Slattery v. St. Louis and New Orleans Transportation Co.

• Decision Date: 21 March 1887
• Parties: Slattery et al., Plaintiffs in Error, v. The St. Louis and New Orleans Transportation Company et al
• Court: Missouri Supreme Court

4 S.W. 79

91 Mo. 217

Slattery et al., Plaintiffs in Error, v. The St. Louis and New Orleans Transportation Company et al

Supreme Court of Missouri

March 21, 1887

Appeal from St. Louis City Circuit Court. -- Hon. A. M. Thayer Judge.

Affirmed.

Dyer Lee & Ellis for plaintiffs in error.

(1) It is a favorite doctrine of the American courts that the property of a corporation is to be deemed a trust fund for the payment of the debts of the corporation, so that the creditors have a lien on it in preference to any of the stockholders of the corporation. Thomp. Stock., sec. 10 and cit. And a creditor may follow this trust fund into the hands of every one, except a bona fide purchaser for value, and fastening a trust upon it may subject it to the payment of the corporation debts. Wood v. Dummer, 3 Mason's Cir Ct. 308; Union Nat. Bank v. Douglass, 1 McCrary, 86; Railroad v. Howard, 7 Wall. 392. The Mississippi Valley Transportation Company took the property of the New Orleans Transportation Company, charged with the debts of the former company. Hibernia Ins. Co. v. St. L. & N. O. Transp. Co., 10 F. 596; 13 F. 516; Fogg v. Receiver, 17 F. 871; S. C., 5 McCrary, 449; Brum v. Insurance Co., 16 F. 140; Railroad v. Boring, 51 Ga. 582-7; Dean v. LaMotte Lead Co., 59 Mo. 523; Town of Reading v. Wedder, 66 Ill. 80; Charitable Society v. Episcopal Church, 1 Pick. 371-4; Boone Corp., sec. 209; Railroad v. Bee et al., 48 Cal. 398, 405; Miners Ditch Co. v. Zellerback, 37 Cal. 543; City of St. Louis v. Gas Light Co., 70 Mo. 98; Hastings v. Drew, 50 How. Pr. 254; Railroad v. Evans, 6 Heisk. 607; Thompson v. Abbott, 61 Mo. 176. (2) When the creditor corporation refused to assert the corporate rights and collect and preserve the only property of the company, the stockholders might, in the right of the corporation, proceed in equity with the claim against the debtor and their own corporation as joint defendants. 2 Perry Trusts [2 Ed.] sec. 845, p. 477; Eager v. Burnes, 21 Beav. 579; 3 Pom. Eq. Jur. sec. 1095, and notes; Insurance Co. v. St. L. & N. O. Transp. Co., 14 F. 610; Brewer v. Boston Theatre, 104 Mass. 399; Robinson v. Smith, 3 Paige, 222; Peabody v. Flint, 6 Allen, 52; Atwood v. Merriweather, Eng. L. R. 5 Eq. Cas. 464, note; Memphis v. Dean, 8 Wall. 73; Pond v. Railroad, 12 Blatchf. 280. And this standing in the court of equity is accorded a stockholder, either against wrong-doing directors or other debtors of the corporation. Detroit v. Dean, 106 U.S. 537; Hawes v. Oakland, 104 U.S. 450; Pomeroy's Eq. Jur., 13, and note. (3) The right of stockholders to proceed against their wrong-doing directors for fraudulently colluding with the debtor of such corporation and refusing to collect such debt, and for abandoning the only corporate asset, is no bar to the right of such stockholders to follow the property of such debtor corporation, and to fasten upon it as a charge the debt, in fraud of which such property has been conveyed. It does not lie in the mouth of such conniving debtor to say to the stockholders, your only remedy is against your directors for fraud. Barr v. Cubbage, 52 Mo. 404; Berthof v. Quinlan, 68 Ill. 297; Wharton's Agency, sec. 417, et seq.; Story's Agency [9 Ed.] secs. 229-30. (4) Even if the stockholders were to pursue the wrong-doing directors, the remedy would be in equity. Brewer v. Boston Theater, 104 Mass. 399; Greaves v. Gage, 69 N.Y. 154; 3 Pom. Eq. Jur., sec. 1094, note 1; Horner v. Henning, 93 U.S. 228-232; Buchanan v. Boston Iron Co., 3 Bradw. 191; Buchanan v. Low, 3 Bradw. 202. It follows that the stockholders' remedy against these directors being in equity, they are not thereby barred from pursuing another equitable remedy against the trust fund. (5) As the stockholders must in any event go into equity with their complaint, it also follows, "when a court of equity once acquires jurisdiction of a cause it will not relax its grasp upon the res until it shall have avoided a multiplicity of suits, by doing full, adequate, and complete justice between the parties. It will not content itself in this regard by any halfway measures; it will not declare that a party has been defrauded of his rights, and then dismiss him with a bland permission to assert, at new cost and further delay, those rights in another forum." Real Estate Savings Inst. v. Collonious, 63 Mo. 295; Corby v. Bean, 44 Mo. 379; Rozier v. Griffith, 31 Mo. 171; Keeton v. Sprading, 13 Mo. 321; Primm v. Raboteau, 56 Mo. 407; McDaniel v. Lee, 37 Mo. 204; Dameron v. Jamison, 71 Mo. 97, 100; Evans v. Railroad, 64 Mo. 462. And the fact that a moneyed judgment is asked for in an equity case, and is indispensable in ascertaining the rights of the parties, will not oust the court of equity jurisdiction. Alexander v. Relfe, 74 Mo. 520; Barnes v. McMullins, 78 Mo. 272; Baile v. Insurance Co., 73 Mo. 384; Real Estate Savings Inst. v. Collonious, 63 Mo. 290. (6) The plaintiff's bill is not multifarious. A series of transactions tending to one common end, or all necessary to plaintiff's equity, do not constitute multifariousness. McGlothen v. Henery, 44 Mo. 350; Bobb v. Bobb, 76 Mo. 419. (7) The only theory upon which the plaintiff's bill is demurrable, in equity, is because these stockholders may, in the right of their company, have a money judgment at law against the New Orleans Transportation Company. The petition must, therefore, be good at law against the latter company, and its demurrer should have been overruled. Under the code practice, "a suit should never be dismissed on the ground that a court of equity has no jurisdiction of the matter because the plaintiff has an adequate remedy at law; it should be retained and decided as an action at law, and the adequate legal relief should be awarded." 1 Pom. Eq. Jur., sec. 358. The point cannot be urged here that there is a defect of parties defendant in omitting to join the wrong-doing directors as parties defendant. No such ground for demurrer is assigned. Hicks v. Jackson, 85 Mo. 283.

