Wilson v. Torchon Lace & Mercantile Co.

• Decision Date: 19 July 1912
• Citation: 149 S.W. 1156
• Court: Missouri Court of Appeals
• Parties: WILSON v. TORCHON LACE & MERCANTILE CO.

149 S.W. 1156

WILSON v. TORCHON LACE & MERCANTILE CO.

St. Louis Court of Appeals. Missouri.

July 19, 1912.

Rehearing Denied October 15, 1912.

1. ACTION (§ 25)—NATURE—LEGAL OR EQUITABLE —AGREEMENT TO REPURCHASE STOCK.

An action to compel a corporation to repurchase stock sold by it to plaintiff in accordance with an agreement made at the time of such sale could not be treated as an action at law for money had and received, but was more in the nature of a suit in equity to cancel the sale and secure a return of the consideration on the ground of fraud.

2. CORPORATIONS (§ 487) —ULTRA VIBES CONTRACTS—ENFORCEMENT.

A person parting with his money in reliance on a promise by a corporation, which under the law it has no power to make, cannot compel fulfillment, especially where the contract remains executory.

3. CORPORATIONS (§ 82) — AGREEMENTS TO REPURCHASE STOCK—INVALIDITY.

An agreement by a manufacturing corporation, on a sale of stock of the original issue, and not treasury stock, to repurchase such stock at any time the purchaser desired to sell, violated Rev. St. 1899, § 1327 (Rev. St. 1909, § 3354), providing the mode and manner in which the amount of the capital stock of such corporations may be decreased, and was ultra vires and void.

4. CORPORATIONS (§ 487]—AGREEMENTS TO REPURCHASE STOCK—INVALIDITY.

An ultra vires agreement by a manufacturing corporation to repurchase stock sold by it cannot be upheld on the ground that it is an executed contract, since as to the corporation it is wholly executory.

5. CORPORATIONS (§ 385) —ULTRA VIBES— AVAILABILITY AS A DEFENSE.

Where a transaction is one not permitted, or which is forbidden, by law, and is not merely an exercise of, but contrary to, the charter powers of a corporation, a plea of ultra vires is available to the corporation.

6. MONEY RECEIVED (§ — NATURE AND FORM OF REMEDY.

While the form of action for money had and received to a certain extent ingrafts equitable principles upon actions at law, it cannot be used to evade the application of settled equitable principles.

7. SPECIFIC PERFORMANCE (§ 110 — AGREEMENTS TO REPURCHASE STOCK—EQUITIES.

Where a person seeking to enforce a contract by a corporation to repurchase stock sold by it has received cash and stock dividends, which he does not offer and is not able to return, the equities are against plaintiff.

8. CORPORATIONS (§ 81) — CONDITIONAL SALES—WHAT CONSTITUTES.

A purchase of stock from a corporation, upon the corporation's agreement to repurchase at any time the purchaser wished to sell, was not a conditional one, where the purchaser was so completely the owner of the shares that he received, appropriated, and still holds the cash and stock dividends thereon.

9. CORPORATIONS (§ 387) —ULTRA VIBES— AVAILABILITY AS A DEFENSE.

The plea of ultra vires is available to a corporation for the benefit of its stockholders to defeat a recovery on a contract made by it, although the stockholders themselves did not intervene and set up such a defense.

Nortoni, J., dissenting.

Appeal from St. Louis Circuit Court; Daniel D. Fisher, Judge.

Action by Charles A. Wilson against the Torchon Lace & Mercantile Company. Judgment for plaintiff, and defendant appeals. Reversed.

John C. Robertson, of St. Louis, for appellant. H. H. Denison, Geo. W. Bailey, and Edward A. Feehan, all of St. Louis, for respondent.

REYNOLDS, P. J.

