Meir v. Crossley

• Citation: 264 S.W. 882,305 Mo. 206
• Decision Date: 27 August 1924
• Docket Number: 23270
• Parties: FRANK MEIR v. WALLACE CROSSLEY et al., Appellants
• Court: Missouri Supreme Court

264 S.W. 882

305 Mo. 206

FRANK MEIR v. WALLACE CROSSLEY et al., Appellants

No. 23270

Supreme Court of Missouri

August 27, 1924

Motion for Rehearing Denied August 27, 1924.

Appeal from Mississippi Circuit Court; Hon. Frank Kelly Judge.

Reversed and remanded (with directions).

Cyrus Crane, W. C. Russell and J. G. L. Harvey for appellants.

(1) The petition does not state a cause of action, because the sale of stock, the maintenance of a general office, the holding of board meetings, the making of contracts and the sale of notes, all in this State, do not constitute a doing of business in this State, as that term is used in Sec. 9792, R S. 1919, upon which said section plaintiff's petition is bottomed. 12 R. C. L., sec. 48, p. 69; Booth v Scott, 276 Mo. 1; Bank v. Leeper, 121 Mo.App. 688; Parker v. Wear, 230 S.W. 75; Wolfing v. Cork Co., 250 Mo. 723; Hogan v. St. Louis, 176 Mo. 149; Shields v. Chapman, 240 S.W. 505; Missouri Coal & Mining Co. v. Ladd, 160 Mo. 441; Clark v. Petroleum Co., 144 Mo.App. 182; Home Lbr. Co. v. Hopkins, 10 A. L. R. 885; Ryan v. Miller, 236 Mo. 496. (2) The evidence does not show that the defendants, or any one of them, had anything to do with the organization of the corporation under the laws of Delaware. (3) Even though it be held that the defendants did organize said corporation, there is nothing in the evidence to show that they organized it under the laws of Delaware for the purpose of avoiding the laws of Missouri. State ex rel. v. Cook, 181 Mo. 602; Booth v. Scott, 276 Mo. 27; State ex rel. v. Sullivan, 282 Mo. 261. (4) The evidence does not show that the defendants had any connection with or knowledge of the preparation and distribution of the prospectuses, Exhibits "A" and "B." (5) If the corporation be held to have been validly organized, then the directors cannot be held responsible for any fraud committed by the corporation through its agents, unless such directors actually participated in the commission of the fraud. As the alleged misrepresentations relate only to the property held by the corporation, actual participation in such misrepresentations by the directors could only be shown under the Statute of Frauds by a writing signed by such directors. The respondent produced no such written testimony, and the court erred in admitting parol evidence of the alleged misrepresentations. Sec. 2172, R. S. 1919; 14-a C. J. 184; Clark v. Edgar, 84 Mo. 106; Knight v. Rawlings, 205 Mo. 412; McKee v. Rudd, 222 Mo. 351, 369; Liggett v. Bank, 233 Mo. 605. (6) If said Section 9792 be accorded the meaning contended for by respondent, then such section is in violation of Sections 1 and 2, Article IV, of the Constitution of the United States. Adams v. Turner, 244 U.S. 594; Allgeyer v. Louisana, 165 U.S. 589; N. Y. Life Ins. Co. v. Dodge, 246 U.S. 375; N. Y. Life Ins. Co. v. Head, 234 U.S. 149.

Gallivan & Finch and Ward & Reeves for respondent.

(1) The acts of the oil company constituted a "doing of business" in this State as that term is used in Sec. 9792, R. S. 1919. Booth v. Scott, 267 Mo. 1; U.S. Machinery Co. v. Ramlose, 210 Mo. 631; Tri-State Amusement Co. v. Amusement Co., 192 Mo. 409; Chicago Mill & Lbr. Co. v. Sims, 101 Mo.App. 569; Jones v. Martin, 15 Ala.App. 675; Donaldson v. Thousand Springs Power Co., 29 Ida. 735. (2) The exercise of any of the charter powers of a corporation constitutes a "doing of business." Bank v. Leeper, 121 Mo.App. 688; Wulfing v. Cork Co., 250 Mo. 723; Mo. Coal & Mining Co. v. Ladd, 160 Mo. 441; Hurst Automatic Switch Co. v. Trust Co., 216 S.W. 954. (3) There was ample evidence to show that defendants' attempted incorporation under the laws of Delaware was a fraud upon the States of Missouri and Delaware. Cleaton v. Emery, 49 Mo.App. 345; Davidson v. Hobson, 59 Mo.App. 130; The Journal Co. v. Nelson, 133 Mo.App. 482; State ex rel. v. Cook, 181 Mo. 596; Booth v. Scott, 276 Mo. 1. (4) Since the defendants, in attempting to organize the corporation under the laws of Delaware, did not comply with the laws of that State, then the rule of comity stressed in appellants' brief has no application. Cleaton v. Emery, 49 Mo.App. 345. (5) (a) The laws of Delaware required the incorporators to be residents of that State, and to subscribe $ 1000 in stock. (b) Since the persons for whose benefit the subscriptions were made by the pretended incorporators were all residents of Missouri, they, rather than the dummies, will be treated as the real incorporators. American Alkali Co. v. Kurtz, 134 F. 663; Pauley v. State Loan & Trust Co., 165 U.S. 606; Dum v. Howe, 107 F. 849; Houghton v. Hubbell, 91 F. 453; White v. Marquardt & Sons, 105 Iowa 145; 14 C. J. 1032. (6) It therefore follows that the defendants should "be held as partners, and as such become liable for the debts of the alleged corporation." Sec. 9792, R. S. 1919; Booth v. Scott, 276 Mo. 1. (7) Section 9792 is a remedial statute and as such should be liberally construed so as to give effect to the legislative intent. Rogers v. Stag, 185 Mo.App. 659; Sullivan v. Sullivan Mfg. Co., 14 S.C. 499; Flenniken v. Marshall, 28 L. R. A. 402; Rider v. Fritchey, 49 Ohio St. 285, 15 L. R. A. 513; Kelly v. Fourth of July Mining Co., 21 Mont. 291, 42 L. R. A. 621.

