Strong v. Frerichs, 24439.

• Decision Date: 03 May 1938
• Docket Number: No. 24439.,24439.
• Parties: STRONG v. FRERICHS.
• Court: Missouri Court of Appeals

116 S.W.2d 533

STRONG v. FRERICHS.

No. 24439.

St. Louis Court of Appeals. Missouri.

May 3, 1938.

Rehearing Denied May 18, 1938.

[116 S.W.2d 534]

Appeal from Circuit Court, St. Louis County, Division No. 2; John A. Witthaus, Judge.

"Not to be published in State Reports."

Suit by Jules Q. Strong, as trustee in bankruptcy of the estate of the Allegheny Tube & Steel Company, against John Frerichs, to recover difference between sale value of capital stock of bankrupt, sold and delivered to defendant by the bankrupt and the amount paid by him to the bankrupt for the stock, wherein defendant filed a counterclaim. From a judgment for defendant, on appeal from judgment of justice of the peace court for plaintiff, the plaintiff appeals.

Judgment reversed and cause remanded, with directions.

Barton N. Grant, of St. Louis, for appellant.

Oliver J. Miller, Robert G. Maysack, and Lashly, Lashly & Miller, all of St. Louis, for respondent.

HOSTETTER, Presiding Judge.

This is a suit for recovery of $50 instituted on March 30, 1935, before a justice of the peace in St. Louis county. The suit was instituted by Jules Strong, trustee in bankruptcy of Allegheny Tube & Steel Company against defendant, a stockholder in the bankrupt company, to recover the difference between the sale value of the capital stock of the bankrupt, sold and delivered to the defendant by the bankrupt, and of the amount paid by him to the bankrupt for the stock which was sold to him as fully paid and non-assessable.

The statement, filed before the justice of the peace, is as follows:

                "John Frerichs
                7307 Delmar
                St. Louis, Mo
                

To Jules Q. Armstrong, Trustee in Bankruptcy of Allegheny Tube & Steel Company:

                March 15, 1929 5 shares Common
                  Stock @ $5.00                          $ 25.00
                March 15, 1929 5 shares Preferred
                  Stock @ $100.00                         500.00
                

                April 18, 1929 5 shares Common
                  Stock @ $5.00                            25.00
                April 18, 1929 5 shares Preferred
                  Stock @ $100.00                         500.00
                                                         _______
                                                         1050.00
                      Paid                               1000.00
                                                         _______
                      Balance due                       $  50.00
                

(And interest from January 5, 1931), under and in accordance with levy of assessment and order to collect made by Walter D. Coles, Referee in Bankruptcy on January 5, 1931."

The answer, caption and signature omitted, is as follows:

"John Frerichs, defendant herein, states in answer to plaintiff, Trustee, that he owes nothing on account of the matters and things set out by plaintiff.

"That he paid full market value for the stock mentioned.

"That he was informed by the President and Treasurer that the stock he secured was fully paid for and if such was not the fact, then this defendant alleges that its purchase was secured from him by false and fraudulent representations and is null and void.

"That said corporation, Allegheny Tube & Steel Company, is justly indebted to him in the sum of $1,100.00 which this defendant is entitled to offset and recoup against and claim of the creditors of this corporation. Plaintiff states that said Allegheny Tube & Steel Company offered to buy of this defendant for the sum of $1,100.00 his ten shares of preferred stock, and this offer was accepted by defendant, and said shares were surrendered to said Company under date of April 7, 1930, but this defendant has never received compensation therefor and said Company owes this defendant said sum, which defendant now sets up as an offset and recoupment against any claim of this plaintiff. Jerman's Adm'r v. Benton, 79 Mo. 148; Stinebaker v. National Restaurant Co., 133 Mo.App. 250, 113 S. W. 237; Austin Powder Co. v. Commercial Lead Co., 134 Mo.App. 183, 114 S. W. 67.

"This defendant further alleges that this action is brought more than five years after the transaction in which defendant's liability, if any, arose and hence is barred by the Statute of Limitations of the State of Missouri, article 9, chap. 5, R.S.Mo. 1929, Mo.St.Ann. § 860 et seq., p. 1136 et seq., and defendant sets up said statute in bar of this action."

The plaintiff prevailed in the justice of the peace court and the cause was appealed to the circuit court of St. Louis county, and was there tried to a jury on the 6th day of April, 1936.

