Milligan v. G. D. Milligan Grocer Co.

• Citation: 233 S.W. 506,207 Mo. App. 472
• Decision Date: 18 June 1921
• Docket Number: No. 28004,28004
• Parties: MILLIGAN v. G. D. MILLIGAN GROCER CO.
• Court: Court of Appeal of Missouri (US)

233 S.W. 506

207 Mo. App. 472

MILLIGAN v. G. D. MILLIGAN GROCER CO.

No. 28004

Springfield Court of Appeals. Missouri.

June 18, 1921.

Rehearing Denied August 8, 1921.

Appeal from Circuit Court, Greene County; Orin Patterson, Judge.

Action by Nelle C. Milligan, executrix of the last will and testament of Alva' D. Milligan, deceased, against the G. D. Milligan Grocer Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Barbour & McDavid, of Springfield, for appellant.

E. P. Mann and W. D. Tatlow, both of Springfield, for respondent.

COX, P. J.

Action by Nelle. C. Milligan, executrix of the last will and testament of Alva D. Milligan, deceased, against G. D. Milligan Grocer Company, a corporation, to recover $5,950 and interest as dividend on 238 shares of capital stock in the corporation. The petition alleges that deceased, Alva D. Milligan, was the owner of 238 shares of stock of the defendant at the time of his death on or about January 4, 1919; that on or about April 20, 1918, the board of directors of defendant declared a dividend of $25 on each share of stock, which amounted to $5,950 on the 238 shares held by Alva D. Milligan at his death; and that it has not been paid. The petition further alleges that after said dividend was declared, to wit, on or about April 22, 1918, the said dividend was credited to the several stockholders on the books of the corporation, and so remained credited on said books at the time of the death of the deceased and at the time the stock of deceased was sold by order of the probate court, and that a part of said dividend was afterward paid to some of the stockholders; that the declaration of said dividend was known to and acquiesced in by all the directors and stockholders and recognized by them as a debt and obligation of the corporation to the respective stockholders; and that the defendant corporation as well as its directors and stockholders are estopped from denying or questioning the validity of said declaration of dividend.

The answer denies that a dividend was declared by the board of directors or that it was credited to the stockholders on the books of the corporation or that such alleged action was known and acquiesced in by all the directors and stockholders or that they or the corporation are estopped to resist the payment of said alleged dividend. It further alleges that on April 20, 1918, the board of directors of the corporation consisted of three members, Alva D. Milligan, F. A. Leard, and Madge E. Milligan; that on that date two of said directors met in special meeting and made the order declaring the dividend, but without notice to Madge E. Milligan, the other member, and therefore their action at that time was void.

The trial was had before the court without a jury. Judgment for plaintiff, and defendant has appealed.

A finding of facts was filed by the trial judge, from which we note the following: The court found that defendant is a corporation with a capital stock of $100,000, divided into 1,000 shares of the par value of $100 each. In 1918, Madge E. Milligan was president, F. A. Leard, her brother, vice president, and Alva D. Milligan was secretary and general manager and he had active charge of the business. Its directors were Madge E. Milligan, Alva D. Milligan, and F. Leard. The records of the corporation show that a special meeting of its directors was held on April 20, 1918, at which a dividend of $25 on each share for the year ending December 31, 1917, was declared. At this meeting only F. A. Leard and Alva D. Milligan were present and the other member of the board, Madge E. Milligan, had no notice of the meeting and was not present. Alva D. Milligan died in January, 1919. Plaintiff is executrix of his will. Alva D. Milligan was the owner of 238 shares of stock, and his part of the dividend has not been paid. All of the stockholders resided in Springfield, Mo., except Norvell W. Milligan, who lived in California. The stock was held as follows: Madge E. Milligan, 262 shares; Madge E. Milligan, trustee for Rester Milligan, 262 shares; Alva D. Milligan, 238 shares; Mary Milligan Clement, 1181/a shares; Norvell W. Milligan, 1181%a shares; F. A. Leard, 1 share. On April 22, 1918, the purported dividend was extended on the books of the corporation as credits in favor of the respective stockholders according to their interests. At or about that time every stockholder was notified of the declaration of the dividend by a document called a "trial balance." These documents showing the dividend, with other information, were sent to the stockholders a number of times. No stockholder or director ever objected to the said dividend nor prior to this suit challenged its validity, but they all acquiesced in it. After Norvell W. Milligan was notified of the dividend, he asked that it be paid, but was informed by Alva D. Milligan that the corporation was not ready to pay. In rune, 1918, Norvell drew a draft for $500 on the corporation, which was paid and charged against his share of the dividend, which amounted to $2,962.50. In June, 1919, Madge E. Milligan, acting for herself and certain employees of the corporation, purchased the stock of Norvell W. Milligan for $50,000, less certain deductions, among which was the $500 received on the said draft, and this $500 was paid by her to the company. This left the original credit of $2,962.50 credited to him on account of the supposed dividend intact and was then credited to the "employees" account for whom Madge E. Milligan had bought the stock.

