Warren v. Mayer

• Decision Date: 06 February 1912
• Citation: 143 S.W. 861
• Parties: WARREN v. MAYER et al.
• Court: Missouri Court of Appeals

143 S.W. 861

WARREN v. MAYER et al.

St. Louis Court of Appeals. Missouri.

February 6, 1912.

Rehearing Denied February 20, 1912.

1. APPEAL AND ERROR (§ 639) — RECORD — ABSTRACT — REQUISITES.

Where the abstract in a suit in equity contains the material evidence affecting the result, the court, on appeal, will not dismiss the appeal or affirm a judgment on the ground of incompleteness of the abstract.

2. CORPORATIONS (§ 545) — PREFERENTIAL PAYMENTS — LIABILITY OF DIRECTORS.

A payment of the proceeds of the assets of a corporation was made either for the purpose of paying a dividend previously declared, or by virtue of stockholding. The payment was authorized by three directors, two of whom received the benefit thereof. The payment was made in process of winding up the corporation, which was insolvent. A creditor of the corporation, on an account due before the sale of the assets, obtained a judgment against the corporation. Held, that the two directors receiving payment of the proceeds were liable to the judgment creditor.

3. CORPORATIONS (§ 544) — PREFERENTIAL PAYMENTS — LIABILITY.

The rule that a corporation may prefer one creditor over another applies only in cases of a going concern, and does not apply to an insolvent corporation winding up its affairs; but the assets of such a corporation are a trust fund for the benefit of its creditors.

4. CORPORATIONS (§ 544) — PREFERENTIAL PAYMENTS — LIABILITY.

Where an unlawful preferential payment to a creditor is made by an insolvent corporation in process of liquidation, the excess of the amount over what the creditor will receive under an equal pro rata distribution among all creditors is recoverable for the benefit of the other creditors.

5. CORPORATIONS (§ 545) — PREFERENTIAL PAYMENTS — LIABILITY.

Where a payment of corporate assets is made to a stockholder while the corporation is insolvent and in process of liquidation, the stockholder is liable to creditors for the whole sum received.

Appeal from St. Louis Circuit Court; George C. Hitchcock, Judge.

Action by Thomas Warren against Henry Mayer and another. From a judgment for plaintiff, defendants appeal. Affirmed.

Julius T. Muench, for appellants. George B. Webster, for respondent.

REYNOLDS, P. J.

This is a suit, filed to the October term, 1907, of the circuit court of the city of St. Louis, against Henry Mayer, Morris Mayer and Frederick Mayer, as stockholders, officers and directors of the A. B. Mayer Manufacturing Company, for an accounting and to recover from them as individuals the amount of a judgment, together with costs and interest, in favor of plaintiff and against the A. B. Mayer Manufacturing Company. The petition, after averring the incorporation of the A. B. Mayer Manufacturing Company, and that it entered upon its business as a manufacturing corporation, avers that thereafter, on the 12th of April, 1897, that company became justly indebted to the plaintiff, on which indebtedness plaintiff, on the date last mentioned, brought action against the company; that afterwards, on the 12th of June, 1902, plaintiff recovered his judgment against the company in the sum of $765 for his debt and $157.55 for his costs in the suit expended and that that judgment thereafter remained and still is unpaid. It is further averred that afterwards and on the 25th of July, 1902, the A. B. Mayer Manufacturing Company, by action of its board of directors, was duly dissolved; that at the time of the institution of the suit in which he recovered his judgment, namely, the 12th of April, 1897, the A. B. Mayer Manufacturing Company owned and was possessed of property and assets of great value, to-wit, of the value of $100,000, with which property and assets it was then carrying on business and was possessed of a large trade, but that while plaintiff's action was pending and in (March), 1901, the defendants, then being officers, directors and stockholders of the A. B. Mayer Manufacturing Company, caused all of the property and assets of the A. B. Mayer Manufacturing Company to be distributed among the stockholders of that company including these defendants and that no provision was made for the payment of the debts of the company. It is further charged that at the time the assets and property of the company passed into the hands of defendants, those assets were a trust fund for the payment of all debts and liabilities of the A. B. Mayer Manufacturing Company and when received and taken by defendants were charged with such liability, and that the defendants have appropriated to their own use those assets of the value before stated. Plaintiff demands and prays for an accounting of the assets received by defendants from the A. B. Mayer Manufacturing Company; that their value be found; that interest be computed upon his judgment and the aggregate amount of his debt, interest and costs due thereon to the date of the decree be ascertained, and that the defendants be decreed to pay the same to plaintiff with interest to the date of the decree and all costs of the proceeding. Defendants answered by general denial.

