Wilson v. St. Louis & Western Railroad Company

• Decision Date: 05 February 1894
• Citation: 25 S.W. 527,120 Mo. 45
• Parties: Wilson, Appellant, v. The St. Louis & Western Railroad Company et al
• Court: Missouri Supreme Court

25 S.W. 527

120 Mo. 45

Wilson, Appellant, v. The St. Louis & Western Railroad Company et al

Supreme Court of Missouri, First Division

February 5, 1894

Appeal from St. Louis City Circuit Court.

Affirmed.

J. R Kinealy and M. Kinealy with whom is Adiel Sherwood for appellant.

(1) The acts claimed to have been done by the defendants Dodson, Owen and Diffenderfer -- save the calling of meetings by Dodson -- were acts within the scope of their duties as directors, and didn't entitle them to any compensation, save that provided by section 5, of the act of incorporation of the company, i. e., one dollar and fifty cents per day, while the board is in session, and ten cents per mile from home to the place of meeting and return. Cheeney v. Co., 68 Ill 571; Loan Association v. Steinmetz, 29 Pa. St. 534; Dunston v. Gas Co., 3 Barn. & Ad. 125; Stacy v Bank, 4 Scam. (5 Ill.) 94; Ogden v. Murray, 39 N.Y. 202, 207; Toponce v. Co., 24 P. 534; Railroad v. Poor, 59 Me. 277; Gravel Road Co. v. Branegan, 40 Ind. 361; Beach on Railroads, sec. 484. (2) Unless when, and to the amount, authorized by an express provision of the act of incorporation, a director can not receive any compensation for past services. Bennett v. Car Roofing Co., 19 Mo.App. 349; Loan Association v. Steinmetz, 29 Pa. St. 534; Gravel Road Co. v. Branegan, 40 Ind. 361; Dunston v. Gas Co., 3 Barn. and Ad. 125; Barrill v. Co., 50 Hun, 257; Toponce v. Co., 24 P. 534; Gridley v. Railroad, 71 Ill. 201. (3) And where the board have power to fix a salary, it must be done by resolution made of record before the services are commenced. Besch v. Mfg. Co., 36 Mo.App. 335. (4) Although the act of incorporation of the Laclede & Fort Scott Railroad Company provided that the directors might fix the salary of the president or other officers, yet they could not lawfully exercise that power while the corporation remained insolvent, as that company was in 1879 and 1881. McAvity v. Co., 82 Me. 504. And this is so, even though it had been satisfactorily proved that a salary had been voted for Mitchell, or fixed in 1871, as he stated. Ins. Co. v. Crane, 47 Mass. 64; Co. v. Terrell, 48 N.Y. 427. (5) The action of the directors in voting any salary to Dodson, even for future services, would have been unlawful after 1871, or even before. Ins. Co. v. Crane, 6 Metc. 67; Ferry Co. v. Terrell, 48 N.Y. 427; Davis v. Railroad, 22 F. 883. (6) A majority of the board of directors must be disinterested as to every matter voted on. Miner v. Ice Co., 93 Mich. 97. (7) The directors can not issue stock below par. Sturges v. Stetson, 1 Bliss, 246. (8) The notes given Owen, Dodson and other directors, so far as given for past services, were void. Gravel Road Co. v. Branegan, 40 Ind. 361; Railroad v. Miles, 52 Ill. 174. And if the Dodson note be void, of course the Johnson judgment got by Dodson's waiver of service is void. (9) Directors and officers of a corporation are trustees for the stockholders and creditors, and any arrangement or agreement by which they secure advantages or profits to themselves not expressly authorized by the charter is void. Railroad v. Poor, 59 Me. 277; Coal Co. v. Parish, 42 Md. 598; Benson v. Heathorn, 1 Younge & C. Ch. 326; 38 Mo.App. 229; Ryan v. Railroad, 21 Kan. 365; Ogden v. Murray, 39 N.Y. 202; Freeman v. Stine, 15 Phila. 37; In Re Co., 2 L.R.Ch. Div. 1; Miner v. Ice Co., 93 Mich. 97. (10) The burden of proof was on Dodson, Diffenderfer and Owen to show the perfect fairness, adequacy and equity of their action in voting the stock on November 29, 1879, and June 20, 1881. Coal Co. v. Parish, 42 Md. 598. The burden of proof is on them also, because they were called on to give the particulars; the facts are within their own knowledge. Davies v. U.S. 23 Ct. of Cl. 468; Bank v. Railroad, 77 Ga. 786; 1 Rice on Evidence (Civil), p. 117. And because they are trustees. Sweeney v. Co., 30 W.Va. 443; Dufford v. Smith, 18 A. 1052. (11) The resolutions of November 29, 1879, and of June 20, 1881, so far as they provided that the stock issued to the president or to any of the directors should be deemed paid up in full, are void, and the par value of the stock so issued may be recovered. Shickle v. Watts, 94 Mo. 410; McAvity v. Co., 82 Me. 504; In Re Co., L. R. 10 Ch. Div. 597; In re Co., L. R. 2 Ch. Div. 10; Sturges v. Stetson, 1 Bliss, 250, 253; Cook on Stockholders [2 Ed.], sec. 65, p. 754. (12) And in the following cases, in which several persons were involved (as in case at bar), the court lays down the rule always applied to a joint act of wrong-doing trustees that each and every person who aided, procured or voted for the passage of any of those resolutions, is liable for the par value of all the stock embraced in the resolution, no matter to whom allotted. Freeman's Assignee v. Stine, 15 Phila. 37; In Re Ass'n., 51 L. T. Rep. Ch. Div., p. 286; Metcalfe's Case, L. R. 13 Ch. Div., 169. (13) The ordinary stockholders are liable in this action for the balance of the par value remaining unpaid on their stock, although they may have been promised by the officers of the company that fifty per cent. would be accepted in full payment. Pickering v. Templeton, 2 Mo.App. 424, and cases cited. The statute of limitations is no defense to any demand involved in this action. Bank v. Bank, 107 Mo. 133; Flint on Trusts and Trustees, secs. 316, 317, pp. 469, 470.

