Luft v. Strobel

• Citation: 19 S.W.2d 721,322 Mo. 955
• Parties: Charles G. Luft v. John Strobel et al., Appellants
• Decision Date: 18 May 1929
• Court: United States State Supreme Court of Missouri

19 S.W.2d 721

322 Mo. 955

Charles G. Luft v. John Strobel et al., Appellants

Supreme Court of Missouri

May 18, 1929

Rehearing Denied July 30, 1929.

Appeal from Circuit Court of City of St. Louis; Hon. Erwin G Ossing, Judge.

Reversed and remanded.

W G. Carpenter for appellants.

(1) The contract introduced in evidence is a promoter's contract, and the signers thereof were promoters of the Savidge Tractor Company and by participation therein assumed the liability of promoters. Knufinke v. Strobel, 3 S.W.2d 400. (2) A promoter is a person who brings about the incorporation and organization of a corporation. He brings together the persons who become interested in the enterprise, aids in procuring subscriptions and sets in motion the machinery which leads to the formation of the corporation itself. The evidence shows conclusively that after entering into the promoters' agreement, Burnett & Company on their part began soliciting subscribers to the capital stock of the corporation to be formed by selling preincorporation certificates; that Luft, Savidge and Dalby on the part of the other signers to the contract likewise sold preincorporation certificates. All worked together to effect the organization of the company and all were "promoters" thereof. Hornblower v. Crandall, 78 Mo. 581; Exeter v. Sawyer, 146 Mo. 302; Land Co. v. Case, 104 Mo. 572; Brooker v. Trust Co., 254 Mo. 154; Fegarden Bros. v. Zinc Co. (Ark), 72 S.W. 989; Zinc Carbonate Co. v. Bank, 103 Wis. 125; Cook on Stock & Stockholders (2 Ed.) sec. 651; 14 C. J. 251, sec. 1282. (3) Promoters and those aiding promoters in the creation of a corporation occupy a fiduciary relationship to each other and to all who may subsequently become members or subscribers, and must make a full and fair disclosure of all facts pertaining to their relationship with each other and the corporation so to be formed; otherwise, their dealings with the corporation are either void or voidable. Land Co. v. Case, 104 Mo. 572; State ex rel. Hadley v. Bank, 197 Mo. 574; Lumber Co. v. Cramme, 204 Mo. 594; Brooker v. Trust Co., 254 Mo. 154; Land Co. v. Webster, 75 Mo.App. 457; Knufinke v. Strobel, 3 S.W.2d 400; 14 C. J. 253. (4) The notes were voidable and unenforceable for the additional reason that the stockholders and officers receiving same were either the sole and only officers and directors of the company, or substituted dummies to act for them, and were thus dealing with themselves at the expense of the company, and such notes are voidable whether they were acting in good faith or otherwise. Proctor v. Farrar (Mo.), 213 S.W. 469; Billings v. Shaw, 209 N.Y. 265. (5) A renewal note is subject to the defenses of fraud, failure of consideration and similar defenses, in the same manner as the original note. Murphy v. Gay, 37 Mo. 536; Comings v. Leedy, 114 Mo. 554; Natl. Bank v. Donnell, 172 Mo. 384; Johnson v. Grayson, 230 Mo. 380; Natl. Bank v. Laughlin, 305 Mo. 8; Ford v. Roofing Co., 285 S.W. 538; Peoples Bank v. Yager, 288 S.W. 954; Farmers Bank v. Harris, 250 S.W. 946; Schelp v. Nicholls, 263 S.W. 1017; Danforth & Co. v. Crookshank, 68 Mo.App. 311; Yuniker v. English (Kan.), 247 P. 637; Saeger v. Grayton, 217 Mass. 521; City Natl. Bank v. Mason, 181 Iowa 824. (6) Plaintiff's Instruction 1 omits every issue of fraud, failure of consideration, want of notice, or duty or obligation of promoters to stockholders. An instruction for the plaintiff purporting to cover the whole case and directing verdict for him by omitting some element requisite to right of recovery is error, and is not cured by proper instruction for defendants covering all elements of plaintiff's case, as such instructions would be in conflict. Heigold v. U. Rys., 308 Mo. 142; State ex rel. v. Ellison, 272 Mo. 571; Wojtylak v. Coal Co., 88 Mo. 283; Paul v. Coal & Coke Co., 260 Mo. 367; Brainard v. Railroad, 5 S.W.2d 15; State ex rel. v. Becker, 1 S.W.2d 103. (7) Plaintiff's Instruction 2 was highly objectionable in that (a) it presents to the jury an issue of fact pertaining to "purchased stock in Savidge Tractor Company without knowledge," etc., which issue is wholly foreign to the case and contrary to all evidence in the case. (The notes were issued long after the stock was purchased); and (b) it was indefinite, confusing and misleading in reference to "corporations mentioned in the evidence" and concerning "matters and things mentioned in the evidence;" and (c) did not correctly state the law pertaining to knowledge on the part of defendants, or notice to them or as to full and fair disclosure of facts. It is reversible error to give an instruction which confuses the issues and misleads the jury. Stuart v. Dickinson, 290 Mo. 516; Bean v. Lucht, 165 Mo.App. 175; Cole v. Waters, 164 Mo.App. 567; Knopp v. Hanley, 153 Mo.App. 169; Stipel v. Piggot, 269 S.W. 942. (8) When the evidence presumptively established the relationship of promoter between the respondent and Savidge Tractor Company, and that defendants' obligations to respondent were only to pay the original notes of Savidge Tractor Company, the entire burden of showing absence of fraud, and to show a full and fair disclosure of all material facts was cast upon respondent. R. S. 1919, sec. 845; Nat. Bank v. Interstate Prod. Corp., 282 S.W. 1033; Newton Co. Bank v. Cole, 282 S.W. 466.

