Ward v. Davidson

• Citation: 89 Mo. 445
• Parties: WARD and others v. DAVIDSON and others.
• Decision Date: 18 March 1886
• Court: United States State Supreme Court of Missouri

89 Mo. 445

WARD and others

v.DAVIDSON and others.

Supreme Court of Missouri.

March 18, 1886.

Appeal from St. Louis court of appeals.

Action by stockholders against directors and superintendent of the corporation for breach of trust, and for the removal of the defendants from office.

Judgment against defendants, who appeal.Same counsel as in Hutchinson v. Green, post, 853.

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BLACK, J.

The plaintiffs, who are a minority of the stockholders of the Keokuk Northern Line Packet Company, bring this suit against five out of the nine directors, and against Peyton S. Davidson, who was the superintendent of the company, and also make the corporation a defendant, for the reason, as alleged, that it is in the control of the other defendants.

The petition, in its general scope, charges the defendants with having engaged the corporation in ventures foreign to its corporate powers, and alleges that they have abused their trusts as officers, and have used the money, property, and credit of the corporation for their private gain and emolument. There was a general finding of the issues for the plaintiffs, and a special finding that the defendants had been guilty of misconduct as directors and officers. The corporation and its agents were enjoined from dealing in boat stores not needed for the use of the company's boats, from dealing in grain with Shethar or others, and from loaning its credit or money to William F. Davidson or others. The defendants were removed from their offices, an election of other directors was ordered, and the property of the corporation put into the hands of a receiver. Money decrees were entered in favor of the corporation, and against the defendants, in various amounts.

The case is here upon cross-appeals. The proceeding, it may be added, is based upon section 948, Rev. St. The questions presented are mostly issues of fact, and, as the record consists of over 1,600 pages of printed matter, we shall, in many instances, state conclusions only.

The Keokuk Northern Line Packet Company was incorporated early in 1873 by the consolidation of three rival companies. The property of the old companies was put in at an appraised value, thus giving the new corporation a capital stock of $751,000. The principal offices were at first divided among members of the old companies. McCune, the president, died in 1874, when his representatives, contrary to an agreement existing between the stockholders of two of the old companies, sold their stock to W. F. Davidson. This gave him, and those acting with him, a majority of the stock, and the control of the affairs of the corporation. A hostility previously existing between some of the parties was in nowise allayed by the combination of property and interests. The minority stockholders, from 1875 to the trial of this cause, elected four directors, and the majority five.

In 1875 the corporation was out of debt, and had on hand $75,000 in cash or its equivalent. In 1878 it was in debt $90,000 and over. The property in the mean time decreased in value and quantity nearly, if not quite, one-half. This contrast between the McCune and the present administration is constantly pressed upon our consideration, and is entitled to a fair consideration. But it must be remembered that the cash on hand was at once paid out by way of a dividend, being the first and only one ever paid; that the boats of the company, save two new ones built at a large expense, were those which came from the old companies, had been in use a long time, and required expensive repairs. The average life of a steam-boat is from seven to ten years. The receipts of the company were on the constant decline, and this is nowhere more marked than in the McCune administration. This was doubtless due in a great measure to the competition, and especially that created by the construction of railroad lines to and from the principal points on the river. We must therefore be guided by the more specific evidence. The officers do not guaranty that the corporation will make money.

1. William F. Davidson was elected president in April, 1875, and continued to hold that office to the trial of this cause. The salary of the office had been and was then fixed at $4,000 per annum. In October of that year he took a credit in his account on the books for $4,500 salary for the eight months and some days, being $1,555.55 in excess of the amount to which he was entitled. The matter came before the board of directors in April, 1876, when a motion to charge him with the excess was lost; four directors voting for and four against it. But on the next day a resolution ratifying the credit as it stood was carried; four directors voting against and five for it, William F. Davidson being one of the five, and without whose vote the resolution could not have been adopted. The salary for 1876 and subsequent years remained, and, indeed, was again fixed, at $4,000. Notwithstanding this, he had himself credited with a salary of $5,000 per annum for the years 1876, 1877, and 1878. The only excuse offered for this is that he refused to work for $4,000. But the directors had a right to and did fix the compensation, and he agreed to that, and to the amount thus fixed, by the act of accepting the office. As to the excess for 1875 he had no right to it, and he could not create a right by his own vote. He could not, at the same time and in the same matter, act for himself and the corporation of which he was agent and trustee, being both a director and president. The attempted ratification thus brought about by his own vote was of no validity. It was a void act. Butts v. Wood, 37 N. Y. 318; Jones v. Morrison, 31 Minn. 148; S. C. 16 N. W. Rep. 854.