The cause came on for hearing before the court as a cause in equity and resulted in a judgment for plaintiff against the defendants Henry and Morris Mayer for $1,367.37, apportioned equally between them, that is, to be satisfied by the payment of $683.68 by each, the court finding in favor of the defendant Frederick C. Mayer and rendering its decree accordingly. A motion for a new trial having been filed, overruled and exceptions saved, the cause has been duly appealed to this court by the defendants Henry and Morris Mayer.

Counsel for respondent complains that the abstract prepared by the counsel for appellants does not set out all the evidence in the case and supplements it by what, as we understand, is the omitted part. Examining that we cannot say that it is of sufficient materiality or importance to have affected the result, one way or the other and as we are satisfied we have practically all the testimony before us, we decline to dismiss the appeal, or affirm, as we might do, for reason of an incomplete setting out of all the evidence in the case, it being a suit in equity.

All the facts leading up to the transfer of the assets of the A. B. Mayer Manufacturing Company to the Mayer Fertilizer & Jung Company are so fully set out in Warren v. Mayer Fertilizer & Junk Co., 145 Mo. App. 558, 122 S. W. 1087, and were substantially in evidence in the trial of this case, so that we do not consider it necessary to repeat them, referring to the report of that case for those facts. Accepting what was held in that case as to the bona fides of the transaction as between the two companies, and that the remedy, if any, was against the officers, directors and stockholders of the A. B. Mayer Manufacturing Company, plaintiff brought this suit.

In rendering judgment the learned trial court handed down a memorandum giving his view of the case. Reciting the facts substantially as in the former case, and taking up the dealings with the fund of $12,000 the proceeds of the sale, by the executrix of the A. B. Mayer estate, to whom the court found that it was turned over by the A. B. Mayer Manufacturing Company, the learned trial judge finds that these proceeds were subject to distribution among the stockholders, only after the payment of the company's debts, and would pay $24 per share if so distributed among the stockholders on the outstanding stock of that company; that at the time this $12,000 was received by the A. B. Mayer Manufacturing Company there were two claims against it, namely (1), that of A. B. Mayer for dividends, "which the company never had the means to pay," according to the minutes of the directors' meeting of February 9, 1901, and which minutes were signed by these defendants. (2). The claim of this plaintiff which was then in litigation and subsequently became a judgment on June 11, 1902. The learned trial judge then proceeds: "In this situation the $12,000 above mentioned was applied on account of the (dividend) claim of A. B. Mayer, at least it would so appear from the order of distribution in the final settlement of the estate of A. B. Mayer, although it is not at all clear from other evidence in the case whether this was really done or whether it was paid on account of the respective holdings of stock. The stockholders were all in the same family and it made little difference to them whether they received the money as stockholders, or as legatees under the will of A. B. Mayer, if the money was applied to the payment of his claim. If the claim was paid, then the stock would be worthless, and if the claim was worthless, then the stock would have some value. If the $12,000 was applied in payment of the claim and such claim should subsequently be held valid, then any other creditor of the company should have to go unpaid. If, on the other hand, the $12,000 was distributed according to the holdings of the several shareholders, such stockholders would be liable pro rata for the amount they so received to any creditor of the company. It was to the interest of the stockholders for it to appear that the $12,000 was applied on the claim of A. B. Mayer rather than on the stock and doubtless they knew it at the time. The $12,000 — part of the proceeds from the sale of the assets of the A. B. Mayer Manufacturing Company — was accordingly paid to the executrix of the estate of A. B. Mayer, who applied it...