Riesterer v. Horton Land & Lumber Company

• Decision Date: 12 February 1901
• Parties: RIESTERER et al. v. HORTON LAND & LUMBER COMPANY et al., Appellants
• Court: Missouri Supreme Court

61 S.W. 238

160 Mo. 141

RIESTERER et al. v. HORTON LAND & LUMBER COMPANY et al., Appellants

Supreme Court of Missouri, First Division

February 12, 1901

Appeal from Ripley Circuit Court. -- Hon. Jno. G. Wear, Judge.

Affirmed.

Seneca N. Taylor, Chas. Erd and S. C. Taylor for appellants.

(1) The Constitution is imperative to the effect that the stock and bonded indebtedness of a corporation shall not be increased without first giving sixty days' public notice, as provided by law. Constitution, art. 12, sec. 8; R. S. 1889 secs. 962, 2499. And the Revised Statutes declare in positive terms, that such notice shall be published in some newspaper sixty days previous to the date such meeting is to be held the last insertion to be not less than one, nor more than six days before the meeting. R. S. 1889, secs. 963 and 2500. This court has expressly held that this sixty days' notice was intended for the public at large, and is essential as a condition precedent to the things for which the statute requires the sixty days' notice before the stockholders' meeting, and it would seem that the statute could have no other rational interpretation. State ex rel. v. McGrath, 86 Mo. 241. The Constitution and statutes being in force at the time the bonds in question were issued, constitute prohibitions against the corporation issuing bonds without an action authorizing it at a stockholders' meeting held after the sixty days' public notice required by the law. Ampleman v. Ins Co., 35 Mo.App. 314; State ex rel. v. McGrath, 86 Mo. 241; Havens v. Ins. Co., 123 Mo. 418; Daggs v. Ins. Co., 136 Mo. 390; Cleveland City, etc., Co. v. Taylor Bros. I. Co., 54 F. 182; Head v. Ins. Co., 6 U. S. (2 Cranch), 127. (2) If a corporation does not act within the authorized objects of its charter, or performs an authorized act by a prohibited method, the act will be wholly void. St. Louis v. Russell, 9 Mo. 507; Blair v. Ins. Co., 10 Mo. 559; Christian University v. Jordan, 29 Mo. 68; Railroad v. Winkler, 33 Mo. 354; Bank v. Young, 37 Mo. 398; Ruggles v. Collier, 43 Mo. 353; St. Louis v. Clemens, 43 Mo. 404; Bank v. Harrison, 57 Mo. 511; Matthew v. Skinker, 62 Mo. 311; State ex rel. v. McGrath, 86 Mo. 241; State ex inf. v. Lincoln Trust Co., 144 Mo. 586. (3) Corporations must act strictly within the scope of the power conferred on them by the act calling them into being; and when a grant of power from the Legislature is relied on, the mode and place prescribed in the grant for doing the particular thing must be pursued according to the law creating them, else the act is void. Bank v. Bank (Mo.), 53 S.W. 989; Matthew v. Skinker, 62 Mo. 331; Railroad v. Marine Co., 36 Mo. 294; Bank v. Young, 37 Mo. 398; Duke v. Markham, 105 N.C. 131; Pierce v. Building Co., 9 La. 397; Lincoln v. Express Co., 45 La. Ann. 729; Shepp v. Railroad, 13 Pa. Co. Ct. Rep. 254, 2 Pa. Dis. Rep. 679; Bank v. Danbridge, 12 Wheat. 64; Head v. Ins. Co., 2 Cranch 127; Railroad v. Railroad, 75 Ky. 6. (4) The law is well settled that where a statute is founded upon public policy, a party can not waive its provisions, even by express terms. The contracts of private persons can not alter a statutory rule established on grounds of public policy. State ex rel. v. McGrath, 86 Mo. 241; White v. Ins. Co., 5 Central Law Journal, 486; Merrill v. Town of Monticello, 138 U.S. 673; Duke v. Markham, 105 N.C. 131; Pierce v. New Orleans Building Co., 9 La. 397; Lincoln v. Express Co., 45 La. Ann. 729; Shepp v. Railroad, 2 Pa. Dis. Rep. 679. (5) If this court should hold that some of the bonds are not invalid, though issued in violation of the Constitution and statutes, and that such bonds might have been lawfully pledged as collateral security to the German-American Bank, when properly certified, still, we insist that, as to sixty of the bonds for $ 500 each, found in the possession of the German-American Bank, which were not certified by the trustee until more than four months after appellants' lien by attachment had obtained, that the attachment lien and title acquired thereunder are prior and superior to that part of the decree in favor of the German-American Bank predicated upon the bonds not so certified. Burk v. Dulaney, 153 U.S. 228; Hurt v. Ford, 142 Mo. 306 to 308; Ayers v. Millroy, 53 Mo. 516; Jones on Corporate Bonds and Mortgages, secs. 206, 210; Massachusetts v. Railroad, 83 N.Y. 223; Ledwich v. McKim, 53 N.Y. 314; Speer v. Railroad, 79 Ala. 576; Zabriski v. Railroad (U. S.), 23 Howard 381.