In June, 1919, the plaintiff, under order of the probate court, sold as executrix the 238 shares of stock owned by Alva D. Milligan to Madge D. Milligan. This stock was appraised at its book value, omitting the dividend. In the negotiations for this sale, both plaintiff and Madge E. Milligan acted in recognition of the validity of the dividend of April 20, 1918, and straightway after the sale the dividend of $5,950 that had been credited to Alva D. Milligan was transferred on the books of the company to Madge D. Milligan without an assignment thereof from plaintiff. All the stockholders knew about the dividend and all the directors knew all of the particulars about this dividend. The by-laws of the company enabled either of the three directors to call a special meeting of the board. The by-laws also provided for two regular meetings each year of the board, and at least one of these had been held. There had been no disavowal of the dividend nor a cancellation of the credits entered because of the dividend.

Because the directors of the corporation individually and when acting as a board conducted the business of the corporation on the assumption that the dividend of April 20, 1918, was valid, and because plaintiff knew of that conduct and relied on it, and because the corporation cannot restore the status quo ante, the corporation is estopped from questioning the validity of the dividend. The corporation accepted or affirmed the validity of the dividend by failing to challenge it in any of its meetings and by permitting the dividend to be carried on its books as credits to stockholders for more than a year and by permitting plaintiff's interest therein, amounting to $5,950, to be transferred to another on the books of the company without an assignment from plaintiff.

The trial court held that the purported action of the board of directors on April 20, 1918, was illegal because one director was not notified of the meeting, but held that the corporation became bound by it on the theory of estoppel and by ratification, and found for plaintiff for $5,950 and interest at 6 per cent. from August 21, 1919,

The finding of the court that Madge E. Milligan, one of the directors, was not notified of the meeting of the board on April 20, 1918, was based on the testimony of F. A. Leard and Madge E. Milligan, who were directors at that time. Respondent contends that by the death of Alva D. Milligan, one of the directors who participated in the meeting on April 20, 1918, the other directors, F. A. beard and Madge E. Milligan, are by statute rendered incompetent to testify that no notice of that meeting was given to Madge E. Milligan, the other director, and, with their testimony eliminated, there is no evidence that such notice was not given, and in that situation the law will presume that the meeting was regularly called, and the record, being regular on its face, must stand as valid and binding.

Respondent also contends that even if these witnesses are held competent and the finding that no notice of that meeting was given is warranted, yet the action of the two members of the board has since been ratified by the corporation through its directors and stockholders, and also that it is now estopped to deny the validity of the declared= of the dividend.

Appellant's contention is that the holding of the trial court that F. A. Leard and Madge E. Milligan, directors, were not disqualified as witnesses by the death of the other director, Alva D. Milligan, was right, and that the finding from their testimony that Madge B. Milligan had no notice of the special meeting of the board of directors on April 20, 1918, at which the dividend in question purports to have been declared, was also right, and therefore that action of the board as shown by the record of the board's proceedings was void is also correct, but that the finding of the court that the corporation had ratified the action of the two in declaring a dividend, or that it is now estopped to deny the validity of the declaration of a dividend at that time, is not warranted by the evidence, and hence the finding should have been for defendant.

The question of the competency of F. A. beard and Madge B. Milligan as witnesses to testify that no notice of the special meeting of the board of directors was given has been most ably briefed by counsel and many authorities cited to uphold the opposing contentions. Space will...