Vogeler v. Punch

• Decision Date: 11 June 1907
• Citation: 205 Mo. 558,103 S.W. 1001
• Parties: VOGELER v. PUNCH et al.
• Court: Missouri Supreme Court

103 S.W. 1001

205 Mo. 558

VOGELER v. PUNCH et al.

Supreme Court of Missouri, Division No. 2.

June 11, 1907.

1. CORPORATIONS — FULL-PAID STOCK — ISSUANCE — CONSIDERATION.

Where full-paid nonassessable stock is issued for money, property or labor, grossly disproportionate in value to the par value of the stock, such issuance is unlawful as against nonconsenting stockholders and creditors.

2. SAME — PAYMENT IN LEGAL SERVICES — FUTURE SERVICES — CONSIDERATION.

Where defendant P., an attorney, contracted to render certain services for a mining corporation in consideration of certain full-paid and nonassessable stock, and continued to render such services as were required, such services, in the absence of fraud, constituted a good consideration in payment for stock issued so as to entitle P. to the rights of a stockholder, though a part of the services were to be rendered in the future.

3. SAME — STOCKHOLDER'S RIGHT TO SUE.

In a suit by a stockholder to cancel certain stock issued to the corporation's former attorney in payment for legal services, complainant was bound to allege and prove either that the corporation had refused to sue, or that defendant was in control of the corporation.

4. SAME — INTRA VIRES ACTS — GOOD FAITH — PRESUMPTION.

The issuance of stock by a mining company to its former attorney in payment for services rendered cannot, in the absence of fraud, be questioned by a stockholder.

5. SAME — ACTION BY STOCKHOLDER — PLEADING.

In a suit by a stockholder to set aside the issuance of certain stock to an attorney in payment for services, an allegation that complainant had endeavored unsuccessfully by application to the corporation to secure relief and protection from the wrongs and against the danger alleged in the petition, without stating what those efforts were, and the reason for the failure, was insufficient to show that complainant had exhausted his remedies within the corporation so as to entitle him to sue in equity.

6. PLEADING — OBJECTIONS — WAIVER — FAILURE TO DEMUR.

In a suit by a stockholder of a corporation to set aside an alleged erroneous issue of certain of the corporation's stock, defendant's failure to demur to an insufficient allegation in the bill as to complainant's endeavor to secure relief through the corporation did not waive the defect.

Appeal from St. Louis Circuit Court; O'Neil Ryan, Judge.

Suit by Julius Vogeler, as administrator of Louis L. Solomon, deceased, against Montague Punch and the Copper Crown Mining Company. From a judgment for defendant Punch, plaintiff and defendant mining company appeal. Affirmed.

Collins & Chappell and Brownrigg & Mason, for appellants. T. J. Rowe, for respondent.

BURGESS, J.

This is a suit in equity, and was instituted by Louis L. Solomon, a stockholder of the defendant Copper Crown Mining Company, against Montague Punch and the said Copper Crown Mining Company for the cancellation of a certificate for 1,000 shares of the capital stock of said company of the alleged par value of $25 each. The plaintiff, Solomon, having died during the pendency of the suit, it was revived in the name of his administrator, Charles M. Dewey. The latter having also died during the pendency of the suit, it was revived in the name of Solomon's administrator de bonis non, Julius Vogeler, the present plaintiff.

