Raleigh Investment Co. v. Bunker
| Decision Date | 15 December 1920 |
| Citation | 227 S.W. 121,285 Mo. 440 |
| Parties | RALEIGH INVESTMENT COMPANY v. S. J. BUNKER, Appellant |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Karl Kimmel Judge.
Affirmed.
Jesse McDonald, George B. Webster and Arnold Just for appellant.
(1) Appellant was a bona-fide purchaser of the stock without knowledge that it was partly unpaid, and he is not liable. Keystone Bridge Co. v. McCluney, 8 Mo.App. 496; Berry v. Rood, 168 Mo. 316; Cook on Corporations sec. 257; Skrainka v. Allen, 76 Mo. 384; Erskine v. Loewenstein, 82 Mo. 301; Meyer v. Ruby Co., 192 Mo. 162; Bonet Const. Co. v. Central Am. Co., 153 Mo.App. 185. (2) The blocks of fourteen shares and eighty shares not being transferred on the corporate books from Evans to appellant, as required by the terms of the certificate, appellant is not the stockholder as to such shares and is not liable thereon. 14 Corpus Juris, 781; Cook on Corporations (7 Ed.), secs. 258, 260; People's Bank v. Stadmuller, 150 Cal. 106; Marlborough Mfg Co. v. Smith, 2 Conn. 579; Topeka Mfg. Co. v. Hale, 39 Kan. 23; Robinson v. Southern Bank, 180 U.S. 295; Wilson v. Ry. Co., 108 Mo. 588.
Connett & Currie and John A. Gilliam for respondent.
(1) Appellant is liable as purchaser of stock to the amount of $ 80 per share with interest at six per cent computed from date when be obtained the stock on at least 119 shares of stock bought by him from E. E. Evans, the promoter and president of the company. Enright v. Heckscher, 240 F. 863, 153 C. C. A. 549; Davis v. Scott, 195 S.W. 383; Luehrmann v. Title & Trust Co., 192 S.W. 1026; Van Cleve v. Berkey, 143 Mo. 109; Rumsey Mfg. Co. v. Kaime, 173 Mo. 551; Berry v. Rood, 168 Mo. 316; Meyer v. Mining & Milling Co., 192 Mo. 162; Trust Co. v. McMillan, 188 Mo. 568; State ex inf. v. Hogan, 163 Mo. 43; Shickle v. Watts, 94 Mo. 414; Keystone Bridge Co. v. Barstow, 8 Mo.App. 494; Keystone Bridge Co. v. McCluney, 8 Mo.App. 496; Moores v. Citizens Nat. Bank, 111 U.S. 156; Rhoads v. Blatt, 84 Pa. St. 31; Shober v. Wheeler, 113 N.C. 370; Bay v. Cook, 31 Ill. 336; Scoggin v. Schloath, 15 Ore. 380; Shaw v. Ansoldi Co., 165 N.Y.S. 872; Stevens v. Episcopal Church History Co., 140 A.D. 570; Sand Co. v. Crematory Co., 205 Ill. 42. (2) The transferee of stock, if taken with notice that the stock is unpaid, is liable for the amount unpaid. Cook on Corp. (7 Ed.) sec. 293, and cases cited in notes, and Secs. 373, 374, 375, 376, 377, 378, 379, 380, 381, 382, 383 and note 4 on Sec. 384 of Cook on Corp. (5 Ed.); Trust Co. v. McMillan, 188 Mo. 568; Shaw v. Spencer, 100 Mass. 302; Coleman v. Howe, 154 Ill. 472; Wilson v. Met. El. Ry. Co., 120 N.Y. 152; Rogers v. Stag Mining Co., 185 Mo.App. 675; Cypress Lumber Co. v. Shadel, 52 La. Ann. 2094; Howes v. Chaille, 129 Ind. 435; Jackson L. S. & R. Co. v. Davison, 65 Mich. 416; Sicker v. Rambousek, 193 Mo. 113; Stephenson v. Kilpatrick, 166 Mo. 262; Ins. Co. v. Smith, 117 Mo. 261; Thompson on Liability of Stockholders, sec. 129. (3) The buying of stock from the president of a corporation which is standing in his own name, and which is sold for his own benefit, within a short time after the incorporation of the company, at about ten per cent of its par value, puts the purchaser upon inquiry, is a badge of fraud, and the purchaser is not a bonafide purchaser of the stock, but is liable for all that is unpaid on the stock. Cook on Corp. (7 Ed.) sec. 293 and note; Mores v. Citizens Natl. Bank, 111 U.S. 156; Van Cleve v. Berkey, 143 Mo. 109; State ex inf. v. Hogan, 163 Mo. 43; Davis v. Scott, 195 S.W. 383; Allen v. Ligon, 175 Ky. 767; Robinson v. Robards, 15 Mo. 459; Fisher v. Shelver, 53 Wis. 498; Boyd v. Ellis, 11 Iowa 97; Dodson v. Cooper, 50 Kan. 680; Kuykendall v. McDonald, 15 Mo. 416; Fisher v. Lewis, 69 Mo. 632; Lionberger v. Baker, 88 Mo. 447; Hudgins v. Kemp, 61 U. S. (20 How.) 45; Trust Co. v. McMillan, 188 Mo. 568; Farrington v. Railroad, 150 Mass. 406; Hoppin v. Doty, 25 Wis. 591; De Witt v. Perkins, 22 Wis. 473; Auction & Com. Co. v. Mason, 16 Mo.App. 473; Eck v. Hatcher, 58 Mo. 241; Webster v. Upton, 91 U.S. 65; Ins. Co. v. Sherwood, 72 Mo. 461. (4) The circumstances of this case show that Bunker got thirty-five shares direct from Evans at $ 10 per share, and 102 shares by contract for relieving him from a $ 450 note, and eighty shares by relieving him from an $ 800 note, that at the time of getting the last 102 shares Bunker was secretary of the company and shortly thereafter became its president and general manager, and he is bound by the transfer for the unpaid amount on the stock and is estopped to deny his ownership and liability. Trust Co. v. McMillan, 188 Mo. 568; State ex inf. v. Hogan, 163 Mo. 43; Gillett v. Chicago Title & Trust Co., 230 Ill. 373; Nelson v. Chicago Title & Trust Co., 230 Ill. 440; Kemp v. Chicago Title & Trust Co., 230 