Woodson, J. All concur; Ragland, J. , in a separate opinion, in which Graves, J., and James T. Blair, P. J., concur.

OPINION

WOODSON

The plaintiff instituted this suit in the Circuit Court of Mississippi County against the defendants, to recover the sum of $ 15,000, the purchase price of 15,000 shares of stock in the Missouri Mid-West Oil Company (hereinafter to be designated as the "Company") alleged to have been fraudulently sold and delivered to him under false and fraudulent pretenses made to him by the defendants regarding the incorporation of the company and its capital stock, assets and property at the time he purchased the stock.

The trial was had before the court and a jury, which resulted in a verdict and judgment for plaintiff for the full amount sued for, and after moving unsuccessfully for a new trial, the defendants duly appealed the cause to this court.

While the record is quite voluminous, the case as presented here in its final analysis is reduced to a comparatively small compass.

Counsel for defendants contend that the petition does not state facts sufficient to constitute a cause of action against them. The petition in substance charges that:

Plaintiff is a resident of Scott County, Missouri; the defendant Wallace Crossley, is a resident of Johnson County, Missouri the defendant Edwin P. Deal is a resident of Mississippi County, Missouri; the defendants C. A. Burney and Lee Wilson are residents of Jackson County, Missouri, and the defendant Roscoe Gooding is a resident of Macon County, Missouri.

For cause of action, plaintiff says that the defendants in the year of 1917, all being residents of the State of Missouri, confederated together for the purpose of organizing a corporation for the ostensible purpose of obtaining oil properties in the State of Kansas, to sell and offer for sale stock in such company to the citizens of the State of Missouri and elsewhere, and that in furtherance of such scheme and plan the defendants, in order to evade the laws of the State of Missouri, which require the incorporators to pay at least fifty per cent of the amount of the capital stock at the time of the incorporation in cash, secured the services of three citizens of the State of Delaware as dummies for the purpose of organizing a corporation under the name of the Mid-West Oil Company of Delaware; that said dummies so selected were James Satterfield, L. B. Phillips and James Bailey, all residents of the city of Dover, State of Delaware, who, at the instance of these defendants, prepared and filed articles of association in the office of the Secretary of State of the State of Delaware on the 29th day of October, 1917, for the incorporation, with a capital stock of $ 1,500,000, divided in 1,500,000 shares, with a par value of one dollar each, and that said articles of association provided that the corporation would commence business with $ 1,000; that the articles of association recited that James H. Satterfield had subscribed for 334 shares, L. B. Phillips 333 shares, and James M. Bailey, 333 shares; plaintiff alleges that the subscriptions so made were made at the instance and for and on behalf of these defendants, and that no sum whatever was actually paid by any of said subscribers for said stock, and that immediately thereafter, to-wit, on the same day the articles of association were filed in the office of the Secretary of State of the State of Delaware, and within one hour thereafter, the said Satterfield, Phillips and Bailey held a meeting as the incorporators of said pretended corporation and transferred the subscription of James M. Satterfield for 334 shares of said stock to Wallace Crossley, defendant herein, and transferred the subscription of L. B. Phillips for 333 shares to Lee Wilson, defendant herein, and transferred the subscription of J. F. Bailey, for 333 shares to C. A. Burney, defendant herein; that at said meeting the said dummy incorporators nominated as directors of said pretended corporation for the ensuing year the defendants Wallace Crossley, Edwin P. Deal, C. A. Burney, Lee W. Wilson and Roscoe E. Gooding.

Plaintiff avers that thereafter by a resolution passed by the defendants, as directors of said pretended corporation, the name thereof was changed to the Missouri Mid-West Oil Company and copies of such resolution were filed with the Secretary of State of Delaware. Plaintiff further avers that the said pretended Delaware corporation had no property or assets in the State of Delaware, had no property or business in the State...