Schroeder v. Edwards
| Decision Date | 31 March 1916 |
| Citation | 184 S.W. 108,267 Mo. 459 |
| Parties | HERMAN SCHROEDER et al. v. GEORGE L. EDWARDS et al., Appellants. HERMAN SCHROEDER et al; JOHN D. GERLACH, Administrator of Estate of HARVEY NEVILLE, Appellant, v. GEORGE L. EDWARDS et al |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. George C Hitchcock, Judge.
Reversed and remanded (with directions).
Eliot Chaplin, Blayney & Bedal for plaintiffs.
(1) A shareholder's liability to creditors of a corporation is determined by the statutes of the State in which the corporation was incorporated, and the construction of its statutes by the court of last resort of that State is followed in all jurisdictions. Meyer v. Mining Co., 192 Mo. 162; Hodgson v. Cheever, 8 Mo.App. 318; Bagley v. Tyler, 43 Mo.App. 195; Guerney v Moore, 131 Mo. 650; Leucke v. Tredway, 45 Mo.App. 507; Kimball v. Davis, 52 Mo.App. 194; McClure v. Iron Co., 90 Mo.App. 567; Pfaff v. Gruen, 92 Mo.App. 560; 4 Thompson on Corporations (2 Ed.), sec. 5050, p. 1440; 10 Cyc. 670. This liability will be enforced in all other jurisdictions unless the statute creating the right gives an exclusive remedy for its enforcement. Hodgson v. Cheever, 8 Mo.App. 318; Bagley v. Tyler, 43 Mo.App. 195; Guerney v. Moore, 131 Mo. 650; Leucke v. Tredway, 45 Mo.App. 507; Schickle v. Watts, 94 Mo. 411; Van Cleve v. Berkey, 143 Mo. 109; Meyer v. Milling Co., 192 Mo. 162; Euston v. Edgar, 207 Mo. 287. (2) The services of Mr. Edwards in raising $ 19,500 for the company under the circumstances disclosed in evidence were not such services as could be given or received in payment of capital stock. 1 Cook on Corporations (7 Ed.), pars. 17 and 18; Thompson on Corporations (1 Ed.), sec. 1605; 4 Thompson on Corporations (2 Ed.), secs. 3962-3964; Clark and Marshall on Corporations, sec. 384; Sand Co. v. Crematory Co., 205 Ill. 42; Liebke v. Knapp, 79 Mo. 22; 10 Cyc. 472. (3) Under the law of Illinois, shares of stock must be paid for in money or money's worth. Where an agreement is made to that effect, shares may be paid for in property, but to constitute payment the property must have been bona fide sold to and received by the corporation at its market or cash value. Coleman v. Howe, 154 Ill. 458; Van Cleve v. Berkey, 143 Mo. 109; Sprague v. Bank, 172 Ill. 149; Sand Co. v. Crematory Co., 205 Ill. 42; Gillett v. Title & Trust Co., 230 Ill. 373. (4) In the absence of an express agreement on the part of a corporation, an officer is not entitled to payment for services rendered as such officer. Gridley v. Railroad, 71 Ill. 200; Fritze v. Bldg. & Loan Soc., 186 Ill. 183; Macaroni Co. v. Boggiana, 202 Ill. 312. (5) Payment for the capital stock of a corporation in property must be made under an agreement with the corporation. An agreement between the promoters to this effect is not sufficient. 1 Cook on Corporations (7 Ed.), sec. 18; Jewell v. Paper Co., 101 Ill. 57. (6) The appellants having failed to make the point below that respondents must introduce the Illinois statutes showing the authority of the clerk to enter a judgment in vacation cannot make the point on appeal. The judgments cannot be collaterally attacked for defects in procedure; being judgments of a court of general jurisdiction of a sister state authenticated under the act of Congress they are entitled to full faith and credit, and it will be presumed that the court had jurisdiction unless it is affirmatively shown to the contrary. 2 Black on Judgments (2 Ed.), secs. 889 and 896; Dodge v. Coffin, 15 Kan. 277; 23 Cyc. 1090, 1095; Lackland v. Pritchett, 12 Mo. 485; Assurance Co. v. Walden, 238 Mo. 49; Hurd's R. S. Ill., ch. 110, sec. 88; Conkling v. Ridgely, 112 Ill. 36; (7) The law of Illinois, as determined by its court of last resort, allows a corporate creditor to recover against shareholders for the unpaid portion of their stock even though the creditor at the time of extending credit knew the shares were unpaid. Gillett v. Title & Trust Co., 230 Ill. 373; Sprague v. Bank, 172 Ill. 149; 4 Thompson on Corporations (2 Ed.), sec. 5028, p. 1423.
Jeffries & Corum for defendants.
