119 Mo. 9 | Mo. | 1893
I. Under charter provisions, the board of directors of the defendant corporation is composed of five members, and at the time the facts occurred which gave origin to the present litigation, and since that date, consisted of the following persons, to-wit, Edwin A. Gould, R. M. McDowell, W. P. Coleman, James A. Hill, and W. S. Hill. Edwin Gould was president of the corporation, and McDowell general manager. In this posture of affairs, the following proposition, being the same referred to in plaintiff’s petition, was made to defendant by plaintiff:
“Rich Hill, Mo., May 19,1890.
11 Mr. Fdwin Gould, President the Mich Hill Goal Mining
Co.,New York City, N. Y.
“Dear Sir: — I have succeeded in purchasing from E. B. Adams a tract of land, embracing about 360 acres, a mile or two south of Rich Hill; also 611-) acres*20 from Bobert M. Handley, adjoining the foregoing. Tbe location of these tracts is undoubtedly familiar to you. I have done this to secure the lands, believing them to be valuable, but will transfer them to the Bieh Hill Goal Mining Company if it wants the same. If the Bich Hill Coal Mining Company concludes to take these lands, I will turn them over at the same price and terms at which I purchased them, any time between now and the 29th inst. The cost of the Adams property is $10,800. Terms: One-third down; balance in one and two years, with six per cent, interest. The cost of the Handley property is $30,575 cash. To the above should be added some incidental expenses. Yours, truly,
“W. S. Hill.”
Pursuant to this proposition, a special meeting of the directors was held in New York on the twenty-second of May, 1890, at which were present Edwin Grould, James A. Hill, and plaintiff. The other members -of the board were hot present, nor were they notified in writing Or otherwise; indeed the meeting was had upon an agreement made on the same day it was convened, and within a few minutes after such agreement was reached. Article 13 of the by-laws of the defendant, which was adopted in 1880, and has been in force ever since, provides that “a special meeting of the board of directors may be called at any time by the president or a majority of the members of the board, giving ten days7 notice in writing, to each of the directors.77 During the same year, another by-law (number 11) was adopted by the defendant corporation: “The attendance of ¿ majority of the board of directors shall be necessary to constitute a quorum for the transaction of business; a less number may adjourn from time to time.7 7
The decree finds that the board of directors con
In the present case, then, there were only three of the board of directors present at the meeting held in New York city on the twenty-second of May, 1890, which professed to accept the written proposition of plaintiff, which was the only offer or proposition made by plaintiff to sell the land to defendant, which offer was not in any manner changed or modified at any subsequent period. As before stated, the lower court found that plaintiff and James A. Hill were both
This being the case, as there were not but three of the directors present, and two of these disqualified-by reason of interest, it results that as there was no valid quorum present, that no binding contract was made by plaintiff with the defendant corporation in regard to the land in question. The books abound with instances illustrating the wholesome principle that no one, especially in an official position of trust and confidence, is permitted to be exposed to the temptation necessarily incident to a situation where duty prompts to go one way, and self-interest another. Such, of course, would be the situation of a director when attempting to sell for himself, and to buy for the corporation. He can neither make such a contract in the beginning, nor enforce it in the end. It is true, the court below, while finding that plaintiff and his father were directors, and interested in the subject-matter of the proposed contract, yet at the same time finds, in paragraph 4 of the decree, that “they ivere not acting as trustee, or in any representative capacityHow this could be, it is inexpressibly difficult to understand. Though a director is not technically a trustee, yet, as an accurate author aptly remarks: ‘ ‘The relation between the directors of a corporation and the company itself is, however, in many respects, a fiduciary or trust relation. * * * The directors of a corporation are ordinarily invested with the most extensive powers of management. They are empowered to represent the
Upon the principle thus announced, this court has always firmly stood, as shown by the cases cited from our own reports, and there are none in those report's which, when rightly understood, assert a different doctrine. Wherever, in those reports, a director has been a contracting party, there have been others disinterested, sufficient to constitute a valid quorum. Touching the same point, it is said in a comparatively recent case: “He (Munson) stood in the
II. Now, as to notice to the other directors. Article 13 of the by-laws requires ten days’ notice to be given in order to call a special meeting. This course was not pursued in respect to the meeting in New York, as plainly appears from the evidence. In People v. Batchelor, 22 N. Y. 134, Judge Selden forcibly remarks: “It is not only a plain dictate of reason, but a general rule of law, that no' power or function entrusted to a body consisting of a number of persons, can be legally execised without notice to all the members composing such body.” To the same effect see 1 Mor. Priv. Corp. [2 Ed.], secs. 479, 481, 531, 532; Green’s Brice’s, Ultra Vires, 438, and notes; Tel. Co.
III. The same line of remarks as aforesaid are applicable to the meeting of the board of directors in St. Louis on June 10,1890, because only McDowell and the two Hills were there present, and Director Coleman, though notified by telegram, was not present. Edwin Glould was not notified, as he testifies, and Dr. Smith does not testify to the contrary. He merely says he thinks he notified G-ould by telegram, though when he notified him he does not state. On the twenty-ninth of May, it seems, it was agreed between James A. Hill and McDowell to hold a meeting in St. Louis on June 2; they consented to the waiving of the ten days’ notice.” This meeting was not held on June 2, nor was any record of its convening entered, nor any adjournment of record made. It seems that James A. Hill informed Dr. Smith, the secretary of the defendant corporation, of W. S. Hill’s absence, and requested the secretary to adjourn the meeting. In this way it appears that-the special meeting was “postponed” to June 9; but it was not held then, because there was no sufficient number of directors present, and no adjournment of record was then made, and no notices were served on the absent directors, except such as were served on the twenty-ninth of May aforesaid.
