State, at Inf. of Huffman v. Sho-Me Power Co-op.

• Decision Date: 31 July 1947
• Docket Number: 38883
• Parties: State of Missouri at the Information of M. J. Huffman, Prosecuting Attorney of Wright County, Missouri, ex officio, and at the Information of M. J. Huffman, Prosecuting Attorney of Wright County, Missouri, at the Relation of W. D. Freeman and C. H. Cramer, Informant, v. Sho-Me Power Co-operative, a Corporation, Respondent, Arkansas-Missouri Power Company, Empire District Electric Company and Missouri Utilities Company, Intervenors, Sho-Me Power Corporation, Respondent-Intervenor
• Court: Missouri Supreme Court

204 S.W.2d 276

356 Mo. 832

State of Missouri at the Information of M. J. Huffman, Prosecuting Attorney of Wright County, Missouri, ex officio, and at the Information of M. J. Huffman, Prosecuting Attorney of Wright County, Missouri, at the Relation of W. D. Freeman and C. H. Cramer, Informant, v. Sho-Me Power Co-operative, a Corporation, Respondent, Arkansas-Missouri Power Company, Empire District Electric Company and Missouri Utilities Company, Intervenors, Sho-Me Power Corporation, Respondent-Intervenor

No. 38883

Supreme Court of Missouri

July 31, 1947

Quo Warranto.

Plan of reorganization approved.

Henry C. Salveter and Gregory C. Stockard for respondent Sho-Me Power Cooperative and respondent-intervenor Sho-Me Power Corporation.

