Scott v. Barton

Decision Date15 December 1920
PartiesEDWARD J. SCOTT and JOHN R. SCOTT, Appellants, v. R. L. BARTON et al
CourtMissouri Supreme Court

Appeal from St. Louis City Circuit Court. -- Hon. George H. Shields Judge.

Reversed and remanded (with directions).

Kinealy & Kinealy for appellants.

(1) A creditor who has obtained a judgment against a corporation and a return of execution nulla bona may then proceed against the holders of unpaid stock. 10 Cyc. 725 and 731, tit Corporations; Shickle v. Watts, 94 Mo. 410; Meyer v. Min. & Mill. Co., 192 Mo. 162. (2) The judgment against the corporation is conclusive on the stockholder. Nichols v. Stevens, 123 Mo. 96; Johnson v. Stebbins-Thompson Ry. Co., 177 Mo. 581. (3) If the holder of the stock be an assignee thereof and took it with notice that it had been paid up in property then he takes it subject to the right of a creditor to have the value of the property investigated, and if such value be not equal to the amount of the capital stock, then the holder of the stock is liable to the creditor. Meyer v. Min. & Mill. Co., 192 Mo. 162. (4) To defend, by way of estoppel, against the claim of the creditor, it must be shown that he had actual knowledge that the stock was not fully paid. Rogers v. Stag Min. Co., 185 Mo.App. 659; Construction Co. v. Western, 153 Mo.App. 185. (5) The mere fact that the creditor may also be a stockholder does not prevent him from pursuing his remedy as a creditor. Schaefer v. Brewing Co., 4 Mo.App. 115; Guernsey v. Moore, 131 Mo. 650; Meyer v. Min. & Mill. Co., 192 Mo. 162. (6) Under our procedure the courts can only consider controversies as concrete cases made by the pleadings. State ex rel. v. Muench, 217 Mo. 124; Moormeister v. Hannibal, 180 Mo.App. 717. (7) If the stockholder, when sued by a creditor, admits that he is such stockholder, he can file a cross-bill bringing in all other stockholders for contribution. Hatch v. Dana, 101 U.S. 205; Young v. Farwell, 139 Ill. 326; Martin v. Land Co., 94 Va. 28; Brundage v. Monumental Co., 12 Ore. 322. (8) Defendants are bound by the allegations of their answer. Oglesby v. Railroad. 150 Mo. 137; Knopp v. Kelsey, 102 Mo. 291; Weil v. Posten, 77 Mo. 284; Bruce v. Sims, 34 Mo. 246. (9) An assignment of a judgment to one not a party thereto does not extinguish the judgment. Not even where the assignee is a surety for the judgment debtor. 23 Cyc. 1475; Bardon v. Savage, 1 Mo. 560; Bradley v. Heffernan, 156 Mo. 653; Prather v. Hairgrove, 214 Mo. 142; Thompson v. Longan, 42 Mo.App. 146; Marshall v. Meyer, 96 Mo.App. 643; Vas Hoose v. Machinery, 169 Mo.App. 54. (10) The liability of stockholders to corporate creditors does not make the stockholders sureties for each other. Guernsey v. Moore, 131 Mo. 650. (11) The assignee of the subject-matter of a pending suit gets all the rights of his assignor. R. S. 1909, sec. 1924; United Shoe Mach. Co. v. Ramlose, 210 Mo. 631; Hendricks v. Callaway, 211 Mo. 536; Van Syckel v. Beam, 110 Mo. 589; Craig v. Zimmerman, 87 Mo. 475; Langford v. Varner, 65 Mo.App. 370; Bank v. Stanley, 46 Mo.App. 441; Craig's Appeal, 92 Mo. 396. (12) All the questions involved in this case having recently been under review of Court in Banc, are concluded here against respondents. Scott v. Luehrmann, 213 S.W. 855.

Muench, Walther & Muench for respondents.

