State ex rel. Donnell v. Foster

• Decision Date: 21 December 1909
• Citation: 125 S.W. 184,225 Mo. 171
• Parties: STATE ex rel. DONNELL et al. v. FOSTER, Judge, et al.
• Court: Missouri Supreme Court

125 S.W. 184

225 Mo. 171

STATE ex rel. DONNELL et al. v. FOSTER, Judge, et al.

Supreme Court of Missouri.

December 21, 1909.

Rehearing Denied February 2, 1910.

1. CORPORATIONS (§ 609) — DISSOLUTION — JURISDICTION OF PROCEEDINGS.

A judge of a circuit court has no jurisdiction in an equitable proceeding to dissolve a corporation where there is no statute conferring that jurisdiction upon the court.

2. CORPORATIONS (§ 614) — DISSOLUTION — ACTION BY STOCKHOLDERS — PERSONAL JUDGMENT AGAINST OFFICERS — NATURE OF ACTION.

Rev. St. 1899, § 1338 (Ann. St. 1906, p. 1075), provides that the circuit court shall have jurisdiction over the officers of corporations to order payment by them to the corporation which they represent of all money belonging to the corporation which they have acquired to themselves or transferred to others, or may have lost or wasted by violation of their duties. An equitable action was brought by minority stockholders to dissolve a corporation, and to have a receiver appointed for it on the ground that the officer in charge of the corporation had mismanaged its affairs, and had converted money of the corporation to his own use. The corporation was made a party defendant and with the other defendants contested the suit. Judgment was entered dissolving the corporation, and appointing a receiver, and a personal judgment was rendered against the officer in charge for the money converted by him in favor of the receiver. Held, that the action was not brought under section 1338 because the provisions of that section do not contemplate a dissolution of the corporation, nor the entering of a decree in favor of the receiver of the corporation, and a decree directing the managing officer to pay the receiver a stated amount which he had withdrawn from the corporation is invalid, the receiver not being a party to the suit, and the decree could not be sustained as warranted by section 1338, as by the previous recitals of the decree the corporation had been dissolved.

3. CORPORATIONS (§ 621) — ACTION FOR DISSOLUTION — APPOINTMENT OF RECEIVER.

Minority stockholders in a suit against a corporation and its managing officer for dissolution of the corporation and the appointment of a receiver alleged that against their protest the managing officer had put in operation a fraudulent scheme for selling the products of the corporation; that by reason of such scheme the corporation had been denied the use of the United States mails; that the managing officer had wasted the assets of the corporation, and had converted large sums of money to his own use. Held, that the court had authority to appoint a receiver to take charge of the assets of the corporation, and to recover any sum of money which had been wrongfully appropriated by the managing officer.

Lamm, J., dissenting in part.

In Banc. Application by the State, on the relation of John W. Donnell and others, for a writ of prohibition against Robert M. Foster, Judge, and others. Writ granted, prohibiting the court from enforcing portions of a decree in the case of Watkins and others against the Donnell Manufacturing Company and others.

This is an original proceeding by which it is sought to have this court issue its writ of prohibition against the judge of the circuit court of the city of St. Louis, division No. 3, James A. Watkins, Rudolph C. Carssow, Oscar C. Carssow, and John H. Holliday, prohibiting said court as well as the other defendants from enforcing certain judgments and decrees entered by said circuit court. This application for a writ of prohibition is the outgrowth of a suit filed by one James A. Watkins, Rudolph C. Carssow, and Oscar C. Carssow, in behalf of themselves and other stockholders of the Donnell Manufacturing Company, against John W. Donnell, Fannie M. Donnell, Thomas Maher, and the Donnell Manufacturing Company, in which the plaintiffs alleged among other things that the defendant John W. Donnell was the owner of 364 shares of the capital stock of the Donnell Manufacturing Company, Fannie M. Donnell the owner of 4 shares, and Thomas Maher the owner of 1 share; that the plaintiff James A. Watkins was the owner of 107 shares, Rudolph C. Carssow was the owner of 72 shares, and Oscar C. Carssow the owner of 10 shares; that for several years last past the company had carried on its business at a large and increasing annual loss; that the capital stock had become largely impaired and that the corporation was insolvent; that the reputation, credit, and good will of the Donnell Manufacturing Company had been destroyed and its assets had been wasted until it had become insolvent by the incompetent, dishonest, and fraudulent mismanagement of its business by said John W. Donnell and his co-directors.

