Rood v. Crocus Hill Mining Co.

• Decision Date: 20 July 1911
• Citation: 157 Mo. App. 405,139 S.W. 222
• Parties: ROOD v. CROCUS HILL MINING CO. et al.
• Court: Missouri Court of Appeals

139 S.W. 222

157 Mo. A. 405

ROOD v. CROCUS HILL MINING CO. et al.

Springfield Court of Appeals. Missouri.

July 20, 1911.

1. CORPORATIONS (§ 259)—CREDITORS—REMEDIES AGAINST STOCKHOLDERS.

A creditor of a corporation can reach unpaid stock subscriptions by suit in equity or by statutory motion for execution against the stockholder, or may sue at law under Rev. St. 1909, § 3006; the remedies being concurrent.

2. APPEAL AND ERROR (§ 1009)—CHANCELLOR'S FINDINGS—CONCLUSIVENESS.

In equity cases, the Supreme Court will defer to, but is not bound by, the chancellor's findings.

3. CORPORATIONS (§ 249)—STOCKHOLDERS— LIABILITY TO CORPORATE CREDITORS—OFFSET.

In a proceeding by a corporate creditor for execution against stockholders on unpaid subscriptions,

they are entitled to offset debts due them from the corporation.

4. APPEAL AND ERROR (1177)—REMAND FOR NEW TRIAL—PROPRIETY.

While ordinarily, on reversing judgment for plaintiff in an equitable proceeding, the cause should be remanded for new trial, where a demurrer to plaintiff's testimony was sustained, making it unnecessary for defendants to offer any evidence, a new trial will not be ordered if the facts involved are known only to defendants, and they testified fully at the trial.

5. CORPORATIONS (§ 256)—STOCKHOLDERS— LIABILITY FOR UNPAID SUBSCRIPTIONS— EVIDENCE—WEIGHT.

In a proceeding by a corporate creditor for execution against stockholders on their unpaid subscriptions, finding for defendants held against the evidence.

Appeal from Circuit Court, Jasper County; Henry L. Bright, Judge.

Proceeding by Norman P. Rood, trustee, against the Crocus Hill Mining Company and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

J. W. McAntire, for appellant. McIndoe & Thurman, for respondents.

COX, J.

This is a proceeding by the plaintiff, as a judgment creditor of the defendant Crocus Hill Mining Company, by separate motions under the statute, asking for execution against defendants Bendelari and Cook, for unpaid subscription to the stock of the Crocus Hill Mining Company. Trial was had and the issues found for defendants, and plaintiff has appealed.

The facts which afterward led to the procurement of the judgment which appellant is seeking to collect were as follows: The Crocus Hill Mining Company was indebted to a number of parties, including these defendants Bendelari and Cook, and executed a deed of trust, with plaintiff as trustee, upon all its property to secure these creditors. In this deed of trust each creditor is named, and the amount due each specified. The total debts secured amounted to $5,814.49, of which the amount stated to be due these defendants is $425. Afterwards the deed of trust was foreclosed, and the proceeds of the sale applied pro rata upon these debts. The plaintiff, trustee in the deed of trust, and representing all the creditors named therein, brought suit against the corporation for the balance due on these debts, and secured judgment for $3,499.89, and it is upon this judgment that he now seeks execution against these parties. It will thus be seen that about 40 per cent. of the debts were paid from the proceeds of the sale under the deed of trust. Upon this basis the amount due Bendelari and Cook at the time the judgment was rendered against the corporation in plaintiff's favor was $255, and they are now interested in the judgment to that extent.

The important question to be determined upon this appeal is whether the finding of the trial court is for the right party. Counsel for the respondents insist that this is not an equitable proceeding, but one at law, and that therefore the finding of the trial court is binding upon us, and the judgment should be affirmed. To support this contention, we are cited to Colonial Trust Company v. McMillan, 188 Mo. 547, 87 S. W. 933, 107 Am. St. Rep. 335, and other cases. These cases were brought under what is now section 3006, R. S. 1909. Actions under that section are law actions, as held by the cases to which we have been referred, but, as the present case is a proceeding under another section of the statute, the cases cited are not in point in this case.

The creditor of a corporation, who seeks to reach unpaid subscription to stock to satisfy his debt, may bring an action in equity or proceed under the statute by motion for execution against the owner of the stock, as was done in this case, or he may bring an action at law under section 3006. These are concurrent remedies, and the creditor should be guided by the facts in the case in determining which remedy he will pursue. Shields v. Hobart, 172 Mo. 491, 72 S. W. 669, 95 Am. St. Rep. 529; Steam Stone Cutter Company v. Scott, 157 Mo. 520, 57 S. W. 1076.

The Supreme Court of this state has held, in the case of Erskine v. Loewenstein, 82 Mo. 301, that this statutory proceeding by motion for execution is a substitute for an action in equity to accomplish the same end. By this decision of the Supreme Court, we are bound; hence it becomes our duty to review the testimony and dispose of the case in the same way as if it were an action in equity. The St. Louis Court of Appeals has in a very recent case recognized the same rule upon the same authority. Bonet Construction Company v. Central Amusement Company, 132 S. W. 270.

In equity cases it is settled law in this state that, while an appellate court will defer somewhat to the finding of the chancellor, it will not be bound thereby; but, if satisfied that the result reached by the chancellor is wrong, will review the testimony and render such judgment as the facts warrant. Benne v. Schnecko, 100 Mo. 250, 13 S. W. 82; McElroy v. Maxwell, 101 Mo. 294, 14 S. W. 1; Patterson v. Patterson, 200 Mo. 335, 98 S. W. 613. Following this rule, we shall examine the testimony and determine for ourselves whether or not the finding of the trial court was for the right party.

The evidence produced upon the hearing of the motion for execution disclosed the following state of facts:

The State Lead & Zinc Company was the owner of a mine in Jasper county. The defendants Bendelari and Cook were partners, and conceived the idea of organizing a corporation for the purpose of buying and operating the mine owned by the State Lead & Zinc Company. To accomplish this purpose, they took in another partner by the name of White, who was a resident of St. Paul, Minn., and these three constituted a partnership known as the Bob White Mining Company. The sole purpose of the formation of this partnership seems to have been to organize and start a new corporation for the purpose of buying and operating the mine in question. To accomplish this purpose, Cook went to St. Paul, and he and White induced parties there to invest in this mining venture and to put up money to them for that purpose, for which they were to receive stock in the new corporation when it was organized. On May 10, 1907, the Bob White Mining Company opened an account with the Miners' Bank, and from that date until June 10th, when the account closed, made deposits totaling $36,500, and drew checks for the entire amount. The corporation was organized on May 16, 1907, and named the Crocus Hill Mining Company. It was capitalized for $100,000, consisting of 1,000 shares of the par value of $100 each. The parties signing the articles of association were the defendants A. E. Bendelari and Frederick Cook, and A. W. Thurman, B. L. Geddes, and S. Wax. The articles of association recited that the board of directors should consist of five members, and that the first board were the members above named. It also stated that the entire stock of the corporation had been bona fide subscribed and had been duly paid, and was then in the custody of the board of directors, or managers. That the subscribers to the stock were as follows: A. E. Bendelari, 50 shares; Frederick Cook, 50 shares; A. W. Thurman, 1 share; B. L. Geddes, 1 share; and S. Wax, 898 shares. The evidence showed that the mine was bought from the State Lead...