its surplus, leaving the book value of its stock $124.20. The Guaranty Company contends that the actual value was only $114 per share, subject to certain contingent liabilities which might grow out of an investment called the Cunningham sugar deal, in which it was trustee in a mortgage of the Cunningham Company securing its bonds to the amount of $850,000, from which, under its powers as such trustee, it had released certain property of the mortgagor at the request of the holders of all the bonds except $125,000, and had been advised that it would be liable for any loss to the nonconsenting bondholders resulting from such release. Under these circumstances it was thought advisable to issue an additional $250,000 of its authorized capital stock, and offer it to the stockholders and general public. This was ordered at a meeting of the board of directors held June 9, 1909.

These subscriptions did not materialize as readily as desired, so that on the 11th day of June, 1909, only $79,000 had been secured; and on June 14, 1909, a meeting of the board of directors was held, at which the order of June 9th for the issue of additional stock was rescinded, and Mr. Kreismann, a vice president of the company and the head of a committee of three which had been appointed for that purpose, of which plaintiff was a member, reported that they had secured the signatures of more than two-thirds in amount of the holders of the stock of the company to the following agreement:

                                             "June 11, 1909
                

"We, the undersigned stockholders of the Lincoln Trust and Title Company, hereby severally agree to a merger of that company and the Title Guaranty Company upon the following terms:

"The Title Guaranty Company is, as soon as it can legally be accomplished, to increase the present capital stock in the amount of $1,000,000, $500,000 of which shall be paid up in cash, and $500,000 of which shall be issued to the stock holders of this company share for share, for their stock in this company, and in addition the Title Guaranty Company shall pay to the stockholders of this company $70,000 in cash or certificates of deposit as the committee in charge of arranging details may arrange. This agreement to be open for acceptance by said Title Guaranty Company for five days, and is conditioned upon the holders of at least two-thirds of the stock of this company joining in it. And upon so doing we bind ourselves to use our influence and efforts to procure such action by Lincoln Trust & Title Company as may be necessary to carry it out; it being further understood that the stockholders of this company shall be liable for no commissions.

"That thereupon they had met with the officers of the Title Guaranty Trust Company, and had agreed upon the following terms for the sale of the stock of the company held by the different stockholders of this company:

"The Title Guaranty Trust Company, as soon as it can be legally accomplished, is to increase its present capital from $1,500,000 to $2,500,000, $500,000 of which increase shall be paid up at par in cash, and $500,000 of which shall be issued to the stockholders of this company share for share. In addition, the Title Guaranty Trust Company shall give to the stockholders of this company certificates of deposit to the amount of $70,000, payable in six and twelve months after their date, each for $7 per share, and bearing interest from their dates at the rate of 3½ per cent. per annum."

This was signed by the plaintiff Luehrmann and is the only paper or transaction in connection with the matter which bears evidence of his assent.

The report was approved by the directors, and the stockholders were notified that they were entitled to subscribe for $125,000 of the new stock to be issued by the Guaranty Company under the agreement. A form for a receipt was reported, to be given for such certificates of stock as should be surrendered for exchange in pursuance of its terms, providing that the depositors should receive in return therefor an equal amount of the new stock of the Guaranty Company, together with two certificates of deposit of $7 for each share as provided in said agreement. Mr. Luehrmann was also present at the directors' meeting, and voted for the resolution approving the report of the committee, as did all the directors except Mr. Garrell, who was excused from voting.

On June 18, 1909, the Guaranty Company notified the Lincoln Company that it would not carry out the agreement because there were outstanding contingent liabilities which had not been disclosed to them. Mr. Luehrmann, who acted in everything connected with the transaction for his brother, Edward H. Luehrmann, the plaintiff in a similar suit pending in this court (No. 18161, 192 S. W 1034), as well as for himself, insisted that the Guaranty Company must either stand by the contract embodied in the Kreismann report or he would refuse to surrender his stock in the Lincoln Company or abide by any other agreement that might be made between the two companies. He promptly notified Mr. Van Riper, president of the Guaranty Company, to this effect. Mr. Meyer, to whom the stock certificates of both the Luehrmanns had been delivered under the Kreismann agreement, thereupon returned them, taking up the receipts he had given them, dated June 17th.

On June 21, 1909, committees of the two companies agreed upon a new contract of that date, which, after reciting the agreement of June 11th and that there were contingent liabilities not shown in a statement of June 5, 1909, upon which the Guaranty Company claimed that contract was based, including a contingent liability arising out of the release of certain property of the Cunningham Company, to which we have already referred, provided, among other things, that the cash consideration of $14 per share for the stock of the Lincoln Company should be held by the Guaranty Company to indemnify it against any loss on account of said release or any other liability not shown in said statement, except certificates and guaranties of title issued by the Lincoln Company, and that the Guaranty Company should pay the stockholders of the Lincoln Company 4 per cent. interest, payable semiannually, on that amount so long as said money should be held by the Guaranty Company pending the termination of such contingent liabilities.

A meeting of the board of directors of the Lincoln Company was called by its president and held on June 24th. The call stated the purpose of the meeting to be "accepting resignations and filling vacancies in the board." At this meeting 10 of the 15 directors, including the officers of the board, tendered their resignations, one at a time. Mr. J. C. Van Riper said of these retiring directors: "They preferred for us to put some one in their places, which we did." These resignations were accepted, the vacancies filled, and the new president and secretary elected by the unanimous vote of the board as constituted at the time each of said questions was submitted, except the plaintiff, who voted "No" on each proposition. Mr. Franciscus and Mr. Gottlieb, the new president and secretary of the company, were both directors of the Guaranty Company.

The board as then constituted proceeded at the same meeting to lease to the Guaranty Company the premises then occupied by the Lincoln Company in the Lincoln Trust Building together with its title plant and safe deposit department, surrendering possession the same day. Of these transactions Mr. J. C. Van Riper says:

"We were located across the street in very bad quarters. The trade had not been fully consummated; that is, all of the exchange had not been...