St. Louis Paint Mfg. Co. v. Mepham

• Citation: 30 Mo.App. 15
• Parties: ST. LOUIS PAINT MANUFACTURING COMPANY, Plaintiff Appellant, v. GEORGE S. MEPHAM, Defendant Appellant.
• Decision Date: 13 March 1888
• Court: Court of Appeal of Missouri (US)

30 Mo.App. 15

ST. LOUIS PAINT MANUFACTURING COMPANY, Plaintiff Appellant, v. GEORGE S. MEPHAM, Defendant Appellant.

Court of Appeals of Missouri, St. Louis.

March 13, 1888

APPEAL from the St. Louis Circuit Court, HON. GEORGE W. LUBKE Judge.

Reversed and remanded.

W. C & J. C. JONES and LODGE & TALTY, for the defendant appellant.: The plaintiff company had no power under the law to either directly or indirectly purchase, deal, or traffic in its own stock. 1 Morawetz on Priv. Corp. [2 Ed.] secs 113, 434; Thomp. on Liab. Stock., sec. 234; Currier v. Slate Co., 56 N.H. 262. Under the evidence, even taking the theory of the case taken by the court below, it cannot be said that defendant used more than $120.66 of plaintiff company's moneys, and by the taking up of the plaintiff's notes for $2,804.34 bearing interest at ten per cent. per annum, and which would not mature for two years thereafter, the plaintiff received a greater benefit than the amount of the profit realized on the transaction which would come to it from the use of said sum of $120.66. Williams v. Patrons of Husbandry, 23 Mo.App. 132. The evidence shows that plaintiff has no cause of action against defendant. At the time Ritterskamp sold and transferred his stock to defendant, he ceased to be a shareholder in plaintiff corporation, he was discharged from all further liability to contribute capital, and he likewise lost all right to share in the company's profit and to participate in the management of its affairs. The transferee, George S. Mepham, defendant appellant, became a stockholder in place of Ritterskamp, the retiring member. 1 Morawetz on Priv. Corp. [2 Ed.] sec. 159; Miller v. Ins. Co., 50 Mo. 57. Every one of the stockholders in plaintiff corporation at the time of this transaction agreed to the transaction, afterwards approved of and ratified defendant's act and received their share of the profits realized on the transaction. 1 Morawetz on Priv. Corp. [2 Ed.] secs. 227, 228, 261; Hotel Co. v. Wade, 97 U.S. 13; Church Appeal, 88 Pa.St. 503.

DYER, LEE & ELLIS, for the plaintiff appellant: While it is true a corporation cannot speculate in its own stock for the purpose of realizing profit therefrom, yet when a director or officer of the company so speculates with the funds or credit, or in behalf of the company, he cannot excuse himself by pleading ultra vires, when called to account by the corporation for profits in such speculation. Thompson's Liability of Officers, 362, 360, sec. 8. When an officer of a corporation wrongfully, with the moneys or credits of his company, realizes a secret profit for the use of himself, or of himself and another officer of the company, in such case the company can, by a bill in equity, compel him to account for and pay over the profits so realized. Chouteau v. Allen, 70 Mo. 290; Landis v. Saxton, 89 Mo. 375, 382; McAllen v. Woodcock, 60 Mo. 174. There being no controversy about the fact that thirty-two hundred and twenty-five dollars of the forty-five hundred dollar check (paid to Ritterskamp on account of his stock), was the money of the company, the entire profit realized on that sum, to-wit, $761.49, should be paid plaintiff by defendant in this action, even though defendant afterwards paid over to W. G. Mepham as an individual, one-half of that sum. Att'y Gen'l v. Wilson, 1 Craig and Phil. 1; S. C., 10 L. J. (Ch.) 53; Cooley on Torts, 133, 144; Bliss Code Plead., sec. 82; Thompson's Liability of Officers, 376, sec. 17, 353, note 6; Cunningham v. Pell, 5 Paige Ch. 607, 612; Miller v. Fenton, 11 Paige Ch. 18. The evidence clearly shows the thirty-four hundred dollars cash payment made by Dr. Stevens, and which went to Ritterskamp on the purchase of stock, was paid to the company and by the company to Ritterskamp; and that it was not paid to defendant individually as on a purchase of stock from him. Hence we say the transaction, although ultra vires, enured to the benefit of the company as between it and the defendant, and the plaintiff is entitled to recover the entire profit realized on the investment of sixty-six hundred and twenty-five dollars company money, which profit was $1,865.37. Bent v. Priest, 10 Mo.App. 544; S. C., affirmed, 86 Mo. 475; Chouteau v. Allen, 70 Mo. 290; Landis v. Saxton, 89 Mo. 375, 382; Leary v. Railroad, 16 Mo.App. 560.

