Zeitinger v. Annuity Realty Co.

• Decision Date: 03 June 1930
• Docket Number: 28509
• Citation: 28 S.W.2d 1030,325 Mo. 194
• Parties: C. J. Zeitinger et. al., Appellants, v. Annuity Realty Company et al
• Court: Missouri Supreme Court

28 S.W.2d 1030

325 Mo. 194

C. J. Zeitinger et. al., Appellants, v. Annuity Realty Company et al

No. 28509

Supreme Court of Missouri

June 3, 1930

Rehearing Overruled June 3, 1930.

Appeal from Circuit Court of City of St. Louis; Hon. M Hartmann, Judge.

Affirmed.

Hall & Dame for appellants.

(1) The allegations of the petition must be taken as true for the purpose of the demurrers. Verdin v. St. Louis, 131 Mo. 26. (2) Taking the facts as set up in the petition: (a) The money of the Dry Goods Company was used to purchase the ground (99-year lease) upon which a "syndicate" with knowledge and recognition of this, constructed the Railway Exchange Building. The equitable ownership right resulting from this, while recognized and declared by the Syndicate in writing, was never delivered, but remained in trust with the Syndicate, and the property is still impressed with this trust. Robertson v. Woods, 263 S.W. 135; Cassity v. Cassity, 240 S.W. 486; Burton v Helton, 257 S.W. 128; Thierry v. Thierry, 298 Mo. 25, 249 S.W. 946; Calloway Bank v. Ellis, 215 Mo.App. 72, 238 S.W. 844; Sanford v. Van Pelt, 314 Mo. 175, 283 S.W. 1022. (b) The Syndicate managers took over the title and owned and controlled as principals the whole property and enterprise. They thus became trustees and were bound to deal with the Dry Goods Company as fiduciaries during the continuance of the relation. 26 R. C. L. 1280 secs. 130, 131; United States v. Dunn, 69 L.Ed. 876; Darling v. Buddy, 318 Mo. 784. (c) While the success of the Syndicate's building undertaking depended upon making the annuity subscribers and the bond subscribers, by whom additional capital was furnished, secure, the exercise of good faith, at least, on the part of the Syndicate was required as to the interest or equity belonging to the Dry Goods Company. As this interest remained in trust and under control of the Syndicate it was the duty of the Syndicate to preserve and protect it. 26 R. C. L. 1281; In re Kline, 32 A. L. R. 926, 280 Pa. St. 41; Brooker v. Trust Co., 254 Mo. 125. (d) The Syndicate could not lawfully take advantage of the bankruptcy situation and permit those in privity with it to take over, without consideration, through the formality of a bankruptcy sale, the equity in the property, nor could such a purchaser hold adversely to the Hargadine Company. 7 R. C. L. 857, sec. 94; 26 R. C. L. 1296, secs. 148, 149; McDaniel v. Sprick, 297 Mo. 424, 249 S.W. 611; Nolle v. Parks, 173 Mo. 616; O'Day v. Annex Realty Co., 191 S.W. 41; 26 R. C. L. 1325, secs. 189-192; Phillips v. Jackson, 240 Mo. 310. (e) The legal fiction of separate entities of corporations formed as symbolic representations of the several interests included in the holdings of the Syndicate will be (must be) disregarded by equity in determining the rights of the parties. Penn. Canal Co. v. Brown, 235 F. 669; Brooker v. Trust Co., 254 Mo. 155; 1 L. R. A. (N. S.) 176, note, 39 A. L. R. 1073; Chicago & G. T. Railroad Co. v. Miller, 91 Mich. 166, 61 N.W. 981; Int. Tel. Co. v. B. & O. Tel. Co., 51 F. 49. (f) The transfer of control by property ownership to control by stock ownership (or custody and voting power) was a change only in form. This applies to both the annuity and the building companies. Penn. Canal Co. v. Brown, 235 F. 669; Darling v. Buddy, 1 S.W.2d 163. (g) What the Syndicate did for the Railway Exchange Building, Incorporated, it was bound to do for the Dry Goods Company, and the benefits of the purchase at the bankruptcy sale and of adjustment with the bondholders and securing of loan or advancement of $ 300,000 in return for a new lease to May Department Stores Company rightfully and lawfully inures to the benefit of the Dry Goods Company. McDaniel v. Sprick, 297 Mo. 424, 249 S.W. 611; Phillips v. Jackson, 240 Mo. 310; Vorlander v. Keyes, 1 F.2d 67; Thompson v. Hayes, 11 F.2d 244; 26 R. C. L. 1280. (h) The Syndicate managers, Jones and Filley, by having full control, custody and voting power of the stock of the Railway Exchange Building, by the written instruments of the Syndicate, were trustees as to the equitable rights represented by the stock and had the duty of preserving and protecting these rights and for its breach they are personally liable. Darling v. Buddy, 318 Mo. 784; Walker v. Hatfield, 17 S.W.2d 357. (i) If the contract of November 24, 1911, was ultra vires as to the Dry Goods Company (as the petition alleges), then the Syndicate managers are nevertheless trustees of an express trust, because the same is declared in writing, and plaintiffs are entitled to have a prior lien established (barring effect, if any, of Sec. 1834, R. S. 1919, relating to improvements put on land of another). First: Authorities as to ultra vires: Booker v. Trust Co., 254 Mo. 125; Cummings v. Parker, 250 Mo. 427; Hanlon etc. v. Miss. Val. Trust Co., 251 Mo. 553. Second: Authorities as to nature of trust: Hall v. Bank, 145 Mo. 418; Sanford v. Van Pelt, 314 Mo. 175, 283 S.W. 1022; Smith v. Hainline, 253 S.W. 1049; Neal v. Bryant, 291 Mo. 81. (j) If the contract of November 24, 1911, is not ultra vires or void for other reasons as to the Dry Goods Company, the Syndicate managers are then trustees of an express trust, under this and their other writings, and have the duty of protecting the interests and rights which, in accordance with their writings, are under their custody and control. Darling v. Buddy, 318 Mo. 784. (k) If the effect of the ruling of the bankruptcy court that after the forfeiture of the lease of the Railway Exchange Building Company to the Annuity Realty Company is to disclaim as to rights not included in the lease (as the petition stating the facts alleges), then, regardless of the question of trust, the Dry Goods Company, through the Railway Exchange Building Company, still holds the reversionary equity by the letter of the agreement, of April 2, 1912. Richards v. Coal Mining Co., 221 Mo. 149; 7 C. J. 417. (3) The Statutes of Limitations do not apply in this case: (a) The issues are new. The breach of plaintiff's rights complained of in the main runs back only to the bankruptcy proceedings in 1924, and the cause of action accrued less than six months before this suit was filed. (b) The rights involved are continuing in their nature and in futuro. 7 A. L. R. 1021, note. (c) The trusts involved are express trusts against which the Statutes of Limitations do not run while they are unfulfilled. Sanford v. Van Pelt, 314 Mo. 175, 283 S.W. 1022; Smith v. Hainline, 253 S.W. 1049; Hall v. Bank, 145 Mo. 418; 17 R. C. L. 708.

