Meir v. Crossley

Citation264 S.W. 882
Decision Date31 July 1924
Docket NumberNo. 232704,232704
PartiesMEIR v. CROSSLEY et al.
CourtUnited States State Supreme Court of Missouri

Appeal from Circuit Court, Mississippi County; Frank Kelly, Judge.

Action by Frank Meir against Wallace Crossley and others. Judgment for plaintiff, and defendants appeal. Reversed and remanded, with directions.

Cyrus Crane, of Kansas City, W. C. Russell, of Charleston, and J. G. L. Harvey and F. W. McAllister, both of Kansas City, for appellants.

Gallivan & Finch, of New Madrid, and Ward, Reeves & Oliver, of Caruthersville, for respondent.

Statement.

WOODSON, J.

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 pretences 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 in this case 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, Mo.; that the defendant Wallace Crossley is a resident of Johnson county, Mo.; the defendant Edwin P. Deal is a resident of Mississippi county, Mo.; that the defendants C. A. Burney and Lee Wilson are residents of Jackson county, Mo.; and that the defendant Roscoe Gooding is a resident of Macon county, Mo.

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, in order to evade the laws of the state of Missouri, which require the incorporators to pay at least 50 per cent. of the amount of the capital stock at the time of the incorporation in cash, the defendants 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 into 1,500,000 shares, with a par value of $1 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 3. F. Bailey for 333 shares to defendant 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 of Missouri, other than the business of the selling of stock to the citizens of Missouri, but did and performed business in the state of Missouri, to wit, sold a large part of its capital stock inn the state of Missouri, and kept and maintained its general office, and had all of its board of directors' meetings, and made contracts and sold notes in said state (italics show amendment at close of testimony); that the only property acquired or intended to be acquired was contracts for or leases of lands in the state of Kansas, and that the action of the defendants in attempting to incorporate the company under the laws of the state of Delaware was for the purpose of evading the laws of the state of Missouri, and the laws of the state of Kansas.

Plaintiff avers that after the attempted incorporation of said pretended oil company the defendants, as officers and directors of said company, by means of a prospectus, literature, agents, and salesmen, made false statements to this plaintiff with respect to said company and its properties, for the purpose of cheating and defrauding this plaintiff, by inducing this plaintiff and others to buy stock in said company; and plaintiff avers that the defendants, conspiring and confederating together for the purpose of inducing this plaintiff to purchase stock in said company, caused to be issued a pamphlet or prospectus, dated February 20, 1918, at Kansas City, Mo., reciting that the said company was being managed by Wallace Crossley, Edwin P. Deal, C. A. Burney, Lee W. Wilson, Roscoe E. Gooding, and John T. Barker.

Plaintiff further avers and charges that, after having featured in said prospectus their own official position, high standing, and character, the defendants proceeded to and did, by means of statements in said prospectus and by their own acts, statements, and conduct, and by) the statements of their agents and employees, by them sent out, to sell said stock, falsely and fraudulently, and with the intent of cheating and defrauding this plaintiff and other citizens of this state, make the following false statements and representations, to wit: That the said company owned two oil wells then producing; that it owned one gas well then producing; that it had two oil wells then being drilled, and had two contracts let for two additional wells; that the company owned a lease, thereon described as lease No. 1, consisting of 26 2/3 acres; that the company had, in addition to the lease described as lease No. 1, property described as lease No. 2 and lease No. 3; and that the company owned all leases entirely, except No. 2, in which the company had one-half interest, with full control; that the company's energies and efforts will for some time to come, however, be confined to the development of what is believed to be proven territory, or territory so near to production and in such position as to justify reasonable faith in production, from practically all locations drilled.

But, entirely irrespective of future production, account should be taken of the present production on the company's lease No. 1, where it will be noted are two good oil wells, from which oil is being put into tanks daily, sufficient to yield a dividend on our entire capitalization, and a fuel gas well, the present flow of which indicates that it will supply ample fuel for the operation of this entire lease, if developed up to capacity. Contracts have been let for the drilling of two new wells on said lease. The entire production from the two wells already producing, as well as the production from all wells brought in in the future, will be converted into dividends, to be distributed among the shareholders, less royalty and operating expenses. Said prospectus contained photographs purporting to show the oil wells and the gas wells owned and operated by the company. In furtherance of their scheme to defraud these defendants, and their agents, servants, and employees, by them employed for the purpose of selling stock in said company, took this plaintiff to the state of Kansas and showed him producing wells which were held out and represented to be the property of the company.

Plaintiff further avers that he was solicited to buy stock in said company by the persons authorized and sent out by the defendants as officers and directors of said pretended corporation, and that the above and foregoing statements and representations were made to him, by means of said pamphlets and prospectus and said stock salesmen and solicitors and by the defendants, to induce this plaintiff to buy stock in said company; that plaintiff, knowing the official position and the high standing and character of the defendants, relied upon and believed the statements and representations so made as aforesaid, and acted upon them, and purchased 15,000 shares of stock in said company, and paid therefor the sum of $15,000; and plaintiff avers that said stock was and is absolutely worthless and...

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