OPINION

ROMBAUER P. J.

Under the peculiar facts of this case the state of the pleadings becomes very material. The plaintiff's petition is as follows: " Plaintiff states that it is, and at the dates hereinafter mentioned was, a corporation organized and existing under the general laws of the state of Missouri, having its chief office and place of business in the city of St. Louis, Missouri; that its authorized capital stock is three hundred shares of the nominal value of one hundred dollars each; that heretofore, to-wit, on the sixteenth day of June, 1884, one Louis H. Ritterskamp was the owner and holder of one hundred shares of said capital stock of the nominal value of ten thousand dollars; that at and before said date said Ritterskamp was offering to sell his said stock for the sum of seventy-eight hundred and forty-eight dollars; that on said last-mentioned date and up to January, 1885, the defendant, George S. Mepham, was a stockholder and director in, and also secretary and acting treasurer of said company; that on said sixteenth day of June, 1884, one Charles D. Stevens was willing to purchase one hundred shares of the stock of said company at and for the price and sum of one hundred dollars per share; that the defendant knowing all the facts hereinbefore recited did procure from said Ritterskamp an assignment of his said one hundred shares of stock, it being understood by the defendant at the time that he was acting as director and officer of plaintiff company, and in its interest and on its behalf, which said stock was assigned to the defendant and was immediately thereafter surrendered to the company and cancelled, and in lieu and stead thereof new certificates for said one hundred shares of stock were issued by the defendant acting for and in behalf of the plaintiff company and delivered to said Charles D. Stevens, for and in consideration of which stock the said Stevens did then and there pay to the defendant as secretary and acting treasurer of said company the sum of ten thousand dollars; that all the moneys used by the defendant in the purchase of said stock from said Ritterskamp, to-wit, the sum of seventy-eight hundred and forty-eight dollars, were the moneys and properties of the plaintiff company, as the defendant well knew; that no moneys of the defendant were by him used in the said transaction and negotiations; but that all thereof belonged to the plaintiff company; that it was the duty of the defendant then and thereupon to have accounted to the plaintiff company for the full amount of money received from said Stevens for the stock so issued to him, to-wit, the sum of ten thousand dollars; but the defendant wrongfully and fraudulently retained and still retains, and has and does refuse to account to said corporation for the sum of twenty-one hundred and fifty-two dollars thereof, being the difference between what said Ritterskamp received for his stock out of the moneys of the corporation and what was paid into the moneys of the corporation by said Stevens for said stock; that in the matters afore-said the defendant did violate his obligation as an officer of, and director in, said company, and although often requested has refused to pay over and account for said moneys so wrongfully by him withheld. Wherefore, the plaintiff demands that the court order the defendant to account to the plaintiff for the said money so by him withheld, and that judgment for such sum be rendered thereon against the defendant and in favor of the plaintiff, with interest."

The answer of the defendant is a general denial and no more.

The action is of an equitable nature, and was treated as such by the court and by the parties. The finding of the court is contained in its decree, of which both parties complain; the plaintiff contending that under the evidence the defendant became chargeable with $1,865.37, profits realized by the use of corporate funds in the venture, and the defendant contending that under the evidence he was not chargeable at all.

The decree of ...