J. B. Johnson and T. G. Rechow for respondents.

(1) The statute of limitations applies; this is a creditor's bill; no call was necessary to maintain it and it could be brought at any time that insolvency existed. Bank v. Bank, 107 Mo. 133; Savings Ass'n v. Kellog, 52 Mo. 583; Perry v. Turner, 55 Mo. 418; Cook on Stock and Stockholders, sec. 225, subdiv. F; Field on Corporations, sec. 75; Thompson on Liability of Stockholders, sec. 34, subdiv. 4; Coquard v. Pendergast, 35 Mo.App. 237; McGinnis v. Kortkamp, 24 Mo.App. 378; Goresne v. Lewis, 15 Mo.App. 565. (2) These claims in equity are stale and the doctrine of laches applies and the bill should be dismissed on this ground. Hopes v. Mfg. Co., 31 Am. St. Rep. 637; Bliss v. Pritchard, 67 Mo. 183; Kline v. Vogel, 90 Mo. 239; Pike v. Martindale, 91 Mo. 285; Schradski v. Albright, 93 Mo. 42; Stamper v. Roberts, 90 Mo. 683; Laundrum v. Bank, 63 Mo. 48; Wells v. Perry, 52 Mo. 576; Kelly v. Hurt, 74 Mo. 561; Burgess v. Railroad, 99 Mo. 496; Oil Co. v. Marbury, 91 U.S. 591. (3) The finding of the court should be affirmed on the merits; where charter provides that salary of president may be fixed by the board of directors and a president is elected and serves without any salary being named, the law raises an assumpsit on the part of the corporation to pay a reasonable compensation for his services rendered after his election, and he may recover without any action of the board. 2 Beach on Private Corporations, secs. 208, 209; 2 Wood's Railway Law, sec. 158, also sec. 429; Rogers v. Co., 22 Me. 564; Railroad v. Richards, 8 Kan. 101; Merrick v. Peru Co., 61 Ill. 472; Grundy v. Pine Hill Co., 9 S.W. 414; Bank v. Drake, 44 Am. Rep. 646; Railroad v. Tiernan, 37 Kan. 606. This is quite a similar case to one at bar. (4) Salaries allowed themselves by directors impeachable only for fraud, and this not presumed, but must be proved. McNaughton v. Osgood, 41 Kan. 109; Kelsey v. Sargent, 47 N.Y. 150. (5) Chief officers are not supposed or expected to keep an itemized account of their services. Railroad v. Richards, 8 Kan. 101; Greely v. Bank, 103 Mo. 222. (6) The "trust fund" doctrine has no application to this case. Hopes v. Mf'g. Co., 31 Am. St. Rep. 637; Clark v. Bever, 31 F. 670. (7) The "trust fund doctrine" itself is denied by some courts, doubted by others, qualified by others, and has within the nature of things its own limitation. As this point has been elaborately presented to this court at this term in Alburger v. Bank we deem it unnecessary to repeat the discussion or authorities. (8) Directors may vote on their own claims and give themselves preference in the absence of actual fraud. City of St. Louis v. Alexander, 23 Mo. 483; Foster v. Mullanphy, 90 Mo. 79; Kraft v. Craw, 36 Mo.App. 288; Warfield v. Marshal, 2 Am. St. Rep. 263. (9) The railroad was not subject to garnishment in the Keystone Building Co. case, because the claim was for unliquidated damages. Scackes v. Hotel Co., 37 Mo. 520; Weil v. Tyler, 40 Mo. 581; Branson v. Hays, 37 Mo. 450. (10) In case of judgment by default against a corporation, the stockholder may show when sued that the debt was not due by the corporation. Irons v. Bank, 36 F. 843.

Macfarlane J. Barclay, J., concurring.

OPINION

Macfarlane, J.

This is a suit in equity by plaintiff as a judgment creditor of the St. Louis and Western Railroad Company, to recover from certain stockholders therein, the par value of their stock which, it is alleged in the bill, was issued to and accepted by them, but for which they had never paid. The suit was commenced on the seventeenth day of October, 1888, in the circuit court of St. Louis county. On the second day of February, 1891, the fourth amended petition was filed, upon which the case was eventually tried.

That petition charged that the Laclede and Ft. Scott Railroad Company was organized under an act of the general assembly of this state, approved January 11, 1860. That after said corporation had organized and commenced the transaction of business its name was changed to that of the St. Louis and Western Railroad Company. That said corporation was authorized to issue sixty thousand shares of stock of the par value each of $ 100. That there had been allotted to, and accepted by, defendant J. R. Owen, twenty-one shares; D. R Diffenderfer, eighty-five shares, and to James N. B. Dodson, two hundred and eighty-eight shares and to other named defendan...