We do no deem it essential to burden the statement of this case with a reproduction in full of the petition in the original suit of James A. Watkins et al. v. John W. Donnell et al., but it will suffice to briefly make reference to the features of such petition which are applicable to the questions involved in the present proceeding by which a writ of prohibition is sought.

Said petition avers that John W. Donnell in the latter part of 1906 and the first part of 1907 devised and put into execution a certain plan or scheme by which a large number of individuals were induced, through means of certain printed forms and circular letters, to enter into a form of contract with the said Donnell Manufacturing Company, under which they did each deposit with said company $1,000 to $2,000 in cash, and they were thereupon furnished certain goods for sale which had been manufactured or purchased by the said Donnell Manufacturing Company. Plaintiffs do not know the exact sum of money so received by the said Donnell Manufacturing Company under these contracts, but allege that it exceeded the sum of $100,000. It is next alleged that some of the parties from whom the Donnell Manufacturing Company had received money under the scheme as indicated complained to the Postmaster General of the United States, and upon a hearing of said complaints an order was made by the Postmaster General denying to said defendant the right thereafter to use the mails. It is then alleged that by reason of the operation of the scheme and plan devised by said John W. Donnell and his co-directors, to which reference has been made, a large number of suits have been filed against the Donnell Manufacturing Company by parties who had made cash deposits in pursuance of the plan and scheme heretofore mentioned, for the purpose of recovering said deposits, and damages for alleged frauds practiced upon them in procuring same. It is then alleged that the Donnell Manufacturing Company has sustained and will hereafter sustain great loss, expense, and damage through said litigation, even if all said suits should be decided in favor of the Donnell Manufacturing Company. It is also alleged that, ever since the fraud order issued by the Postmaster General referred to was issued against the Donnell Manufacturing Company denying to said company the right to use the United States mails for the transaction of its business, defendant John W. Donnell, unmindful of his duties as a director and a trustee of the Donnell Manufacturing Company, has been carrying on, and attempts to carry on, the business heretofore conducted by the said Donnell Manufacturing Company in his own individual name, in the name of the "Donnell Specialty Company" and of the "Donnell Supply Company," and in other names, and has been thereby trying to induce the customers and patrons, who formerly did business with the Donnell Manufacturing Company, to transfer and hereafter carry on such business with John W. Donnell as an individual or with copartnerships or companies organized by him with the intent and purpose thereby to transfer and take over the good will and other assets of the corporation to himself or to companies or partnerships controlled by him, to the loss and damage of the corporation and its stockholders. There were other allegations in said petition as follows:

"(3) Plaintiffs further aver that said John W. Donnell has been guilty of reckless, fraudulent, and extravagant mismanagement in his conduct of the business of said company in that he has paid an agent, named Scritzmeier, whom he employed to devise and operate the aforesaid scheme of contracts heretofore referred to, the sum of four hundred dollars ($400) out of every one thousand dollars ($1,000) deposited with it or paid to the Donnell Manufacturing Company under said scheme, and the aggregate of the sums so paid to said agent is more than forty thousand dollars ($40,000). Plaintiffs further say that the services rendered by said agent Scritzmeier in procuring said contracts did not extend over or cover a period of more than four months, and the said services are well known by the said John W. Donnell not to be worth more than one hundred or two hundred dollars per month at the time he paid the said sum of forty thousand dollars ($40,000) therefor. Plaintiffs further aver that said John W. Donnell also employed other agents to assist the said Scritzmeier in operating said scheme and in inducing the people to make such contracts and such deposits, paying them the sum of $6,250 for a few months' services, although said John W. Donnell, at the time he made such payments, well knew that the services so rendered were not worth the sum of $6,250, and knew that they were not in any event worth more than the sum of one hundred dollars ($100) per month for each of the agents so employed during the time they were actually engaged in working for said corporation, or a total sum of $600.

"(4) Plaintiffs further aver that said John W. Donnell, by and through his domination and control of the officers of the defendant corporation, has paid to himself, as a pretended salary for his services as the president and general manager thereof, the sum of sixty-nine thousand...