(1) The consideration for shares of stock of a corporation may be paid in services rendered or to be rendered. Cook on Corporations (7 Ed.), sec. 20; Shannon v. Stevenson, 173 Pa. St. 419; Beach v. Smith, 30 N.Y. 116; Liebke v. Knapp, 79 Mo. 22; Vogeler v. Punch, 205 Mo. 574. (2) A loan of credit is such a service as a corporation may accept in payment for its stock. Saunders v. Marble Co., 25 Wash. 475; Cook on Corporations (7 Ed.), sec. 20; Bank v. Slater, 117 F. 1002. (3) In determining the question as to whether or not the property or services are of adequate value in the payment for shares of stock, the courts of Illinois and elsewhere have adopted what is known as the "good faith" rule, which provides that in the absence of express fraud the adequacy of the consideration cannot be questioned by creditors of the corporation. Kunz v. Valve Co., 29 Ohio Cir. Ct. 519; Coleman v. Howe, 154 Ill. 458; Car Seat Co. v. Rankin, 45 Ill.App. 226; Bank v. Northrup, 82 Kan. 638; Farwell v. Tel. Co., 161 Ill. 52; McBride v. Farrington, 131 F. 797; Coit v. Amalgamating Co., 119 U.S. 343; Fogg v. Blair, 139 U.S. 118; Cook on Corporations (7 Ed.), sec. 46; Trust Co. v. McMillan, 188 Mo. 547; Hall v. Henderson, 134 Ala. 455, 63 L. R. A. 673; McClure v. Iron Co., 90 Mo.App. 567; Carp v. Chipley, 73 Mo.App. 22; Vogeler v. Punch, 205 Mo. 558; Peck v. Coal Co., 11 Ill.App. 88; Chemical Works v. Glass Co., 34 Ill.App. 404; Young v. Iron Co., 65 Mich. 411; Netherly v. Baker, 35 N.J.Eq. 301; Beckley v. Schlog, 46 N.J.Eq. 533. (4) No statute of the State of Illinois being introduced in evidence prohibiting the payment of stock in services, the commonlaw rule in regard thereto will be applied. Horton v. Lbr. Co., 147 Ky. 227; McClure v. Iron Co., 90 Mo.App. 567; 10 Cyc. 649; Coffin v. Ransdell, 110 Ind. 424. (5) Where a judgment of confession in vacation by the clerk is authorized by a statute of a foreign State, such statute must be introduced in order to prove a valid judgment. Otherwise the common-law rule that a judgment is a judicial act and must be entered in open court applies. Roundy v. Hunt, 24 Ill. 598; Trimble v. Stamper, 179 Mo.App. 300; Secs. 6281, 6282, R. S. 1909. (6) Where a creditor participated in the scheme whereby the capital stock of a corporation has not been fully paid and therefore knew at the time he extended credit to it that it was not fully paid, he cannot thereafter enforce his claim by suing the stockholders for the unpaid portion of their stock. This is conceded by appellant to be the well-settled law of Missouri. He asks this court to apply to this case the law of Illinois as declared by the courts of that State, wherein he claims all question of knowledge of, or participation in, the scheme by which the stock is issued for less than its expressed par value, is eliminated from the right of a creditor of the corporation to recover from the stockholders. If this be the settled law of Illinois as declared by the courts of that State, and is relied upon by appellants to control this case, it should have been pleaded and proved in the lower court. Morton v. Supreme Council, 100 Mo.App. 88; Garrett v. Conklin, 52 Mo.App. 654; Ginnochio v. Railroad, 155 Mo.App. 163; Thompson v. Railroad, 243 Mo. 336; Tennent v. Ins. Co., 133 Mo.App. 345. (7) The common law of Illinois applicable to this case is the same as the general common-law rule. When the evidence shows that the capital stock of a corporation was to be paid for in property or services under an agreement between the corporation and the stockholders, and said agreement to render services in payment for the stock has been made and carried out in good faith, in the absence of fraud, creditors are foreclosed from a recovery against such stockholders on the ground that the stock has not been paid for. McClure v. Iron Co., 90 Mo.App. 460; Carp v. Chipley, 73 Mo.App. 22; Vogeler v. Punch, 205 Mo. 558; Kunz v. Valve Co., 29 Ohio Cir. Ct. 519; Coleman v. Home, 154 Ill. 458; Car Seat Co. v. Rankin, 45 Ill.App. 226; McBride v. Farrington, 131 F. 797; Meyer v. Milling Co., 192 Mo. 162; Berry v. Rood, 168 Mo. 333; Woolfolk v. January, 131 Mo. 620; Trust Co. v. McMillan, 188 Mo. 1; Shield v. Hobart, 172 Mo. 491; Biggs v. Westen, 248 Mo. 333; Bonet Const. Co. v. Westen & Kline, 153 Mo.App. 185; Millinery Co. v. Trust Co., 251 Mo. 553.
This is a proceeding in equity by judgment claimants of the Chester Light, Water & Ice Company, a corporation organized under the laws of the State of Illinois, to recover from the defendants, residents of St. Louis, Missouri, as stockholders of said corporation, an amount alleged to be unpaid on the stock held by them in said corporation, and to have said amount, due on said stock, applied to the payment of the plaintiffs' respective claims. Trial was had, in the circuit court of the city of St. Louis, resulting in a judgment and decree in favor of all of the plaintiffs, except plaintiff Neville, and judgment was rendered against defendant George L. Edwards for the sum of $ 10,226.26 and against defendant Grant for the sum of $ 343.16, making a total judgment of $ 10,569.42, which was the total amount of judgments and claims held by the respective plaintiffs, less the claim of plaintiff Neville. Cross appeals were duly taken to this court, one appeal by plaintiff Neville and another appeal by the defendants Edwards and Grant.
The third amended petition, upon which the case was tried alleged the incorporation of the Chester Light, Water & Ice Company, under the laws of the State of Illinois, with an authorized capital of $ 35,000, divided into three...
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