(1) The question whether Scott & Sons were informed of the method by which the Parkview Company was promoted and financed was one of fact, and having been determined by the court below, on ample evidence contained in the record, that finding should be deferred to in this court, in view of the superior opportunity of that court to observe the witnesses and adjudge the weight and credibility of their evidence. Yeager v. Yeager, 185 S.W. 744; Thurmond v. Thurmond, 186 S.W. 1; Clark v. Clark, 143 Mo.App. 350; Hull v. Hull, 168 Mo.App. 220; Thiesen v. Thiesen, 167 Mo.App. 264; Griesedieck v. Griesdieck, 56 Mo.App. 98; Schierstein v. Schierstein, 68 Mo.App. 205; Wald v. Wald, 119 Mo.App. 347; Hunnell v. Zinn, 184 S.W. 1154; Creamer v. Bivert, 214 Mo. 479. (2) Where one deals with a corporation, knowing its stock to have been paid up in property of an unascertained value, and as "full paid," he can no more assail the consideration upon which such stock was issued than can the corporation itself; and especially is this true of one who was a party to the scheme by which stock was issued for an alleged inadequate consideration. Woolfolk v. January, 131 Mo. 637; Berry v. Rood, 168 Mo. 316; Shields v. Hobart, 172 Mo. 491; Trust Co. v. McMillan, 188 Mo. 567; Meyer v. Milling Co., 192 Mo. 162; Hanlon v. Trust Co., 251 Mo. 588; Biggs v. Western, 248 Mo. 344; Bank of Ft. Madison v. Alden, 139 U.S. 372; Cunningham v. Holley, Co., 121 F. 720; Continental, etc., Co. v. Cook, 152 F. 652. (3) The Syndicate contract, expressly joined in by plaintiffs Scott, having provided, in so many words, that "no member of the Syndicate shall be liable beyond the amount of his subscription," plaintiffs are now estopped from gainsaying that covenant, and seeking to make their fellow members pay for three and one-half times that amount. Herman on Estoppel, sec. 575; Bigelow on Estoppel (6 Ed.), p. 495. (4) The contention that the Scotts did not, at the time, know the value of the real estate equities which were turned over to the Park-view Company, will not avail. Not only did they fully examine this property before they either undertook to do the grading thereof or joined the Syndicate, but they had the same sources of information as all others, and cannot plead deliberate ignorance. "Knowledge is that which is, or may be, known." Meier v. Blume, 80 Mo. 184; Wade on Notice, sec. 11. (5) The original plaintiffs in these cases having been paid the agreed amount upon their judgment by parties of at least equal (if not greater) liability with these defendants, the judgment became extinct, unless the purchasers have some superior equity which entitles them to continue its vitality. Franklin v. Menown, 10 Mo.App. 574; Menown v. Crawford, Ibid. 575; Thayer v. Union Tool Co., 4 Gray (Mass.) 75; Hull v. Sherwood, 59 Mo. 172; McDaniel v. Lee, 37 Mo. 204; Johnson to Use, v. Greve, 60 Mo.App. 170. (6) There is not a word of evidence in the present case that, despite this payment to the Scotts by other syndicate members, this judgment should be kept alive. The only reference to the matter is found in the "Defense-Fund Agreement" of September 24, 1914, wherein, among themselves, the subscribers to the agreement reserve the right to seek contribution in equity against other subscribers to the syndicate -- not to continue an action in the name of a creditor, praying for judgments more than $ 400,000 in excess of the price paid by them for the original Scott judgment. This signifies a radical difference between the cases at bar and the case of Scott v. Luehrmann, 213 S.W. 855. But even without such difference, the rule in this State has always been that the payment of judgment by persons of equal, or greater, responsibility with remaining judgment debtors cannot recover from the latter more than a just contribution. Campbell v. Pope, 96 Mo. 475; Milling Co. v. Sugg, 83 Mo. 476; cases last above. (7) This being an equitable proceeding, the original plaintiffs, and, a fortiori, their present substitutes, should do equity. It is not equitable to bring a large number of different suits against many defendants, in the same jurisdiction, upon the causes, if any, identical in all, thus multiplying cost and creating harassment; and in this very cause the corporations (the Trust Companies and the Parkview Company), should have been made parties in order to have their several liabilities determined. Deeming the majority opinion in the Luehrmann case at variance with the following authorities, we respectfully urge a re-examination, by this court, of the point involved. Lucke v. Treadway, 45 Mo.App. 515; Patterson v. Lynde, 112 Ill. 205; Swan Co. v. Frank, 148 U.S. 603; First Natl. Bank v. Smith, 6 F. 215; Elkhart v. Guar. Co., 87 F. 252; Witherbee v. Baker, 35 N.J.Eq. 507; Coleman v. White, 14, Wis. 700; Morawetz on Corp. sec. 625; 20 Ency Pl. & Pr. 724; Continental Adj. Co. v. Cook, 152 F. 652.

MOZLEY, C. White, C., concurs; Railey, C., not sitting.

OPINION

MOZLEY, C.

There are two of these cases, Nos. 20157 and 20158, which have been consolidated by the parties, and only one, No. 20158, has been abstracted and briefed. What is said in this case applies also to the other.

The action is in equity and seeks to enforce the collection from defendants of a judgment in favor of plaintiffs of $ 117,303.35. Plaintiff's bill was dismissed by the court below "without prejudice" and plaintiffs duly appealed to this court.

The case of Scott v. Luehrmann, 278 Mo. 638, 213 S.W. 855, decided by Court in Banc, adjudicates all of the points in issue here. That case was dismissed by the lower court, appealed here, and reversed and remanded to the lower court with directions to proceed in conformity with said opinion. Since the facts of that case and of the instant case are the same with the exception below noted, we deem them important to the present case and therefore, set them out, as follows:

"The consummation between the parties hereto was a judgment in favor of plaintiffs for $ 117,303.35 and against defendants. The petition avers that returns nulla bona were made on two executions; that the corporate defendant (Parkview Realty & Improvement Co.) is wholly insolvent, except the amount due it from subscribers to its stock who have obtained same without paying therefor. The plan of the incorporation of the company is then set out, showing that it gave to each purchaser of its second mortgage bonds a certain proportion...

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