Ill. 495; Meyer v. Mining & Milling Co., 192 Mo. 162; Erskine v. Lowenstein, 82 Mo. 301; Garrett v. Kansas City Coal Mining Co., 113 Mo. 338; Schroeder v. Edwards, 267 Mo. 481; Clark & Marshall on Corp. sec. 605, p. 1842; Sec. 4184, p. 7257, Fletcher's Corporation Cyclopedia; Cutting v. Damarel, 88 N.Y. 410; Sayles v. Bates, 15 R. I. 342; Dain Mfg. Co. v. Seed Co., 95 Mo.App. 144; Wilson v. Railroad, 108 Mo. 609; Keystone Bridge Co. v. McCluney, 8 Mo.App. 496; Camden Land Co. v. Lewis, 101 Me. 78; Moore v. Barrel Co., 238 Ill. 544; Shaw v. Straight, 107 Minn. 152; Moore v. Township of Kenochee 75 Mich. 351; Jones v. Shafer Iron Co., 96 Mich. 98; Camden v. Stuart, 144 U.S. 104; Herbert v. Duryea, 164 N.Y. 596; Patterson v. Woolridge, 170 Ky. 748; Upton v. Tribilcock, 91 U.S. 47.
On June 15, 1915, plaintiff obtained a judgment in the Circuit Court of the City of St. Louis, Missouri, against the Bismarck, Bellevue & Western Railway Company, for $ 17,572.08, upon which judgment an execution and alias execution were issued, and returned nulla bona by the sheriff. On April 3, 1916, plaintiff filed, in the circuit court aforesaid, its notice to defendant, S. J. Bunker, informing him as to the rendition of said judgment and the return of nulla bona aforesaid; and likewise notifying him that on Monday, April 3, 1916, it would move said court for an order against said defendant for an execution against him as a stockholder of said railroad company for the amount of said judgment and costs, or for such portion thereof as this defendant was liable to pay. On April 3, 1916, respondent filed a motion in said court for execution as aforesaid, and on April 12, 1916, filed an amended motion for execution against said Bunker as a stockholder in said railroad company and, after describing the judgment in favor of plaintiff as aforesaid, alleged that an execution had been issued on said judgment and a nulla bona return made thereon; that said Bunker was a stockholder in said company to the extent of 340 shares of the par value of $ 100 each; that one hundred per cent of the par value of 165 shares of said stock remains unpaid; that ninety per cent of the par value of 139 shares of said stock remains unpaid; that said S. J. Bunker purchased said stock with knowledge that nothing had been paid on said 165 shares of stock, and that only ten per cent of the par value of said 139 shares of stock had been paid. Respondent herein asked for an execution against said Bunker, as a stockholder aforesaid, to collect $ 29,010, or as much of said sum as may be necessary to satisfy the judgment aforesaid, being the sum remaining unpaid on the shares of stock held by defendant Bunker.
Appellant herein filed his return, and alleged therein that he is a stockholder of said railway company, but denies that he ever subscribed to the capital stock of same; denies that he was an incorporator thereof, or that he had any knowledge of its organization. He avers that on April 5, 1921, E. E. Evans was the owner of certain shares of the capital stock of said railway company, and that, on said date, he purchased from said Evans, for a valuable consideration then paid to to him, ten shares of the capital stock aforesaid; that he purchased the same in open market, upon the assurance and under the belief, that the same had been fully paid, and that said certificate, representing said ten shares, upon its face stated that they were paid in full and were non-assessable; that he had no notice or knowledge to the contrary; that he then believed, and still believes, that said shares were fully paid, non-assessable, and that no liability attached to the holder thereof, and he so avers; that by reason of the premises, he is not liable for the payment of any portion of said ten shares of stock, etc.
On September 18, 1916, respondent herein filed a reply to the return of appellant aforesaid, and denied all the allegations of new matter contained therein. It is further alleged in said reply, that said railway company was incorporated under the laws of Missouri, with a capital stock of 3,000 shares of the par value of $ 100 each, to build a railroad from Bismarck, Missouri, to Sunlight, in said State; that its first stockholders' meeting was held on March 23, 1912 and the following persons were its organizers, promoters, and constituted its first board of directors, namely, E. E. Evans, C. E. Hamilton, J. R. Roycroft, Edward T. Eversole, P. T. Ramsey, H. P. Hathaway, H. H. Albert, Walter C. Haeussler, E. E. Gimlin, Grant Wyatt and Louis Hudson; that at said meeting, E. E. Evans was elected president of said corporation, C. E. Hamilton vice-president, and J. R. Roycroft secretary and treasurer. It is averred that said directors and Dr. John L. Eaton, and other persons unknown to respondent, were a syndicate, organized to promote...
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