Given Campbell for defendants in error.

(1) Plaintiffs' petition is, in effect, a creditor's bill on behalf of the Foreign Dispatch Company. 3 Pomeroy's Eq., sec. 1091. It will not lie in this case. The creditor must first establish his claim at law; his claim is not certain and he, therefore, cannot be heard to charge fraud on his debtor until it is first ascertained that he is a creditor. Crim v. Walker, 79 Mo. 335; Martin v. Michael, 23 Mo. 56; Dodd, Brown & Co. v. Levy, 10 Mo.App. 121; Parmelee v. Egan, 7 Paige, 610; Grosvenor v. Allen, 9 Paige, 74; Farnham v. Campbell, 10 Paige, 598; Sturges v. Vanderbilt, 73 N.Y. 385; Howe v. Whitney, 66 Maine, 17; Smith v. Railroad, 99 U.S. 398; Case v. Beauregard, 99 U.S. 119; Blake v. Kunkle, 10 Yerger, 218; 1 C. E. Greene, 213, 216; Morawetz Corp., secs. 583, 585. (2) Neither the Dispatch Company, nor can its stockholders, pursue defendants, in equity, until they have exhausted their legal remedies, nor is a court of chancery the forum in which to collect ordinary debts. Howe v. Whitney, 66 Maine, 17; Wiggins v. Armstrong, 2 Johns. Ch. 114; In re Smith, Knight & Co., 4 Ch. App. Cases, 671; Turner v. Adams, 46 Mo. 99; Merry v. Freeman, 44 Mo. 518; Allnut v. Leper, 48 Mo. 319; Pendleton v. Perkins 49 Mo. 565. (3) The distinction between law and equity exists in Missouri under the code. Bliss v. Pritchard, 67 Mo. 181; Kelly v. Hurt, 74 Mo. 561, 567; Turner v. Adams, 46 Mo. 99, and cases cited under point 2. (4) Upon the allegations in the petition plaintiffs could sue the directors in an action at law and recover damages. Greaves v. Gage, 69 N.Y. 154; Allen v. Railroad, 49 How. Pr. 14; Carpenter v. Roberts, 56 How. Pr. 216; R. S., secs. 948, 949, 950. Or they could proceed against them and have them removed, and have a receiver appointed for the Dispatch Company, who would bring an action at law if the court thought that there was any cause of action. R. S. Mo., sec. 948, et seq. (5) Shareholders have no right to go into a court of equity with questions of policy as to the management of the internal affairs of the company. Foss v. Hartbattle, 2 Hare, 461; Thompson Liability of Officers in Corp. 338, 339; Dempfell v. Railroad, 110 U.S. 209. (6) The petition does not state facts to show that any lien exists upon any property held by the St. Louis & Mississippi Valley Transportation Company. Dodsley v. Varley, 12 Adol. & El. 623; Pinch v. Anthony, 8 Allen, 436; 2 Story's Eq., p. 480, sec. 31.

OPINION

Black, J.

This case is here from a judgment sustaining separate demurrers to the petition. The defendants are the St. Louis, New Orleans & Foreign Dispatch Company; the St. Louis and New Orleans Transportation Company, known as the Transportation Company and the St. Louis & Mississippi Valley Transportation Company. The plaintiffs are three of the shareholders in the Dispatch Company, and they own three hundred and thirty of the one thousand shares of stock. The Dispatch Company was organized for the purpose of soliciting freight and making contracts for the transportation of the same by means and through the agency of inland and ocean carriers. It issues through bills of lading, but is not a carrier. At the dates hereafter named the Transportation Company was engaged in moving merchandise upon the Mississippi river. On the fifth of March, 1881, these two corporations made a written contract to continue for five years, whereby the Dispatch Company agreed to open offices and appoint agents to solicit business and make contracts at St. Louis and New Orleans, in the United States, and at Liverpool, England, and at such other places as might be agreed upon. For the freight received and turned over by the Dispatch Company to the Transportation Company, the latter agreed to pay the former ten per centum of the...