Priest v. White

• Decision Date: 21 June 1886
• Citation: 1 S.W. 361,89 Mo. 609
• Parties: PRIEST v. WHITE, Adm'r, etc., and another.
• Court: Missouri Supreme Court

1 S.W. 361

89 Mo. 609

PRIEST v. WHITE, Adm'r, etc., and another.

Supreme Court of Missouri.

June 21, 1886.

1. CORPORATIONS — TORTS OF OFFICERS — FALSE REPRESENTATIONS AS TO STOCK.

Where managers of a corporation make false reports, or resort to fraudulent devices, and thereby induce persons to take stock, such purchasers, in order to recover in an action for fraud and deceit, must show that they acted upon the faith of the representations.

2. SAME — FRAUD OF INCORPORATORS — LIABILITY TO CREDITORS.

The fact that incorporators committed a fraud upon the corporation does not give a creditor of the corporation cause of action against the incorporators.

Appeal from Moberly court of common pleas.

Martin, Hallis & Priest, for appellant, Theo. F. Priest. Porter & Waller and Hardin, Reed & Hall, for respondents, B. W. White, Adm'r, etc., and another.

BLACK, J.

This suit is prosecuted against White, as administrator of Hardin, and against J. B. Bell. The court sustained a demurrer to the evidence, and the case is here on error assigned to that ruling. The petition sets out the indebtedness of the Jackson Coal & Mining Company to the plaintiff as disclosed by his evidence. It then alleges, in substance, that Bell, Hardin, Murphy, and Jackson, having each subscribed for $25,000 of stock, conspired together to cheat the corporation of its stock, with a view of converting the same to their own use, and for the purpose of procuring money on worthless security; that having become the officers of the corporation, and there being no other stockholder, they had certificates of stock issued to themselves as paid-up stock, thereby claiming that the company had sold $100,000 of stock for cash at par, when nothing had been paid on the stock; that they sold the stock on the maket, and appropriated the proceeds to their own use, by reason of which the corporation was insolvent; that plaintiff gave credit to the corporation upon the belief that it had $100,000 invested in property, and without notice that the stock had been fraudulently issued; and that by the said fraudulent acts he was induced to part with his money.

The evidence shows that Bell, Hardin, Murphy, and W. B. Jackson were jointly interested in prospecting for coal, and to that end had procured leases and sunk shafts. In January, 1874, they agreed to, and thereafter did, associate themselves as a corporation by the name of the Jackson Coal & Mining Company, each subscribing for stock to the amout of $25,000. These persons were the officers and only stockholders. They turned over to the corporation the property which they jointly owned, and which was of the value of $12,000, in consideration of which they, in August, 1874, made an entry upon the books of the corporation to the effect that the stock should consist of 1,000 shares, of $100 each, to be issued to the order of themselves; that is to say, 250 shares to each. In December, 1877, Bell sold his stock for three or four thousand dollars, and gave the purchaser an order therefor. In April, 1878, Hardin sold his stock to R. E. Jackson for $4,500. The evidence rather tends to show that these assignees were then solvent, and while they took the stock as paid-up stock, still it might well be inferred from the price paid, and other circumstances, that they knew it had not been paid for at par. At the date of these sales no certificates of stock had been issued. Before these sales of stock the corporation issued nine bonds, of $1,000 each, secured the same by a deed of trust on the then property of the corporation, and sold the same at 60 cents on the...