Ward v. Davidson

• Decision Date: 18 March 1886
• Citation: 1 S.W. 846,89 Mo. 445
• Parties: WARD and others v. DAVIDSON and others.
• Court: Missouri Supreme Court

1 S.W. 846

89 Mo. 445

WARD and others v. DAVIDSON and others.

Supreme Court of Missouri.

March 18, 1886.

1. CORPORATION — POWERS OF DIRECTORS — UNAUTHORIZED ACT OF PRESIDENT — RATIFICATION — VOTING.

The president of a corporation having taken credit on its books for a sum in excess of his salary, an attempted ratification of such act at a meeting of the directors, where four voted against and five for the ratification, is void, the president's own vote being included in and necessary to make up such majority, and the matter being one in which he could not at the same time act for himself and as agent and trustee of the corporation.

2. SAME — PRESIDENT'S TRAVELING EXPENSES — STOCKHOLDERS' RESOLUTION — ORDER OF DIRECTORS.

The stockholders of a corporation passed a resolution requiring the officers and others traveling for the company to render a detailed statement of their expenses, and the directors also ordered the secretary not to pay traveling expenses without an itemized account approved by the executive committee. The president directed a credit to himself for traveling expenses, to be made without either a detailed account or the approval of the committee. In an action against the president and other directors for abuse of their trusts, held that, such item not having been shown to be correct, judgment must be given against the president for the amount credited.

3. EQUITY — PLEADING — AMENDED AND SUPPLEMENTAL PETITION — JURISDICTION OF COURT.

Under Rev. St. Mo. §§ 3535, 3573, it is competent, in an action against the directors of a corporation for abuse of their trusts, to file an amended and supplemental petition alleging that the breaches of trust complained of were then still continued, and the court may render judgment upon matters occurring down to the date of the filing of such amended petition.

4. CORPORATIONS — DIRECTORS — BREACH OF TRUST — LIABILITY.

The directors' executive committee of the K. Packet Co., a corporation owning vessels trading upon the Mississippi river, authorized the president to pay a bonus to any person taking two steamers of a rival line permanently out of the trade, and also authorized him to purchase several of the barges of the rival line. He purchased the steamers for a company trading upon the Yellowstone river, of which he and his brother (who was also superintendent of the K. Packet Co.) had control, and were the real owners. He also purchased four barges from the rival line at a price of $10,000. The barges were transferred by the rival line to the superintendent of the K. Packet Co. and another, and by them turned over to the K. Co. The president directed that he should be credited upon the books of the company with the bonus, and also with $12,000 for the barges. The steamers purchased, after trading for a time on the Yellowstone, were, along with two others belonging to the Yellowstone Co., chartered on behalf of the K. Packet Co., by the president, on terms which proved to be grossly in excess of their true charter value. R., a salaried agent of the K. Packet Co. was also employed on the Yellowstone Co.'s business for some time. Held, in an action against the president and other directors and the superintendent of the K. Packet Co. for breach of their trusts, that the president and superintendent having been guilty of bad faith in their dealings with the company, and having used their authority for their own gain, and for the purpose of enabling the Yellowstone Co., which they owned, to purchase the steamers at a low price, they were liable for the bonus credited to the president, for the overcharge of $2,000 upon the price of the barges, for the excessive charter money, and for R.'s salary while engaged in the business of the Yellowstone Co.

5. SAME — USE OF CORPORATION'S MONEYS.

Where the directors of a steam-packet company have supplied a coal company, owned by them, with coal, upon such terms that the coal company's business was really conducted upon the moneys of the packet company, and have also given a large rebate upon freight due by the coal company to the packet company, they will be liable for interest on the moneys used in the purchase of the coal, and for the amount of the rebate.

6. SAME — POWERS OF PRESIDENT — EMERGENCY.

It is within the power of the president of a packet company, in an emergency and to meet the exigencies of the case, to order a vessel to be lengthened to such an extent as to decrease her draught one-half, and thus enable her to make a trip at low water in the river upon which she plies.

7. SAME — PACKET COMPANY — POWER TO GUARANTY SHIPPERS AGAINST LOSS.

Where the directors of a steam-packet company authorize arrangements to be made with persons "to induce them to buy freight for the boats," it is within the power of the president to guaranty shippers against loss upon the merchandise shipped, to the extent of the freight charges.

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.

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,...