St. Louis Southwestern Ry. Co. v. Meyer
| Decision Date | 13 September 1954 |
| Docket Number | No. 43998,No. 2,43998,2 |
| Citation | 364 Mo. 1057,46 A.L.R.2d 964,272 S.W.2d 249 |
| Parties | , 46 A.L.R.2d 964 ST. LOUIS SOUTHWESTERN RAILWAY COMPANY, a corporation, Plaintiff-Respondent, v. Walter E. MEYER, Otto V. Christie, Arthur H. Cohen, A. Hicks Lawrence, Henry L. Moses, Charlotte T. Taussig, Harry E. Ward and Ruth M. Cook, individually and as class representatives of all of the holders of common stock of St. Louis Southwestern Railway Company, and Cullman Bros. Inc., a corporation, Leo Wallerstein, Dorothy C. Wallerstein, Charles J. Liebman, Milton A. Holmes, Marianna W. T. Lawrence, Jacob I. Rosenbaum, John J. Kenney, Jean Schwedel, Byron J. Quinn, Alfred Hirschman, Margaret H. Liebman, Sherburne M. Earling, Louis H. Berk, Rena Gerson, Lionel C. Rosenbaum, Dora H. Rosenbaum, Ilse Blaugrund, Oliver Crist, Louise Burghardt, Lucien H. Hoch and David E. Rolf, Interveners, Defendants-Appellants, and R. Walston Chubb, Mabel Frank, Giboney Houck, as Executor of the Estate of Louis Houck, deceased, Joseph Plassmeyer and Arpad Plesch, individually and as class representatives of all of the holders of common stock of St. Louis Southwestern Railway Company, and Nelson Cunliff, R. C. Day, C. F. G. Meyer, III, and Arnold G. Stifel, individually, and Southern Pacific Company, a corporation, Gladys M. Albers, Marianne G. McDonough, Albert Oberfeld, David H. Kraft and Richard Heller, individually and as class representatives of all of the holders of preferred stock of St. Louis Southwestern Railway Company, and Samuel N. Koenigsberg, Saul Friedman and E. David Friedman, Executors of the Estate of Elisha M. Friedman, Interveners, Defendants-Respondents |
| Court | Missouri Supreme Court |
Walter E. Meyer, New York City, prose and as attorney for other appellants. Richard A. Holman, New York City, Jean Schwedel, on the brief; Shepley, Kroeger, Fisse & Shepley, Roberts P. Elam, St. Louis, of counsel.
John W. Murphy, Gen. Sol., St. Louis S. W. Ry. Co., Lackland H. Bloom, St. Louis, for plaintiff-respondent.
Coburn, Storckman & Croft, St. Louis, Mudge, Stern, Williams & Tucker, New York City, for respondents Southern Pac. Co., Albert Oberfeld and Marianne G. McDonough. Paul D. Miller, New York City, Clem F. Storckman, St. Louis, Bernard Nemtzow, New York City, of counsel.
BARRETT, Commissioner.
This is an appeal from a judgment of the Circuit Court of the City of St. Louis sustaining the St. Louis Southwestern Railway Company's petition for interpleader. The petitioner, popularly known as the Cotton Belt, is a Missouri corporation, organized in 1891, with its principal office in the Cotton Belt Building in the City of St. Louis. The defendants sought to be interpleaded are the majority stockholders of the Cotton Belt's preferred and common stock. Briefly, the action originated in these circumstances: In November 1951, in addition to a dividend of $5 per share on both the preferred and common stock, the board of directors declared a further dividend of $370,648, $1 per share, on the outstanding shares of the capital stock of the company. By resolution of the board, however, payment of dividends was withheld because there was reasonable doubt, interpreting the articles of association, the stock certificates and the applicable Missouri statutes, as to the right of preferred stockholders to participate in dividends after a payment in one year of a $5 dividend on all classes of stock. In this connection the petition alleged that 'Certain defendants who are holders of preferred stock have asserted claims that the holders of preferred stock are entitled to participate in all dividends declared and paid by the plaintiff, at the same rate per share as the holders of common stock, after the holders of preferred stock and the holders of common stock shall have each received $5 per share in any year, and certain defendants who are holders of common stock have asserted claims that the holders of preferred stock are not entitled to any further dividends in any year after the holders of such preferred stock shall have received dividends at the rate of $5 per share in any year, and that after the holders of such preferred stock shall have received dividends at the rate of $5 per share in any year the holders of common stock are entitled to all further dividends declared or paid by the plaintiff in such year.' It was alleged in the petition and set forth in the resolution, therefore, that payment of the dividends prior to a judicial determination of the respective rights of the common and preferred stockholders would expose the company to the hazard of double or multiple liability and a multiplicity of suits. Because of the claims and the hazards the board segregated and set apart from its cash assets the sum of $370,648 and directed its deposit in a special dividend fund in the Mercantile Trust Company for the benefit of shareholders. Pursuant to resolution this suit was instituted, and subsequently the $370,648 was paid into the registry of the court. The trial court sustained the petition for interpleader, discharged the railway company and ordered the common and preferred stockholders to interplead, individually and as class representatives, as to their respective rights to share in the dividend fund. Certain common stockholders have appealed from the judgment decreeing interpleader.
