Maynard v. Do Run Lead Co.
| Decision Date | 16 June 1924 |
| Docket Number | No. 24063.,24063. |
| Citation | 265 S.W. 94 |
| Parties | MAYNARD v. DO RUN LEAD CO. |
| Court | Missouri Supreme Court |
Appeal from Circuit Court, St. Francois County; Peter H. Huck, Judge.
Suit by Samuel A. Maynard against the Doe Run Lead Company. Judgment for defendant, and plaintiff appeals. Affirmed.
Warner, Dean & Thomson, of Kansas City, for appellant.
Nagel & Kirby, of St. Louis, and Edward A. Rozier, of Bonne Terre, for respondent.
The plaintiff, a stockholder in the defendant corporation, seeks by this suit to compel the issuance to him of certificates of stock to which he claims he is entitled, by virtue of an increase of the capital stock.
The Doe Run Lead. Company originally was incorporated in 1886, with a capital stock of $200,000. In 1888 the stock was increased to $500,000; in 1891, to $750,000; in 1898, to $1,500,000; in 1903, to $4,000,000. In 1906 the capital stock was increased from $4,000,000 to $10,000,000. The increase in 1898 and the increase in 1902, each, was on account of net surplus assets of the company, as was the last increase, April 24, 1906. The last increase gave rise to the claim upon which plaintiff sues.
After notice of the date of meeting and its purpose, the stockholders owning a majority of the stock in said company, April 24, 1906, passed a resolution to the effect that, inasmuch as assets of the company in excess of its liabilities, as shown by its books, were more than $10,000,000, it was desired to convert the surplus assets into increased stock. Accordingly the increase was voted and certification of the fact duly made to the Secretary of State. The $6,000,000 surplus in the assets of the company was due to increase in the value of land held by the company, on account of discovery of additional ore bodies. Before the last increase the capital stock was divided into 40,000 shares of $100 each. The increase added 60,000 shares, so that after the increase the capital stock of the company was $10,000,000, divided into 100,000 shares of $100 each.
The stockholders at that meeting passed a resolution authorizing the directors to set apart $6,000,000 out of the surplus assets for the payment in full of the increased capital stock, "and that the said increased stock so paid be retained in the treasury of this company as treasury stock, either to be sold from time to time by the directors for the benefit of the company, or distributed pro rata among the stockholders as a stock dividend, or both, at the discretion of the board of directors, and at such times as the board may decide that such action will be to the best interests of the company."
On May 10, 1906, the board of directors held a meeting and passed a resolution, as follows:
The board of directors also adopted the following resolution:
"Resolved, further, that the balance of said increased stock be retained in the treasury of the company as treasury stock, to be either sold from time to time by the board of directors for the benefit of the company, or distributed pro rata among the stockholders as a stock dividend, or both, at the discretion of the board of directors, and at such times as the board may decide that such action will be to the interests of the company."
In pursuance of that resolution a stock dividend of 50 per cent. of the outstanding stock was paid June 1, 1906. The outstanding stock at the time was 39,375 shares; 625 of the 40,000 shares authorized being unissued. So 19,687 shares were distributed that date as a stock dividend, making 59,062 shares then outstanding. Those figures should be kept in mind.
The plaintiff bases his right to recover on the theory that, when the capital stock was increased and the increase paid for out of the surplus assets of the company, immediately each stockholder became entitled to a certificate for a share of stock representing his proportion of said increase, and neither the stockholders participating in the meeting at which the increase was voted nor the board of directors had any authority to make a different disposition of the increase, so far as it affected the stockholders not present and voting at the meeting.
Plaintiff's petition sets out the history of the corporation, showing the different increases of capital stock, including the increase of 1906, paid for out of the assets of the company, and alleges that Marion W. Maynard, plaintiff's predecessor in title at the time of the increase, owned 652 shares of stock in the company, fully paid; that by virtue of the 2½ times increase of the original capital stock she became entitled to 1½ times as many additional shares as she already had —that is, 978 additional shares. The petition further recites the action of the board in declaring the stock dividends to be distributed June 1, 1903, whereby she acquired 326 additional shares of stock, and alleges that by reason of that holding she was entitled to certificates representing in addition 1½ times that amount, or 489 shares. The prayer for relief demands the issuance of certificates evidencing the ownership in plaintiff of 978 shares and 489 shares.
The petition alleges that the defendant company and its officers and directors from time to time have made conflicting statements and misrepresentations whereby they sought to conceal the true facts as to the real ownership of the 60,000 shares increase; that the defendant company and its officers and directors now claim that the company has outstanding only 65,783 shares of full-paid stock, and the true facts are that there are outstanding 100,000 shares of stock, and they have illegally withheld issuing certificates representing 34,217 remaining shares of stock. It is further alleged that the stockholders attending the meeting April 24, 1904, who held more than 27,000 of the 40,000 shares of stock then outstanding, donated approximately 40,500 shares of stock to the company; that this stock became treasury stock.
The theory of that last allegation is that, by voting to turn the stock over to the treasury, those voting at the meeting donated their portions of the increase to the company as treasury stock; while those not voting at the meeting, holding approximately 13,000 shares, were not bound by that action and were entitled to their proportion of that treasury stock, about 19,500 shares. It is claimed in this connection that the stock dividend paid June 1 following the meeting was paid out of the treasury stock so donated. The petition alleges that the plaintiff is the holder of 1,100 shares of stock, having bought 122 shares besides the 652 originally owned, and 326 dividend declared.
The plaintiff seeks to avoid the bar of the statute of limitations, or the failure of his suit on account of laches by alleging fraud and concealment on the part of the officers of the company, so as to keep him and his predecessor in title in ignorance of the true condition of the company, of the disposition of the stock, and the number of shares outstanding, etc.
The answer of the defendant also sets out the history of the corporation, the several increases of the capital stock, and recites at length the proceedings at the stockholders' meeting and at the meeting of the board of directors, May 10, 1906, and the distribution of 19,687 shares as stock dividends; being then 50 per cent. of the stock outstanding. It further alleges that in July, 1906, 5,906 shares of the unissued stock held as treasury stock were sold, each stockholder being granted the right and opportunity to subscribe and pay for a ratable part of the same; that the plaintiff, in response to the invitation, purchased his proportion, 98 shares, and then bought 24 shares, in addition, making his total purchase 122 shares. That sale made a total of 65,783 shares issued, leaving 34.217 other shares of unissued stock in the treasury of the company. The answer also pleads the five-year statute of limitations, laches, and waiver by plaintiff of his alleged right to the stock sued for, and sets out the particular facts which would give actual notice to the plaintiff and put him upon inquiry as to the exact situation in relation to the unissued stock and the claim of the company that it was treasury stock, so as to put in operation the statute of limitations.
The petition and the answer, both of great length, differ a little as to the actual facts alleged. The plaintiff filed a reply to the answer, also of great length, which sets up more in detail the facts and circumstances which the' plaintiff claims show concealment from him of the condition of the comapny.
The evidence in the case is quite...
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