J. E. McKeighan, Shepard Barclay and M. F. Watts for respondents.

(1) The constitutional and statutory provisions that sixty days' notice must be given of intention to increase "bonded indebtedness," do not apply to first or original indebtedness. Trust Co. v. Railroad, 51 F. 840. (2) Such statutory provisions, even if applicable to the first issue of bonds, are designed solely for the protection of the stockholders, and may be waived by them. 5 Thompson on Corporations, secs. 6060, 6069; Morawetz on Corporations, sec. 675; 2 Cook on Corporations, sec. 599; Campbell v. Mining Co., 51 F. 1; Beecher v. Market & Mill Co., 45 Mich. 103; Thomas v. Railroad, 104 Ill. 462; Seymour v. Spring Cemetery Ass'n, 144 N.Y. 333; Trust Co. v. Railroad, 67 F. 49; Commrs. of County of Knox v. Aspinwall, 62 U.S. 539; Bank v. Pierce, 117 Mich. 376, 75 N.W. 1058; Bridgeport Electric, etc., Co. v. Meader, 72 F. 115; Trust Co. v. Condon, 67 F. 84; Wood v. Corry Water Works Co., 44 F. 146; Hardware Co. v. Phalen, 128 Pa. 110; Jones v. Guaranty, etc., Co., 101 U.S. 622; National Bank v. Mathews, 98 U.S. 621; Nelson v. Hubbard, 96 Ala. 236; Zabriskie v. Railroad, 64 U.S. 381; Railroad v. Trust Co., 173 U.S. 99; Jones on Corporate Bonds and Mortgages, sec. 173. (3) The bonds in question having been issued with the consent of all the stockholders, and the land company having received and retained full consideration therefor, the company and its stockholders, and all claiming under the company, are estopped from denying the validity of the bonds. Authorities cited under point 2. (4) The provision in the bonds, to the effect that they shall not become obligatory until certified, is intended for the protection of the maker only, can be waived, and in this case was waived. Atwood v. Railroad, 85 Va. 966. (5) An attachment is a lien on the property attached only to the extent of the debtors' actual interest therein. Barnes v. Cox, 58 Neb. 175, 79 N.W. 550; Karger v. Steele-Wedeles Co., 103 Wis. 286; Potter v. McDowell, 43 Mo. 93; Stilwell v. McDonald, 39 Mo. 282; Wright v. Techener, 104 Ind. 185; Hovelman v. Railroad, 79 Mo. 682.

OPINION

MARSHALL, J.

This is an action to foreclose a deed of trust, covering several thousand acres of land in Ripley county, Missouri. The plaintiffs are the trustee and the holders of all the outstanding bonds secured by the deed of trust, and the defendants are the mortgagor and its creditors and other parties claiming title under it. There was a decree for the plaintiffs, from which the defendants perfected this appeal.

Briefly stated, the controversy is this. The Horton Land & Lumber Company owned the land; there was a mortgage on it for $ 6,500; outside of this the company owed a large floating debt, the bulk of which was held by the seven banks that are parties hereto; the total indebtedness amounted $ 110,000; the company desired to fund the indebtedness, and pay the small creditors and concentrate the indebtedness in the hands of the seven banks; to accomplish this it made a deed of trust, for $ 110,000, securing bonds to that amount, and sought to have each of the banks take bonds covering the amount of their claims and to a further amount equal to forty-eight per cent of their respective claims, and to apply the forty-eight per cent cash thus raised to pay the smaller creditors. The banks agreed to this arrangement. After about $ 40,000 bonds had been negotiated it was found that the deed of trust was defectively executed; so, to remedy the defect, on the fifteenth day of May, 1895, all of the stockholders of the Horton Land & Lumber Company signed a written resolution or agreement that the bonded indebtedness be increased to $ 110,000, and directing the vice-president and secretary to issue bonds to that amount and secure the same by a mortgage on the real estate and franchises of the company, and providing that the bonds should not be sold for less than their par value, or for any purpose except money, labor done or money or property actually received, and expressly waiving the sixty days' notice and all other notice required by law to be given of a meeting of stockholders of said company, "called to be held at office of said company on the twenty-first day of May, A. D. 1895, at nine o'clock a. m., for the purpose of taking an election for or against an increase of the bonded indebtedness of the said company as aforesaid, and desire and direct that this paper be taken as our vote in favor of said increase and in favor of the adoption of the above resolution."

On May 17, 1895, the directors held a meeting and unanimously rescinded the prior defective mortgage for $ 110,000, and also rescinded a resolution directing a general assignment for the benefit of its creditors.

On May 21, 1895, the directors held a meeting and, pursuant to the direction in the resolution of the stockholders of May 15 aforesaid, adopted a resolution ordering the issuance of bonds for $ 110,000 secured by mortgage, and this is the mortgage sought to be foreclosed in this case. Accordingly the bonds were issued and the deed of trust properly executed. The bonds contained this provision: "This bond will not become obligatory until the certificate thereon shall be signed by the trustee," and the certificate to be signed by the...