Plaintiff in this case, respondent here, originally brought this action against the Torchon Lace & Mercantile Company, a manufacturing corporation organized and operating under the general statutes of this state as a manufacturing and business corporation, and against Sylvester G. Lewis, president and manager of that company, to recover $1,250 and interest, plaintiff claiming that in July, 1908, the defendant company, acting through its president, had solicited and induced plaintiff to purchase 100 shares of the stock of the defendant corporation for the sum of $1,250, and that for the purpose of inducing plaintiff to purchase the stock Lewis, as the president and general manager and with the knowledge and authority of the defendant corporation and its directors, "and for the purpose of deceiving, misleading and cheating plaintiff, falsely and fraudulently represented to plaintiff that said stock was reasonably worth the said sum of $1,250 and was convertible at the option of plaintiff at any time for said purchase price and that said corporation had made ample provision to retake said shares of stock from plaintiff, and refund to plaintiff the purchase price of $1,250 therefor, at any time after said purchase that plaintiff should so desire." That as a further inducement to plaintiff prior to the purchase and as evidence of the pretended good faith of the corporation, Lewis exhibited and delivered to plaintiff a printed circular issued by authority and direction of the corporation, announcing to plaintiff and to the public generally as an inducement to obtain purchasers for the stock of the corporation, that each and every purchaser of the stock could at any time thereafter obtain from the corporation upon demand an immediate return of all the purchase money paid therefor less a nominal fee for transfer, setting forth in the printed circular "the pretended absolute security and safety and superior advantages thereby obtained by investments in said stock by reason of the ability of the purchaser to immediately procure, at his option, a return of the purchase money therefor." It is charged that all of the announcements and representations contained in the circular were false and fraudulent at the time they were made to plaintiff; that these false and fraudulent representations were made to plaintiff by Lewis acting with the corporation in a fraudulent conspiracy to cheat and defraud plaintiff and to obtain from plaintiff the $1,250 on the false and fraudulent pretenses and representations aforesaid; that on or about the 2nd of July, 1908, plaintiff, placing implicit faith and confidence in defendants and relying upon their statements and assurances and believing all said false and fraudulent representations to be true and having no means to ascertain or reason to believe to the contrary and upon the express condition thereof was influenced and induced thereby to purchase and did purchase the stock and paid the sum of $1,250 therefor to the defendant corporation, which sum was duly received by the corporation, and the certificates of stock received by plaintiff; that on or about the 1st of April, 1909, "pursuant to said representations and conditions of sale of said stock, as aforesaid, and still believing said false and fraudulent representations as aforesaid to be true, plaintiff duly tendered said certificates of stock to defendant corporation, and demanded in return therefor, the $1,250, less the cost of transfer thereof, pursuant to the terms and conditions of the sale and purchase thereof by plaintiff, as aforesaid, but that the corporation then and there refused and still refuses to accept said certificates of stock or to refund the purchase price thereof or any part thereof whereupon plaintiff notified said defendant that said contract of sale by virtue of the promises herein was rescinded and annulled." Plaintiff accordingly prayed the court to find the contract of purchase and sale duly and lawfully rescinded and annulled by virtue of the premises, that plaintiff be permitted to deliver in court the certificates of stock so refused by defendant corporation and that judgment be rendered against defendant for the sum, of $1,250 and interest thereon and for any other and further relief to which plaintiff may be entitled. Lewis filed a general denial by way of answer.

The answer of the defendant corporation, admitting the incorporation of the company, is a specific denial of all the other averments. As affirmative defense the answer sets out that, unsolicited by defendant or any of its officers, plaintiff came to the place of business of defendant and purchased 50 shares of the stock, paying $625; that certificates were duly issued and delivered to him and afterwards on the 30th of January, 1909, all of the original stock not having been sold, a stock dividend of 33 1/3 per cent was declared by the board of directors of the corporation defendant and that as a stockholder at the time plaintiff became entitled to 16 2/3 shares of the unissued stock; that a certificate for said 16 2/3 shares was duly issued and delivered to plaintiff, who afterwards, on the 21st of September, 1909, for value sold this dividend stock to one Vaughn, who, presenting the original certificate to the defendant company, had it taken up and exchanged for one which was issued to him in his own name in lieu of the one for 16 2/3 shares dividend stock theretofore issued to plaintiff. It is further averred that on the 15th of February, 1909 a cash dividend of 12 per cent was duly declared by the board of directors of the defendant corporation on its capital stock and plaintiff as a stockholder received and retained the sum of $60, the dividend on the n shares of stock in his name. These matters are alleged as estoppel against plaintiff from asking to have the alleged contract rescinded, it being averred that plaintiff in seeking equity is not himself offering to do equity. As a further defense it is set out that the corporation being organized under chapter 12, article 9, of the statutes of Missouri, 1899, and its powers derived therefrom, that the contract alleged in the petition `is ultra vires the corporation and is void because contrary to and against sound public policy and that it Is beyond the power of the corporation to deal in its own stock in the manner set out in the petition; that its capital stock is a trust fund for its creditors and that if permitted to traffic in its own capital stock it would destroy the capital that its creditors have a right to rely upon,

To this answer a general...