George Eigel and John V. Lee for respondent;

James T. Roberts of counsel.

(1) The surrender of the original note which appellants had endorsed for Backus was a good consideration for the making of the new note, being the note now in suit. Elec. Co. v. Ten Broek, 97 Mo.App. 175. (2) Plaintiff's Instruction B, which directed a verdict, was refused. This put plaintiff in a position where he could not instruct on defendants' theory of the case without waiving his right to complain in this court of the action of the trial court in refusing to direct a verdict. Everhart v. Bryson, 244 Mo. 507; Hunter v. Pryor, 292 S.W. 1063. (3) The verdict was manifestly for the right party and, even though the instructions are open to criticism, no harm was done. Shinn v. Railroad Co., 248 Mo. 173; Schuepbach v. Gas Co., 232 Mo. 603.

Seddon, C. Lindsay and Ellison, CC., concur.

OPINION

SEDDON

This action was commenced in the Circuit Court of the City of St. Louis on June 29, 1922, against the defendants, John Strobel, Lucas Haefner and William M. Edinger, to recover upon a promissory note executed by the three defendants and by one W. F. Korte, as makers, and dated December 22, 1921, whereby the makers of said note promise to pay to the order of plaintiff, Charles G. Luft, ninety days after the date of said note, the principal sum of $ 1000, with interest at seven per cent per annum from date until paid. The note, by its terms, authorizes any attorney of any court of record to appear in such court, in term time or vacation, and confess judgment in favor of the holder of said note for such amount as may appear to be unpaid thereon, together with costs and reasonable attorneys' fees.

The petition is conventional in its allegations. The joint answer of defendants pleads, in defense of the plaintiff's action, that the note in suit was executed and delivered without consideration, and that said note was given in renewal of other alleged fraudulent and void notes of a corporation known as the Savidge Tractor Company, which notes were without any real or adequate consideration and were the outgrowth of an alleged fraudulent promoters' agreement respecting the organization of the named corporation, the facts respecting which fraudulent agreement and transaction are alleged to have been unknown and undisclosed to the defendants at the time of the execution and delivery of the renewal note in suit. The defendants, by way of counterclaim, seek to recover of and from plaintiff the sum of $ 10,176.59, alleged to have been innocently paid by defendants to plaintiff, and to certain associates of plaintiff, all of whom were engaged in a joint undertaking on the part of plaintiff and his said associates to fraudulently promote a corporation known as the Savidge Tractor Company, and which sum is alleged to have been obtained from the defendants by plaintiff and his said associates by reason of the alleged conspiracy, fraudulent acts, misrepresentations and concealment of plaintiff and his said associates, which acts, facts and circumstances are set out and alleged with particularity in the counterclaim, and for the repayment and return of which sum of money the plaintiff and his said associates are alleged to be jointly and severally liable to the defendants. The reply is a general denial of the averments of the answer and counterclaim of the defendants.

The cause was submitted to the jury upon both the plaintiff's petition and the defendants' counterclaim. The jury returned a unanimous verdict, finding the issues for plaintiff upon his petition, and allowing plaintiff an aggregate recovery of $ 1734.25 upon the promissory note in suit, which aggregate amount includes the sum of $ 1000, the principal of said note; $ 284.25, the accrued interest thereon; and $ 450, as attorneys' fees. The jury, by their verdict, found in favor of plaintiff and against the defendants upon defendants' counterclaim. After an unavailing motion for a new trial, the defendants were allowed an appeal to this court. We take jurisdiction of the appeal because of the amount ($ 10,176.59) sought to be recovered by defendants from plaintiff upon the counterclaim, which amount exceeds the minimum of the pecuniary jurisdiction of this court. [Conrad v. De Montcourt, 138 Mo. 311, 321.]

From a voluminous abstract of the evidence we gather the following facts: William Savidge, a mechanic, who resided in Alton Illinois, obtained the issuance of letters patent...