Schroeder v. Edwards

• Decision Date: 06 January 1916
• Docket Number: No. 17271.,No. 17270.,17270.,17271.
• Citation: 267 Mo. 459,184 S.W. 108
• Parties: SCHROEDER et al. v. EDWARDS et al. (two cases).
• Court: Missouri Supreme Court

184 S.W. 108

267 Mo. 459

SCHROEDER et al. v. EDWARDS et al. (two cases).

No. 17270.

No. 17271.

Supreme Court of Missouri, Division No. 2.

January 6, 1916.

On Motion to Modify, February 15, 1916.

Further Motion to Modify Overruled March 31, 1916.

Appeal from St. Louis Circuit Court; George C. Hitchcock, Judge.

Suit by Herman Schroeder and others against George Edwards and others, in which John D. Gerlach, administrator, was substituted for Harvey Neville, deceased, as plaintiff. Judgment and decree for plaintiffs, except plaintiff Neville, and defendants appeal; and Gerlach, plaintiff, prosecutes a cross-appeal. Judgment as to plaintiff Gerlach affirmed, and judgment for other plaintiffs reversed and remanded, and motion to modify granted.

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, Mo., 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 350 shares of the par value of $100 each, and that defendant George L. Edwards and one J. D. Gerlach were the original incorporators and promoters of said corporation, and that all but 5 shares of said capital stock were originally subscribed for by A. D. Grant as a "straw man," and that said Grant paid no consideration to said corporation for said stock.

That immediately after said corporation was organized said Grant transferred 340 shares of said stock to defendant Edwards; that said Edwards, afterwards, transferred all but 147 shares of said stock to other parties, among them J. D. Gerlach, 146 shares; that an understanding existed between Edwards and Gerlach whereby each was to receive approximately one-half of the capital stock of said corporation; that said defendant Edwards became the owner of and holder of 148 shares of stock in said corporation, and now owns and holds the same on the books of the corporation, and that no consideration has ever been paid to the corporation, nor has the corporation ever received any value for the 148 shares of stock so held by defendant Edwards.

That defendant Edwards, in 1901, indorsed and delivered to said J. D. Gerlach a certificate for said 148 shares of stock held by said Edwards, but that said transfer has never been recorded upon the books of the corporation, and that, at the time of the transfer, the corporation was insolvent and said Gerlach was insolvent, and said transfer was made by said Edwards to avoid liability on said stock; that under the common law of Illinois, the transferrer of stock remains liable thereon until the transfer is recorded on the books of the corporation, and that such liability has not been removed by statute in said state; that there is now due and unpaid on said 148 shares of stock held by said Edwards the sum of $14,800, for which said defendant is liable to these plaintiffs; that said defendant Grant owns 5 shares of the capital stock of said company upon which there has been nothing paid, and that there is due on such shares the sum of $500; that said defendants Grant and Edwards are the only solvent stockholders, holding unpaid stock, within the jurisdiction of said circuit court.

The petition further alleges that section 8, chapter 32, of the Revised Statutes of Illinois, provides as follows:

"Every assignment or transfer of stocks, on which there remains any portion unpaid, shall be recorded in the office of the recorder of deeds of the county within which the principal office is located, and each stockholder shall be liable for the debts of the corporation to the extent of the amount that may be unpaid upon the stock held by him, to be collected in the manner herein provided. No assignor of stock shall be released from any such indebtedness by reason of any assignment of his stock, but shall remain liable therefor jointly with the assignee until the said stock be fully paid. Whenever any action is brought to recover any indebtedness against the corporation, it shall be competent to proceed against any one or more stockholders at the same time to the extent of the balance unpaid by such stockholders upon the stock owned by them, respectively, whether called in or not, as in cases of garnishment. Every assignee or transferee of stock shall be liable to the company for the amount unpaid thereon, to the extent and in the same manner as if he had been the original subscriber."

The petition further alleges: That plaintiff Herman Schroeder, on December 14, 1904, recovered judgment in the circuit court of Randolph county, in the state of Illinois, against said Chester Light, Water & Ice Company, in the sum of $56.70, together with costs amounting to $4.85. That execution was duly issued upon said judgment, addressed to the sheriff of said Randolph county, and was, by said sheriff, duly returned nulla bona. That said judgment still remains due and unpaid, and under the laws of the state of Illinois bears interest at the rate of 5 per cent. per annum. The judgments of the other respective plaintiffs are set forth in the same manner as the judgment of plaintiff Schroeder. The prayer of the petition asks that the court enter a decree against said defendants, in proportion to the amount of their respective stock liability, an amount sufficient to satisfy the total claims and judgments of the respective plaintiffs.

Defendants filed a motion to strike out the third amended petition on the ground that it was a departure from the original cause of action pleaded. This motion was overruled, and defendant saved an exception. Defendants' answer to said third amended petition alleged:

First. That the court had no jurisdiction of the subject-matter.

Second. That the plaintiffs, or some of them, have no legal capacity to sue.

Third. They admit that defendant Edwards, in 1901, sold and transferred all of his stock in said company to said J. D. Gerlach for a consideration of $5 per share and executed to said Gerlach a power of attorney to cause said shares of stock to be transferred on the books of the company to said Gerlach, and, that by reason thereof, the defendant Edwards ceased to be a shareholder in the company, and that if the company is indebted to the plaintiffs, as alleged in their amended petition, said indebtedness accrued long subsequent to the time when defendant Edwards ceased to be a shareholder, as aforesaid.

Fourth. That when the company was organized, it was mutually agreed between the incorporators thereof and all the subscribers to the capital stock that its capital stock should be paid wholly in services and contract and franchise rights to be rendered to and transferred to the company, or for its use and benefit, either before or after the incorporation of the company, and that all of the services and contract and franchise rights agreed to be rendered to and transferred to the company, in payment of the capital stock of the company, were rendered to and transferred to the company, as agreed, and its capital stock fully paid as agreed, all of which was known to the plaintiffs and each of them, and particularly to the plaintiff Harvey Neville, who was an incorporator of the company, shareholder, director, and treasurer thereof, from its organization to its final dissolution, and that neither of the plaintiffs gave or extended credit to the company on the faith that its capital stock had been paid in money or its equivalent in property value, but well knew that the capital stock of the property was not intended to be paid in money or in its equivalent in property.

Fifth. That the liability of shareholders in a corporation, organized under the laws of Illinois, to said corporation or its creditors, is a contractual liability, and that, under and by virtue of the laws of the state of Illinois, which form a part of the said contract, the shareholders of a corporation, organized under the laws of said state, can only be sued upon their stockholders' liability in the courts of that state, and such liability could not be enforced by suit or otherwise except by such suit or proceeding prescribed for that purpose by the laws of the state of Illinois, and in the courts of said state. That under and by virtue of section 8, and section 25, chapter 32, of the Revised Statutes of Illinois, it is provided as follows:

(Section 8 is the same section as is copied in plaintiffs' petition.)

"Section 25. If any corporation or its authorized agents shall do, or refrain from doing any act which shall subject it to a forfeiture of its charter or corporate powers, or shall allow any execution or decree of any court of record, for a payment of money, after demand made by the officer, to be returned `No property found,' or to remain unsatisfied for not less than ten days after such demand, or shall dissolve or cease doing business, leaving debts unpaid, suits in equity may be brought against all persons who were stockholders at the time, or liable in any way,...