There is no claim of a ratification for the other years save by acquiescence, and it is shown that four of the directors at all times denied his right to these credits.

Complaint was also made because of a credit taken of $1,000 in one item for traveling expenses in 1875; and in January following the stockholders passed a resolution requiring the officers and others traveling for the company to render a detailed statement of the expenses, and the directors also made an order that the secretary should not pay traveling expenses of any officer without an itemized account approved by the executive committee. Still, in December, 1876, the president directed a credit to himself for $1,000 for traveling expenses, without a detailed account, or even the approval of the committee. Although complaints were again made, the previous order of the directors was not complied with, and this item was not even shown to be correct on the trial of the cause. It follows that William F. Davidson must be charged with the excess received on salary account, including the year 1875 and subsequent years, and the $1,000 alleged traveling expenses credited to him in 1876.

The amended petition, upon which the issues were made and tried, states that the breaches of trust complained of were then still continued. In equity practice amendments to bills generally related to matters existing at the time of filing the first bill, and matters occurring thereafter were brought upon the record by supplemental bill. Daniell, Ch. Pr. 1516, and notes. Our practice act recognizes the right to bring before the court matters arising after the filing of the petition. Sections 3535, 3573, Rev. St. The amended or supplemental petition must set forth all the facts, so that there will be but one pleading. Section 3576. The new matter here pleaded simply enlarged the extent of the relief, by stating a continuation of the same wrong, and was proper supplemental matter. Story, Eq. Pl. § 336; Jaques v. Hall, 3 Gray, 194. The accounting in respect of salaries will go to the date of filing the amended and supplemental petition. Beyond that we are not asked to go.

2. The Yellowstone Transportation Company was organized for the purpose of carrying out a contract with the United States for the transportation of supplies from Bismarck, on the Missouri river, beyond and up the Yellowstone. The complaint is that the president and superintendent carried on this enterprise, with the money and credit of the packet company, for their private gain, both directly and incidentally, in the purchase of boats and the like. Rainey, who was a salaried agent of the packet company at St. Paul, Minnesota, and Davis were at first to have a small interest, not exceeding one-tenth each, but in the end they received wages only. The defendants say William F. Davidson was not interested in this Yellowstone expedition otherwise than in looking after the interests of the packet company, which, through him, made large advances in the way of purchasing boats, and the sale of boat supplies; but the circumstances attending the sale of supplies, the purchase of boats hereafter noticed, and his letters to Rainey while out on that enterprise, show conclusively that he and his brother, P. S. Davidson, were the real parties in interest and partners in that venture. From a full consideration of this record we can come to no other conclusion.

The contract with the United States was taken in the name of Davis and P. S. Davidson, and was approved and closed on April 2, 1877. On the fourth of that month W. F. Davidson procured from the executive committee authority as follows: “The president is authorized by the committee, if necessary, to pay any one purchasing the Diamond Jo Line of steamers,--the Arkansas and Tidal Wave,--so they may be taken permanently out of the trade of the upper Mississippi river, a sum not exceeding $3,000 as a bonus, and likewise to purchase of the same line from four to six of their new barges, at a price not exceeding $2,500 for each barge; also the president is authorized to sell the steamer Savannah for $3,000, and the steamer Victory for $5,000.”

The Savannah and Victory were sold to P. S. Davidson at the designated prices. Davis...