The following evidence was offered on the part of the plaintiff:

Exhibit A, which was a certified copy of the articles of association of the Allegheny Tube & Steel Company, which showed that it was incorporated for $160,000 and that the capital stock was divided into 600 shares of preferred stock of the par value of $100 a share and 20,000 shares of common stock of the par value of $5 each, and that the corporation had no specific grant of power by which it could repurchase any of its own stock, by that it might retire the preferred stock as follows: "The preferred stock shall entitle the holders thereof to receive out of surplus or net earnings, and the corporation shall be bound to pay thereon as and when declared by the Board of Directors, a dividend at the rate of but not exceeding seven per cent (7%) per annum cumulative from and after the first day of January, 1929, payable semi-annually or quarterly, before any dividends shall be set apart or paid on the common stock, provided, however, that whenever, a dividend is paid on the preferred stock and all prior dividends thereon have been paid, the directors shall, if in their judgment the surplus or net profits after deducting the amount of dividends to accrue on the preferred stock during the current year shall be sufficient for such purpose, have power then or thereafter to declare and pay a dividend on the common stock, which dividend shall not exceed the sum of Twenty-five cents (25¢) per share per annum until all outstanding preferred stock has been retired. Said preferred stock, may be retired and payable on any dividend date upon thirty days' notice to the holders thereof at the sum of One Hundred and Ten ($110.00) per share."

Exhibit B, which was an authenticated copy of the order of the referee in bankruptcy, approving the bond of the trustee in bankruptcy of the Allegheny Tube & Steel Company.

Exhibit C, for the purpose of showing that the estate had assets of less than $50,000, which recited this fact and also directed plaintiff, as trustee, to file this suit and others. It was agreed by counsel that this was not to be taken as a finding or any determination of the liability on the part of this defendant.

Exhibit D, which was an authenticated copy of the allowed claims against the bankrupt estate and totaled $124,903.58.

Carl Boge, a witness called on the part of plaintiff, testified that he had been the auditor for the bankrupt company and that the stock record and books of account, including stock ledger, had been kept under his direction. He identified the stock ledger containing an account of defendant, John Frerichs, which was offered in evidence as Exhibit E, and is as follows:

                Sheet No. ____                                   Account No. ____
                Rating                  Credit Limit             Name John Frerichs
                Business                                    Address 4341 Folsom Ave
                --------------------------------------------------------------------
                  Date         Items           Com           Fol
                  1929          Pfd
                March 15         5                           24            500--
                March 15                        5            26             25--
                April 18         5                           53            500--
                April 18                        5            59             25--
                March 16     By Cash                         16            500--
                March 16     By Org. Exp.                    16             25--
                April 18     By Cash                         34            500--
                April 18     By Org. Exp.                                   25--
                --------------------------------------------------------------------
                  Date               Items                   Fol          Credits
                  1929           Dividends Paid
                April 1               6004                    42            1.55
                July 1                2878                   107           15.77
                October 1             4921                   170           17.50
                  1930
                January 2             7025                     2           17.50
                ---------------------------------------------------------------------
                

The witness explained the entries by saying that the company had made two sales of stock to defendant; the first being on March 15, 1929, and consisting of 5 shares of preferred stock at the price of $100 each, and 5 shares of common stock at $5 a share, making a total purchase price of $525, which had been marked "Paid," when defendant, on March 16, 1929, paid $500 in cash, the balance due of $25 on this purchase had been charged to "organization expense"; and that a similar transaction had taken place on April 16, 1929, and that two days later defendant had paid $500 and the balance of the purchase price, amounting to $25, had been charged to "organization expense"; and that defendant had paid to plaintiff on his preferred stock, as follows:

                  Date        Items          Fol
                March 16   By Cash           16      500--
                March 16   By Cash Org.      16       25--
                             Exp
                April 18   By Cash           34      500--
                April 18   By Cash Org.      --       25--
                             Exp.
                

Witness further testified that he had nothing to do with the actual selling of the stock and that his knowledge came only through what the officers told him had taken place.

Witness further testified that nothing further had ever been paid by defendant on account of said purchases as the stock ledger showed the account closed.

Plaintiff then read in evidence Exhibit C, that portion showing that the assets in the estate did not exceed $50,000 and that the total allowed claims amounted to $124,903.58, and that in order to pay...