The first general question for review, upon the appeal, is the trial court's jurisdiction of the subject matter and the persons of the appellants. In the petition for interpleader the residence of the defendant stockholders, preferred and common, was set forth and as to the nonresident defendants there was a request for and service of process by publication as provided by Section 506.160 RSMo 1949, V.A.M.S. In contending that the trial court did not have jurisdiction of the subject matter it is argued that in this proceeding in rem there was no res and, therefore, service by publication upon nonresident defendants was unauthorized and invalid. It is said, there being no res, that the appearance of other stockholders in the proceeding in rem did not confer jurisdiction. The basis of the argument is that the action of the board of directors in declaring the dividend and setting apart in a separate fund the sum of $370,648 from its cash assets, now in the registry of the court, did not result in the creation of a res for which interpleader will lie nor a res within the jurisdiction of the court warranting service by publication. The declaration of a dividend creates a debt from the corporation to its stockholders, McLaran v. Crescent Planing Mill Co., 117 Mo.App. 40, 93 S.W. 819, hence it is argued that the debt cannot be transformed into a trust fund for the benefit of stockholders without their consent. Nor, likewise, it is said, could the deposit of the money in a bank in St. Louis and subsequently into the registry of the court transform the debt into a res. In these circumstances it is urged that the court's exercise of jurisdiction over the subject matter of this action and over the persons of the nonresident stockholders constitutes a denial of due process. In this connection it is urged that a construction and application of Section 506.160, 'in such a way as to justify service by publication in this action on the nonresident stockholders, inasmuch as the subject of the action is an intangible, would render such statute void and unconstitutional, in violation of the due process guaranteed by the Fourteenth Amendment of the Constitution of the United States and Section 10 of Article I of the Constitution of Missouri.'
The Missouri statute relating to service by publication, Section 506.160 RSMo 1949, V.A.M.S., provides, in part, that 'Service * * * by publication shall be allowed in all cases affecting a fund, will, trust estate, specific property, or any interest therein, or any res or status within the jurisdiction of the court, * * *.' It may be that the sum of $370,648, set apart by resolution from the company's cash assets and deposited in the bank when the suit was instituted (and now deposited in the registry of the court), is not, strictly speaking, a trust. 3 Scott, Trusts, Sec. 531.1, pp. 2535-2537. But it was segregated and set apart, deposited, initially, in a 'special dividend account in trust,' Springfield Gas & Electric Co. v. Graves, 359 Mo. 182, 193, 221 S.W.2d 197, 199, in the Mercantile Trust Company in St. Louis, and it is, undeniably, a 'fund,' 'specific property,' or a 'res' and, indisputably was and is indeed, a tangible thing 'within the jurisdiction of the court' now and when this proceeding was instituted and plainly, within the meaning of the statute, authorized service by publication upon nonresident defendants. Standard Oil Co. v. State of New Jersey, 341 U.S. 428, 71 S.Ct. 822, 95 L.Ed. 1078; Thompson v. Terminal Shares, 8 Cir., 89 F.2d 652; Franz v. Buder, 8 Cir., 11 F.2d 854; In re Interborough Consol. Corp., 2 Cir., 267 F. 914; State ex rel. Reid v. Barrett, 234 Mo.App. 684, 118 S.W.2d 33; Gassert v. Strong, 38 Mont. 18, 98 P. 497, certiorari denied 215 U.S. 583, 30 S.Ct. 403, 54 L.Ed. 338; annotation 15 A.L.R.2d 610.
Furthermore, in this connection, the Circuit Court of the City of St. Louis is a court of general jurisdiction, V.A.M.S. Const.Mo. art. 5, Secs. 1 & 11, with the power to entertain jurisdiction in this class of cases--interpleader actions. Davison v. Hough, 165 Mo. 561, 573, 65 S.W. 731, 733. The St. Louis Southwestern Railway Company is a Missouri corporation and the situs of its shares of stock is Missouri, and the right to dividends is appropriately defined by the laws of Missouri. Thompson v. Terminal Shares, supra; State ex rel. North American Co. v. Koerner, 357 Mo. 908, 211 S.W.2d 698; Lich v. U. S. Rubber Co., D.C., 39 F.Supp. 675; 1 Beale, Conflict of Laws, Sec. 104.1, p. 446; Supreme Council of The Royal Arcanum v. Green,...
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