Vogeler v. Punch
| Citation | 103 S.W. 1001,205 Mo. 558 |
| Parties | JULIUS VOGELER, Administrator of LOUIS L. SOLOMAN, Appellant, v. MONTAGUE PUNCH, Respondent, and COPPER CROWN MINING COMPANY, Appellant |
| Decision Date | 11 June 1907 |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. O'Neil Ryan Judge.
Affirmed.
Collins & Chappell and Brownrigg & Mason for appellants.
The court erred in holding that Punch became on January 12, 1903 and continues to be the lawful owner and holder of certificate No. 35 for one thousand shares of the capital stock of said company, and in refusing the prayer of said petition and cross-complaint for the cancellation of said stock, because: (1) Where the stock of a corporation is issued as full paid and non-assessable, for money, property or labor, grossly disproportionate in value to the par value of the stock, such issuance of stock is unlawful. Garrett v. Mining Co., 113 Mo. 339; Van Cleve v Berkey, 143 Mo. 136; McClure v. Paducah Iron Co., 90 Mo.App. 567; Shields v. Hobart, 172 Mo. 491; Rumsey Mfg. Co. v. Kaime, 173 Mo. 551; Dynamite Co. v. Andrews, 97 Mich. 471; Bank v. Stove Polish Co., 105 Mich. 538; 2 Thompson on Private Corporations, secs. 1562, 2048; Morawetz on Private Corporations, secs. 87, 303-306; Chubb v. Upton, 95 U.S. 665; Upton v. Triblicock, 91 U.S. 45; Fisk v. Railroad, 53 Barb. 515; 10 Cyc. 767. (2) If a promotor or director of a company or other person standing in confidential relation to it procure the issuance to himself of stock of the corporation without consideration, such stock is fictitious and void, and may be cancelled by a court of equity in a suit at the instance either of the corporation itself or of a stockholder. South Joplin, etc., Co. v. Case, 104 Mo. 572; Exter v. Sawyer, 146 Mo. 302; Garrett v. Mining Co., 113 Mo. 330; Morawetz on Corporations, sec. 286; Campbell v. Morgan, 4 Ill.App. 100; Wood v. Union, etc., Association, 63 Wis. 9; Railroad v. Schuyler, 17 N.Y. 592; Fisk v. Railroad, 53 Barb. 514; Chandler v. Bacon, 30 F. 538; Railroad v. Bank, 22 Weekly Law Bulletin, 248. (3) Contracts which promoters of a corporation assume to make on its behalf before it comes into existence are not binding upon the corporation unless ratified by the corporation itself with full knowledge of all the facts. Hill v. Gould, 129 Mo. 116; Pitts v. Steel Mercantile Co., 75 Mo.App. 231; Davis and Rankin v. Creamery Ass'n, 63 Mo.App. 481. (4) A corporation cannot be charged with knowledge of any of its officers or agents with respect to a matter in which, prior to its incorporation, they participated in a scheme to perpetrate a fraud upon it. Bank v. Lovett, 114 Mo. 519; Johnson v. Shortridge, 93 Mo. 227. (5) Even if the company could be held to have ratified this contract, the contract being ultra vires, the company would not be estopped to repudiate it unless the contract had been fully performed and unless its repudiation would operate as a fraud. Bowman Dairy Co. v. Mooney, 41 Mo.App. 665; St. Louis Mfg. Co. v. Hilbert, 24 Mo.App. 343; Gray v. Gray, 83 Mo. 106; St. Louis v. Schulenberg, etc., Co., 98 Mo. 613.