(1) The basic issue is whether Sho-Me Corporation is properly incorporated under the General and Business Corporation Act to acquire and operate the properties of respondent and does not encompass questions relating to proposed financing. State v. Sho-Me Power Cooperative, 354 Mo. 892, 191 S.W.2d 971; Secs. 5651, 5652, R.S. 1939; Boatmen's Bank v. Gillespie, 209 Mo. 217, 108 S.W. 74; People v. City of Paris, 380 Ill. 503, 44 N.E.2d 154; State ex inf. McKittrick v. Murphy, 347 Mo. 484, 148 S.W.2d 527; State ex rel. Johnson v. Consumers Public Power District, 143 Neb. 753, 10 N.W.2d 784; Mo. R.S.A. (Supp 1946), Sec. 4997.4 (e) and (g); In re Rahn's Estate, 316 Mo. 492, 291 S.W. 120. (2) The provisions in the articles of incorporation of Sho-Me Corporation requiring its shareholders to allow to the corporation a thirty-day option to purchase their shares of stock before offering them for sale elsewhere is a reasonable restriction upon the transfer of such shares contemplated and permitted under Missouri Statutes. Mo. R.S.A. (Supp. 1946), Secs. 4997.12 4997.50, 5563.15; State ex rel. Manlin v. Druggists' Addressing Co., Inc., 113 S.W.2d 1061; Scruggs Vandervoort & Barney Bank v. International Shoe Co., 227 Mo.App. 378, 52 S.W.2d 1027; Secs. 5023, 5030, 5338, R.S 1939; Chouteau Spring Co. v. Harris, 20 Mo. 382; Moore v. Bank of Commerce, 52 Mo. 377; Carroll v. Mullanphy Savs. Bank, 8 Mo.App. 249; Bank of Atchison County v. Durfee, 118 Mo. 431, 24 S.W. 133; Brinkerhoff-Farris Trust & Sav. Co. v. Home Lumber Co., 118 Mo. 447, 24 S.W. 129; St. Louis Perpetual Ins. Co. v. Goodfellow, 9 Mo. 149; Mechanics' Bank v. Merchants' Bank, 45 Mo. 513; Spurlock v. Pacific Railroad, 61 Mo. 319; Kretzer v. Cole Bros. Lightning Rod Co., 193 Mo.App. 99, 181 S.W. 1066; State Savings Assn. v. Nixon Jones Printing Co., 25 Mo.App. 642; State v. Clarke, 54 Mo. 17; Hassel v. Pohle, 214 A.D. 654, 212 N.Y.S. 561; People ex rel. Rudaitis v. Galskis, 233 Ill.App. 414; Hulse v. Consolidated Quicksilver Mining Corp., 65 Idaho 768, 154 P.2d 149; Warner & Swasey Co. v. Rusterholz, 41 F.Supp. 498; Doss v. Yingling, 95 Ind.App. 494, 172 N.E. 801; Barrett v. King, 181 Mass. 476, 63 N.E. 934; Casper v. Kalt-Zimmers Mfg. Co., 159 Wis. 517, 149 N.W. 754; In re Laun, Farmers' Mercantile & Supply Co. v. Laun, 146 Wis. 252, 131 N.W. 366; Rychwalski v. Milwaukee Candy Co., 205 Wis. 193, 236 N.W. 131; Bloomingdale v. Bloomingdale, 107 Misc. 646, 177 N.Y.S. 873; Lawson v. Household Finance Corp. 17 Del. Ch. 1, 147 A. 312, affirmed 17 Del. Ch. 343, 152 A. 723; Nicholson v. Franklin Brewing Co., 82 Ohio St. 94, 91 N.E. 991; McDonald v. Farley & Loetscher Mfg. Co., 226 Iowa 53, 283 N.W. 261; Fopiano v. Italian Catholic Cemetery Assn., 260 Mass. 99, 156 N.E. 708; Baumohl v. Golstein, 95 N.J.Eq. 597, 124 A. 118; Cowles v. Cowles Realty Co., 201 A.D. 460, 194 N.Y.S. 546; Sterling Loan & Inv. Co. v. Litel, 75 Colo. 34, 223 P. 753; Searles v. Bar Harbor Banking & Trust Co., 128 Me. 34, 145 A. 391. (3) The provisions in the articles of incorporation of Sho-Me Corporation, (a) restricting the issuance of shares by the corporation to purchasers of electric energy, and (b) restricting the corporation to the issuance of only one share to any such purchaser who is not an incorporator and twelve shares to an incorporator are reasonable restrictions not repugnant to law or public policy. Mo. R.S.A. (Supp. 1946), Sec. 4997.25; In re Holyoke, Holyoke v. Millman, 151 Wis. 551, 139 N.W. 392; Barrett v. King, 181 Mass. 476, 63 N.E. 934; Longyear v. Hardman, 219 Mass. 405, 106 N.E. 1012; Mason v. Millard Tel. Co., 213 Iowa 1076, 240 N.W. 671; People ex rel. Rudaitis v. Galskis, 233 Ill.App. 414; McDonald v. Farley & Loetscher Mfg. Co., 226 Iowa 53, 283 N.W. 261; State ex rel. Normile v. Cooney, 100 Mont. 391, 47 P.2d 637; Scruggs, Vandervoort & Barney Bank v International Shoe Co., 227 Mo.App. 378, 52 S.W.2d 1027; State ex rel. Manlin v. Druggists' Addressing Co., Inc., 113 S.W.2d 1061; Oakland Scavenger Co. v. Gandi, 51 Cal.App. (2d) 69, 124 P.2d 143; Nicholson v. Franklin Brewing Co., 82 Ohio St. 94, 91 N.E. 991; Berle and Means, "The Modern Corporation and Private Property," (1939), p. 58; Means, "The Diffusion of Stock Ownership in the United States," 44 Quarterly Journal of Economics (1930) 561, 567, 596; Elson v. Schmidt, 140 Neb. 646, 1 N.W.2d 314; O'Brien v. Cummings, 13 Mo.App. 197; Kretzer v. Cole Bros. Lightning Rod Co., 193 Mo.App. 99, 181 S.W. 1066; State v. Sho-Me Power Cooperative, 354 Mo. 892, 191 S.W.2d 971 Webster, New International Dictionary (2d Ed., 1940); Rainey v. Taylor, 166 Ga. 476, 143 S.E. 383; Cummings v. State of Missouri, 71 U.S. 277; Meffert v. State Board of Medical Registration and Examination, 66 Kan. 710, 72 P. 247; Hyde v. State, 52 Miss. 665; State ex rel. Evans v. Wheatley, 197 Ark. 997, 125 S.W.2d 101; Commonwealth ex rel. Dummit v. O'Connell, 298 Ky. 44, 181 S.W.2d 691; Baumohl v. Goldstein, 95 N.J.Eq. 597, 124 A. 118; Garrett v. Philadelphia Lawn Motor Co., 39 Pa.Super. 78; Berle and Means, "The Modern Corporation and Private Property," (1939), p. 138. (4) Sho-Me Corporation is properly organized as a profit corporation under the General and Business Corporation Act. 1 Fletcher, Cyc. Corp. (1931), sec. 68; Snyder v. Chamber of Commerce, 53 Ohio State 1, 41 N.E. 33; People ex rel. Hughes v. Universal Service Assn., 365 Ill. 542, 7 N.E.2d 310; Rensselaer County Agricultural and Horticultural Soc. v. Weatherway, 255 N.Y. 329, 174 N.E. 699; Clay Sewer Pipe Assn. v. Commissioner of Internal Revenue, 139 F.2d 130; American Cotton Coop. Assn. v. Union Compress & Warehouse Co., 7 So.2d 537; Neidringhaus v. William C. Neidringhaus Inv. Co., 329 Mo. 84, 46 S.W.2d 828; Mo. R.S.A. (Supp. 1946), Secs. 4997.43, 4997.2; Jones v. Van Hansen Charles Co., 230 A.D. 694, 246 N.Y.S. 204; Dodge v. Ford Motor Co., 204 Mich. 459, 170 N.W. 668. (5) Questions relating to the proposed financial structure of Sho-Me Corporation are irrelevant. Mo. R.S.A. (Supp. 1946), Secs. 4997.53, 4997.50(d); Sylvester Watts Smyth Realty Co. v. American Surety Co. of New York, 292 Mo. 423, 238 S.W. 494; Secs. 5652, R.S. 1939; Re Missouri Electric Power Co., 50 P.U.R. (N.S.) 257. (6) Questions relating to the proposed deed of trust are irrelevant. Sec. 5651, R.S. 1939; State ex inf. McKittrick v. Murphy, 347 Mo. 484, 148 S.W.2d 527; State ex rel. Johnson v. Consumers Public Power District, 143 Neb. 753; People v. City of Paris, 380 Ill. 503, 44 N.E.2d 154.