The petition upon which the case was tried alleges, in substance, that the Copper Crown Mining Company is, and has been, since the 20th day of July, 1902, a corporation organized under the laws of the state of Michigan. That the defendant Punch is in possession of and claims to be the owner of certificate No. 35 of the stock of said corporation, purporting to be for 1,000 shares of said stock, full-paid and nonassessable. That said Punch has been endeavoring to sell and dispose of the stock represented by said certificate, and is now about to sell and dispose of the same. That Punch is not the owner of said stock, and has paid nothing to the company for the same. That said stock certificate, which has been for some time signed in blank by the president and secretary of the company, but not filled out for any number of shares or in the name of any person, was on the 18th day of September, 1902, filled out for 1,000 shares in the name of Punch, and was on the 12th day of January, 1903, delivered to Punch by M. J. Hopkins (the president of the company). That the certificate was a part of the treasury or reserve stock of the corporation, being a portion of that stock which was reserved for sale in order to raise funds to carry on its mining operations. That there was never any action by the board of directors authorizing the said Hopkins or any one else to fill out and deliver the said certificate to Punch, but that said delivery was made by the said Hopkins to Punch upon his own motion, all of which matters and facts were well known to Punch. That prior to the incorporation of the company, Punch entered into an agreement with M. J. Hopkins and one W. R. Hopkins that the company should be incorporated under the laws of the state of Michigan, and that Punch should do the legal work necessary in the matter of said incorporation and organization and continue during the first year of said corporation's existence to render all necessary legal services and advice in connection with the same. That Punch, at the time said agreement was made, represented that he had acquaintances and connections which would enable him to procure and induce investment by other persons of the necessary funds to carry out the development of the mining business, in which it was proposed the company should engage. That said agreement between Punch and the Messrs. Hopkins was never made known to the other stockholders of the corporation or its board of directors. That Punch drew up and prepared the articles of incorporation, and placed himself thereon as a subscriber for 2,000 shares of the stock thereof. That thereafter, and until he obtained possession of the said certificate of stock, he continued to act as the legal adviser of the said M. J. and W. R. Hopkins, and pretended to act as counsel and attorney for said corporation. That subsequent to drawing the articles of incorporation, he wholly failed and neglected to perform his duties as attorney. That he failed and neglected to prepare drafts of minutes of the first meetings of stockholders and directors, and of by-laws to be submitted to the board of directors, as he promised to do. That in September, 1902, he began to urge the Messrs. Hopkins to issue 2,000 shares of the stock of the company to him. That in order to induce them to do so, he represented to them that certain persons were willing to invest in the company and would invest, if he could convince them that he was largely interested therein, which statement was false. He further stated to the Messrs. Hopkins that as a matter of law he was entitled to have such stock issued to him. That they fully relied upon him, and upon faith in his statements and advice delivered to him said certificate No. 35 for 1,000 shares of the stock of the company, and also another certificate of the stock of the company for 1,000 shares. That shortly thereafter, Punch sold or pretended to have sold the latter certificate to a third person. That the latter certificate for 1,000 shares was transferred to such third person on the books of the company by W. R. Hopkins without authority from the directors. That Punch has never paid anything to the company for either of said certificates of stock. That the company and its officers are now recognizing Punch as a stockholder in the company. That the plaintiff has endeavored unsuccessfully to secure from the company relief against the assertion by Punch of his claim of ownership of said certificate. That, if Punch is permitted to sell or dispose of said certificate, the plaintiff's rights as a stockholder of said company will be seriously injured, and he will be greatly damaged, and that he is without adequate remedy at law, etc. The prayer of the petition is that the court order that said certificate be surrendered and canceled, and that until the determination of the suit Punch be enjoined from asserting any rights as a stockholder by virtue of said certificate or from disposing of it, or attempting to dispose of it.

Upon this petition, a temporary injunction was issued as prayed. At the time of the institution of this suit, there was in force against the defendant company a peremptory writ of mandamus issued by the circuit court of the city of St. Louis against the company in a suit instituted by Punch, commanding the company, in substance, to recognize Punch's rights as a stockholder under the same certificate. This peremptory writ of mandamus was, upon a motion in arrest of judgment, afterwards quashed. Punch's answer to the petition was a general denial. The defendant the Copper Crown Mining Company filed an answer and a cross-bill, the allegations of which are substantially the same as those contained in the plaintiff's petition, and substantially the same relief was prayed for. Before the taking of evidence was commenced, the plaintiff requested the court to make a written finding of facts and of the law after all the evidence had been submitted. After hearing the evidence, the court rendered the following decree, and made the following findings of facts and of law:

"This cause coming on for hearing upon the pleadings and testimony herein, it is ordered and adjudged and decreed that the said Montague Punch, one of the defendants herein, became on January 12, 1903, and continues to be, the lawful owner and holder of certificate No. 35 for 1,000 shares ($25,000) of the capital stock of said Copper Crown Mining Company (a corporation), a defendant and cross-complainant herein, issued by its authority for legal services rendered and to be rendered to it by him, and that he is a stockholder in said company, and as such is now,...