Bryan, Williams, Cave & McPheeters for respondents Annuity Realty Company, St. Louis Union Trust Company, St. Louis Union Trust Company, Trustee, and John D. Filley.

(1) The ruling of the trial court sustaining the demurrers of the respondents to the petition was right and its judgment should be affirmed. (a) The allegations in the petition show that the claims set up were decided adversely to plaintiffs in the District Court of the United States in the bankruptcy proceedings of the Railway Exchange Building Company. (b) The acquisition of the leaseholds prior to 1911 by the McKittrick Company and the transfer thereof in 1912 to the Annuity Realty Company, of which complaint is made, were authorized by the board of directors of the McKittrick Company, and the board was fully empowered to act in the premises. Hendren v. Neeper, 279 Mo. 125. (c) The contract of November 24 1911, was not a unilateral contract; it was bilateral. The McKittrick Company was a party to it and received a valuable consideration for the transfers of the leaseholds, in that it received the stock of the Railway Exchange Building Company, it was relieved of the very heavy burden of carrying the several leaseholds, it was relieved of the very heavy burden of erecting a large and costly building upon the block for the May Company, and it was relieved of other burdens under which it was then laboring. The transfers of the underlying leaseholds to the Annuity Realty Company were fair transactions and for the benefit of the McKittrick Company and were clearly not ultra vires. Hendren v. Neeper, 279 Mo. 125; Tanner v. Lindell Ry. Co., 180 Mo. 1; Johnson v. United Railways, 227 Mo. 423; Johnson v. United Railways, 243 Mo. 278; Realty Co. v. Am. Surety Co., 292 Mo. 423; Heinz v. Natl. Bank of Commerce, 237 F. 942; 14 A C. J. 496. (d) The transfers of the leaseholds to the Annuity Realty Company, in accordance with the contract of November 24, 1911, were fully executed and completed in 1912 -- more than twelve years prior to the institution of this suit -- and the plea of ultra vires cannot be used as a sword to recover back such leaseholds or property delivered under such executed transactions. Natl. Bank of Commerce v. Francis, 296 Mo. 169; Schlitz Brewing Co. v. Poultry Co., 287 Mo. 400; Cantley v. Drainage District, 318 Mo. 1120; Kerfoot v. Bank, 218 U.S. 281; St. Louis etc. Railroad Co. v. Railroad Co., 145 U.S. 393. (e) Plaintiffs' petition is without equity for the further reason that it disregards entirely the rights of third persons, namely, the holders of annuity certificates and the holders of Railway Exchange Building, Inc., bonds -- persons who purchased these securities in good faith and whose rights, if plaintiffs' petition were successful, would be entirely destroyed. Johnson v. United Railways, 227 Mo. 423; Tanner v. Lindell Ry. Co., 180 Mo. 1; Dimpfell v. Ry. Co., 110 U.S. 209; Dana v. Tobacco Co., 69 A. 223. (f) This is a stockholders' suit brought by these appellants as stockholders in the McKittrick Company to recover upon an alleged right of that company, but appellants fail to state a cause of action in themselves because their petition fails to show that they ever made any effort to obtain action by the...