R. B. Oliver, Jr., R. K. McPherson and A. Z. Patterson for intervenors.

(1) An attempt to organize a cooperative enterprise under the Missouri General and Business Corporation Act is unlawful and void. Todd v. Ferguson, 161 Mo.App. 624, 144 S.W 158; Secs. 5386, 5426; Mo. R.S.A. 4997.1, 4997.3; State v. Minn. Thresher Co., 14 Minn. 213, 41 N.W. 1020. (2) Mere statement in the articles of incorporation that a corporation is organized under the General Business and Corporation Act is ineffectual if the articles actually set up a cooperative plan and a cooperative relation between the corporation and its members. Todd v. Ferguson, supra; State v. Minn. Thresher Co., supra; 14 C.J., p. 80, sec. 51. (3) The courts will look through the form to get at the real intent of the association of individuals forming the corporation. State ex rel. Pritchett School v. Lesueur, 141 Mo. 29, 41 S.W. 904; Wyatt v. Stillman Institute, 303 Mo. 94, 260 S.W. 73; In re First Natl. Safe Deposit Co., 351 Mo. 423, 173 S.W.2d 403; State v. Baker, 320 Mo. 1146, 9 S.W.2d 589; State ex rel. Danciger v. Pub. Serv. Comm., 275 Mo. 483, 205 S.W. 36; Hall v. Woods, 325 Ill. 114, 156 N.E. 258; Terminal Taxicab Co. v. Kutz, 241 U.S. 252, 36 S.Ct. 583, 60 L.Ed. 984, 119 A.L.R. 1013. (4) The Missouri Rural Electric Cooperative Act expressly authorizes restrictions requiring shareholders or members to be consumers of electrictiy furnished by the cooperative, and restriction that members may hold but one share of stock. The General and Business Corporation Act neither expressly nor impliedly authorizes the creation of such restrictions. Article III of the Sho-Me Power Corporation Articles of Incorporation creates such restrictions and thereby discloses the primary purpose to create a cooperative. Art. III, Sho-Me's Articles of Incorporation. Rural Electric Cooperative Act, Mo. R.S.A., Sec 5394. (5) Courts have clearly ruled that restrictions of this nature are peculiarly adapted to cooperative enterprises. Chaffee v. Farmers Cooperative Elevator Co., 39 N.D. 585, 168 N.W. 616. (6) But, many decisions throughout the country have established the doctrine that such restrictions on share holdings and share transfers, when applied to general and business corporations, constitute unlawful restraints of trade and are against public policy, unlawful and void. Missouri adheres to the rule. James O'Brien v. Cummings, 13 Mo.App. 197; Moore v. Bank of Commerce, 52 Mo. 377; Brinkerhoff-Farris Trust & Savs. Co. v. Home Lumber Co., 118 Mo. 447, 24 S.W. 129; Kretzer v. Cole Bros. Lightning...