T. J. Rowe for respondent.
(1) (a) The general rule is that the stockholders of a corporation have no right to maintain or defend actions for or against a corporation. This duty the law devolves on the directors as the trustees and agents of a corporation, and in the absence of a charge of fraud or collusion, it will be presumed that the directors are acting for the best interests of the corporation, and the suit must be brought by the corporation itself, and not by the stockholders. The stockholder must have exhausted all the means within his reach to obtain redress within the corporation itself. Albers v. Merchants' Exchange of St. Louis, 45 Mo.App. 218; Meyer v. Bristol Hotel Co., 163 Mo. 59; Loomis v. Railroad, 165 Mo. 469; Hawes v. Oakland, 102 U.S. 450; Ready v. Smith, 170 Mo. 172; Dimpfell v. Railroad, 110 U.S. 209; Cook, Stock, Stockh. & Corp. Law, sec. 684; 12 American Digest (Century Ed.), sec. 702, and cases cited, from States of Kansas, Maine, Mass., N. Y., and Penna.; Swope v. Villard, 61 F. 417; Warren v. Rubber Shoe Co., 166 Mass. 97; 10 Ency. Law and Proc., pp. 975, 6, 7, 8. (b) Stockholders must act in good faith in suing in name of corporations. 1 Spelling on Ex. Rem., sec. 747. (c) After stockholder has knowledge or is chargeable with knowledge of an ultra vires, fraudulent, or negligent act of the directors, he must institute his suit, if at all, within a reasonable time thereafter. If it is evident that the stockholder is waiting to see if the unauthorized act will be profitable to the corporation, the court will refuse to grant him any relief. Cook, Stock, Stockh. and Corp. Law, secs. 732, 733, note 3; Steger v. Davis, 27 S.W. 1071. (d) Where discovery of a fraud is an obvious duty and easily accomplished, its non-discovery is gross laches and will not toll the Statute of Limitations or the defense of laches. Loomis v. Railroad, 165 Mo. 495; Kroenung v. Goehri, 112 Mo. 648; Ready v. Smith, 170 Mo. 172. (2) (a) The corporation itself, after issuing its stock as paid-up stock, and declaring it so to be, cannot subsequently repudiate that declaration and agreement and proceed to collect, either from the person receiving the stock, or his transferees, the unpaid part of the par value. It is estopped from so doing. As between the parties it is a legal and valid agreement and violates no principle of public policy. This is the rule where no rights of creditors are involved. Hill v. Coal & Mining Co., 124 Mo. 166; Dickerman v. Northern T. Co., 176 U.S. 121; 1 Cook on Corporations, sec. 30, p. 93; sec. 38, p. 99; Liebke v. Knapp, 79 Mo. 22; Bank v. Gustin, etc., Co., 42 Minn. 327; Northern Trust Co. v. Columbia, 75 F. 936; Wells v. Green Bay Co., 90 Wis. 442; Scoville v. Thayer, 105 U.S. 144; Lorillard v. Clyde, 86 N.Y. 384. (b) 1. Payment of shares in a corporation may be made otherwise than in money, and may be in whatever, considering the situation of the corporation, represents for that corporation, a fair just, lawful and needed equivalent for the money subscribed. Leibke v. Knapp, 79 Mo. 22; Woolfolk v. January, 131 Mo. 631. 2. Stock may be paid for by a director in a company after he had subscribed for stock, by services rendered thereafter, and in the absence of fraud, a corporation will be bound by its estimate of the value of the services. 1 Cook on Corporations, sec. 20, p. 85; Doak v. Stahlman, 58 S.W. 741; Saunders v. U.S. etc., Co., 25 Wash. 475; Divine v. Universal Sew. Mach. Co., 38 S.W. 93; Cook, Stock, Stockh. and Corp. Law, secs. 13, 44, 47; Thompson, Liab. Stockh., sec. 134. (3) (a) An attorney may recover, as upon implied promise, reasonable compensation for services rendered in the preparation of articles of incorporation and other acts in connection with the organization of a company of which he became a director and officer, if such services are accepted, and this, although evidenced by no formal recorded action on the part of the directors fixing compensation by corporation. Taussig v. Railroad, 166 Mo. 28. (b) Managing officers of corporations have power to employ attorneys and counselors, without express delegations of power or formal resolutions to that effect. Southgate v. Railroad, 61 Mo. 94; Rosenbaum v. Gilliam, 101 Mo.App. 134; Taussig v. Railroad, 156 Mo. 28, 186 Mo. 269. (c) "The rule is that a party, although a director or other officer of a corporation, may recover the reasonable value of necessary services rendered to a corporation, entirely outside of the line and scope of his duties as such director or officer, performed at the instance of its officers whose powers are of a general character, upon an implied promise to pay for such services, when they were rendered under such circumstances as to raise a fair presumption that the parties intended and understood that they were to be paid for, or ought to have so intended and understood." Taussig v. Railroad, 166 Mo. 28; Wagner v. Edison Electric Co., 177 Mo. 62; Coal Co. v. Watson, 107 Mo.App. 453; Taussig v. Railroad, 186 Mo. 276. (4) Stockholders, as such, have no implied power to represent the corporation, though they may be appointed agents, but their voluntary acts may be adopted and ratified and thereby become the acts of the corporation. Jones v. Williams, 139 Mo. 1; Cook on Stockholders, sec. 709; Hill v. Coal Mining Co., 119 Mo. 9; Pullman Co. v. Railroad, 115 U.S. 587.
This is a suit in equity, and was instituted by Louis L. Soloman, 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 one thousand shares of the capital stock of said company of the alleged par value of twenty-five dollars each. The plaintiff, Soloman, 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 Soloman'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 twentieth 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 one thousand shares of said stock, full paid and non-assessable. 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...
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