The State ex rel. Sager v. Polar Wave Ice & Fuel Co.
| Decision Date | 30 June 1914 |
| Parties | THE STATE ex rel. ARTHUR N. SAGER, Circuit Attorney, v. POLAR WAVE ICE & FUEL COMPANY, Appellant |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. George H. Shields Judge.
Writ of ouster awarded (conditionally).
Nagel & Kirby, McDonald & Taylor and Jacob Chasnoff for appellant.
(1) The State by suing the appellant corporation and not the individuals who use its charter, has confessed all the issues in appellant's favor. Quo warranto to oust from a corporate charter, for reasons relating to the organization and to the right to use the charter thus obtained, must proceed against the individuals who usurp the charter. If the corporation is sued and is alleged to be duly incorporated (as in the case at bar), the propriety and legality of all matters incident to its organization are admitted. 23 Am. & Eng. Ency. Law (2 Ed.), 596, 623; State ex inf. v. Fleming 147 Mo. 9; State ex inf. v. Fleming, 158 Mo. 567; State ex inf. v. Gravel Road Co., 187 Mo. 439; State ex inf. v. Gravel Road Co., 37 Mo.App. 503; High on Ext. Rem. (3 Ed.), 621. This admission covers every incident to the complete organization of the corporation, and is not limited to the mere issuance of its charter; thus it includes an alleged fraud upon the State in the payment of capital stock (State ex inf. v. Hogan, 163 Mo. 43), and an incorporation for the alleged purpose of acquiring the assets and business of an existing trust so as to perpetuate the unlawful combination and create monopoly (State ex inf. v. Tobacco Co., 177 Mo 37; Feeding Co. v. People, 156 Ill. 448). For the same reason it covers the charge that there was an ineffective attempt to consolidate the seven companies into the new corporation. Under the above authorities, the rule seems firmly established that in quo warranto against a corporation, only acts of misuser or abuse of charter subsequent to incorporation, can be relied upon. It follows that since the information in the case at bar contains no averments of any subsequent misuse or abuse of charter except the furthering of an alleged pre-existing unlawful combination, the State by admitting that the corporate organization was lawful, necessarily admitted also that it was not organized for the purpose of creating monopoly, and did not in and of itself tend to create monopoly, i. e., it admitted in effect that there was no pre-existing unlawful combination. It also thereby necessarily admitted that the continued existence from day to day of such a corporation did not constitute an abuse of charter, for what was lawful to begin with, could not become unlawful through mere continuance. The trial court erred in holding that the general averments of misuse of corporate powers were sufficient, without specific averments of facts constituting misuse or abuse of charter, on which to base its finding and judgment. State ex rel. v. Grimm, 220 Mo. 490; Richardson v. Busch, 198 Mo. 174; Waldhier v Railroad, 71 Mo. 515; Hudson v. Tyler, 140 Mo 263; Chitty v. Railroad, 148 Mo. 75. (2) The acquisition and holding by appellant of the assets and businesses of the seven old companies was not a fraud upon the State, nor unlawful as a legally ineffective effort to "consolidate" the corporate entities of the seven companies, because: There was no effort here to accomplish a statutory consolidation. The statutory method was not pursued, and the essential characteristics of a corporate consolidation, viz., the destruction or merging of the old corporate entities and powers into the new corporation which resulted from their union, were lacking. R. S. 1899, secs. 1334-1336; Powell v. Railroad, 42 Mo. 63; Evans v. Interstate R. T. Co., 106 Mo. 601. The corporate "consolidation" method is not the only effective one by which a new corporation may validly acquire the title and right to hold the assets and businesses of other corporations. Assuming the charter power of the new corporation to acquire, it may do so with the consent of all the stockholders of the old companies: (a) by purchase and conveyance from the old corporations; (b) by distribution of the assets to the stockholders of the old corporations, and purchase and conveyance from the stockholders as individuals, or (c) by purchase from all the individual stockholders, as owners of the equitable title, who cause their old corporations to convey to the new one. A purchase in good faith by either of the above methods would be legally effective, provided the purpose or result did not violate the anti-trust laws, and "purchase" as here used includes "exchange" or acceptance "in payment of stock." State ex rel. v. Tobacco Co., 177 Mo. 29; Feld v. Inv. Co., 123 Mo. 603; Tanner v. Railroad, 180 Mo. 21; Buford v. Packet Co., 3 Mo.App. 168; 1 Cook on Corp. (5 Ed.), secs. 3, 549, 641, 670, 671; Elyea v. Salt Co., 169 N.Y. 33; Holmes & Griggs Co. v. Holmes & W. Co., 127 N.Y. 252; Leathers v. Janney, 41 La. Ann. 1120; Hoene v. Pollak, 118 Ala. 617; In re Lincoln Market Co., 190 Pa. St. 124; Treadwell v. Salisbury Co., 7 Gray, 393; State v. Irrig. Co., 40 Kan. 96; Pingree v. Railroad, 118 Mich. 336; Heman v. Britton, 14 Mo.App. 127. In the case at bar the method pursued was a sale by all of the stockholders, of their shares in the old companies, to option holders, and then a sale by the option holders to the new company, of all the assets of the old corporations -- all in good faith, to the end that the new corporation, having charter power to do so, might begin business owning all the assets of the old companies. The public policy of this State, as expressed in the statute permitting corporate consolidations, favors the amalgamation of the assets of several corporations and does not prevent consolidation of more than two, even under the statute. R. S. 1899, secs. 1334-1336; Jones v. Mo. Edison Co., 135 F.153. (3) The manner and amount of the issue and payment of appellant's capital stock furnishes no support for this action. State ex rel. v. Wood, 13 Mo.App. 139, 84 Mo. 378; Beebe v. Hatfield, 67 Mo.App. 615. The capital stock was in effect paid in full, in cash, which became and was liable for any debts of the corporation until the latter obtained title to the assets of the seven businesses which it was organized to acquire, and which it was the associates' intent should constitute appellant's capital. The payment of corporate capital stock in cash, with the intent of the organizing associates that the particular cash should be checked over immediately for property which it was previously agreed should be transferred to the corporation as its original working capital, is compliance with our law which permits the payment of corporate capital in cash, property or labor done. The good will of a business is property and, therefore, properly receivable in payment of the capital stock of a Missouri corporation. The tangible assets, accounts receivable, and good will, transferred to the appellant by the seven companies, were of the full value of its capital stock. (4) This prosecution by the State is based upon the statutes of Missouri which prohibit all combinations or arrangements "to regulate, or fix, or maintain the prices, or to fix or limit the production of any commodity" (Sec. 8965, R. S. 1899), and all combinations or arrangements "designed or made with a view to lessen, or which tend to lessen full and free competition in the manufacture or sale of any article." Sec. 8966, R. S. 1899. These statutes are to be given a reasonable and not a literal construction. By the words combination "made with a view to lessen, or which tend to lessen full and free competition," are meant combinations which are made directly with a view to, or which directly and immediately tend towards or create a potential power of monopoly, and not any and every combination, which to any extent lessens competition between the units entering into it, nor those which only indirectly and incidentally or as ancillary to lawful acts lessen or tend to lessen competition. State ex inf. v. Harvester Co., 237 Mo. 369; Telephone v. Granby Tel. Co., 147 Mo.App. 216; State ex inf. v. Oil Co., 218 Mo. 1; Euston v. Edgar, 207 Mo. 287; Finck v. Granite Co., 187 Mo. 244; Gladish v. Stock Exchange, 113 Mo.App. 733; State ex inf. v. Tobacco Co., 177 Mo. 1; State ex inf. v. Packing Co., 173 Mo. 356; State ex inf. v. Oil Co., 194 Mo. 124; Froelich v. Benefit Assn., 93 Mo.App. 383; Brewing Co. v. Belinder, 97 Mo.App. 73; State ex inf. v. Insurance Co., 152 Mo. 1; Lead Co. v. Paint Store Co., 80 Mo.App. 266; United States v. Pipe & Steel Co., 85 F.279; United States v. Oil Co., 221 U.S. 1; United States v. Tobacco Co., 221 U.S. 106; Smiley v. Kansas, 196 U.S. 447; Davis v. Booth & Co., 131 F.31; Traffic Assn. v. United States, 171 U.S. 505; State v. Duluth, 107 Minn. 523; Cooke on "Combinations," par. 156, note 15; 25 Harv. L. Rev., p. 53. There was no lessening of competition in the St. Louis ice market resulting from the organization of defendant company, because the units which were combined were non-competing. They did not compete, because they naturally were not competitors. Telephone Co. v. Sarcoxie, 139 S.W. 108. The mere unification of ownership of previously independent plants, though incorporation, is not in itself necessarily a violation of the anti-trust laws. Such combinations may, or may not, constitute illegal combinations, according to other circumstances than the mere fact of combination. State ex inf. v. International Harvester Company, 237 Mo. 369; State ex inf. v. Oil Co., 218 Mo. 1; State ex inf. v. Tobacco Co., 177 Mo. 1; United States v. Pipe & Steel Co., 85 F.271; Montague v. Lowry, 193 U.S. 38; Swift & Co. v. United States, 196 U.S. 375; United States v. Freight Assn., 166...
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