Article 14 of the by-laws of the defendant, heretofore quoted, gave authority tó a less number than a majority of the directors to “adjourn from time to time.” Of course, this means a formal adjournment, entered on the records in the usual way; and if this
And these observations are subject to the further qualification that the notice given on May 29, had emanated from an authoritative source, In the ease at bar, what notices were given by the secretary, Dr. Smith,. were given May 29, but it does not appear that he was authorized to call a meeting. Under article 13 of the by-laws, already quoted, a special meeting of the board of directors could only be called by “the president or a majority of the members of the board,” etc., so that a meeting otherwise called possesses no validity. Society v. Sperry, 10 Conn. 200; Reilly v. Oglebay, 25 W. Va. 36; Stebbins v. Merritt, 10 Cush. 27; 1 Mor. Priv. Corp., section 480.
And it is clearlyi laid down in the authorities that the by-laws of a corporation, when properly adopted, are as binding on the members of such body as is a provision contained in the charter itself (1 Mor. Priv. Corp. section 490); and the same principle of law which dominates the giving notice of time, place, and manner requisite in calling stockholders’ meetings equally applies to meetings of directors (Id. sec. 531). From this, it necessary follows that two of the directors were powerless to waive the ten days’ notice which article 13 of the by-laws required. The meeting in St. Louis on June 10 must, therefore, be regarded as invalid as that held in New York.
IY. But conceding, for argument’s sake, the
The facts undoubtedly show the alleged contract for both tracts of land to be an entirety. Where such a contract is thus made, the authorities are unbroken in their uniformity in the assertion that it must be enforced as an indivisible integer, or not at all; it cannot be enforced by piecemeal. Fry on Spec. Perf. of Contracts [3 Amer. Ed.], secs. 802, 804, 806; Wat. on Spec. Perf. of Contracts sec. 389 et seq; 2 Story’s Eq. Jur. [13 Ed.], sec. 778, and cases cited; Dalby v. Pullen, 3 Sim. 29; Baldwin v. Fletcher, 48 Mich. 604; 2 Beach, Mod. Eq. Jur., secs. 623, 625; Kenner v. Bitely, 45 Fed. Rep. 133; Cato v. Thompson, 9 L. R. Q. B., div. 616. As plaintiff is attempting to enforce only a portion of the alleged contract, that attempt cannot prove successful, as is shown by all of the authorities. It would be
Y. There are other reasons equally cogent for the denial of the relief plaintiff seeks. The land in question, to-wit, the whole tract alleged to have been contracted for, was evidently purchased for coal land. This was the chief object in view in making the purchase. Yet when McDowell began prospecting on the Handley land, as was the custom in that country when coal lands were about to be bought, plaintiff forbade this to be continued, and it was stopped. This action of plaintiff would seem to have been the result of a fear that no coal would be discovered on the land if the prospecting were allowed to continue. Taking this conduct of plaintiff in connection with that already related at the two different meetings aforesaid, in which while directly interested in the subject-matter, he contributed by his vote to produce the result desired, such conduct cannot be regarded in a favorable light by a court of equity, where relief of the character here invoked is asked.
The contract in this instance is executory; and where this is the case, and its enforcement is sought, it will be refused where, considering all the circumstances of the case, it is not certain, fair and just in all its parts, because such enforcement is not a matter of absolute right in any circumstances, but resting in the sound discretion of the court; and such an agreement will not be enforced, if the decree would produce injustice between the parties, or where it would be inequitable under all the circumstances. For this reason it is that a court of equity will permit a party to defend
YI. Recurring to paragraph 4 of the decree and quoting it in full, it is as follows: “That the said William S. Hill and James A. Hill were, at the time of the making of s^tid contract, both interested in making said sale to defendant, but that they were not acting as trustee, or in any representative capacity, the other interest in the stock of defendant not held by them being held for the Missouri Pacific Railway com- ' pany, represented at the time by said Edwin Grould, who at the time held a controlling vote in the meeting, being at the same time the owner of a large májority of the stock as trustee for said railway.”
It will be at once perceived that the lower court took the singular view that notwithstanding the meeting in New York was held without notice, notwithstanding plaintiff and his father were directors, and were interested in the'alleged contract then made, yet, that, as Edwin Grould held a large majority of the stock in the defendant corporation as trustee for the Missouri Pacific Railway company, and that as he “held a controlling vote in the meeting,” therefore, the meeting in New York, without notice and without a quorum, was valid, and the assumed contract made thereat also valid. But this view leaves entirely out of consideration the idea that the directors are the governing body of a corporation, and cannot either represent or bind
VII. But, further, as to the alleged contract made in New York. Plaintiff based his right to relief upon it, but yet took a departure from it in his reply, set up an alleged estoppel, and was permitted, as shown by paragraph 9 of the decree, to recover thereon. But, of course, this was erroneous. The plaintiff had a right to relief, if at all, on his alleged contract in writing. Failing in that, he had no standing in court, because of the provisions of the statute of frauds. Ringer v. Holtzclaw, 112 Mo. 519. See, also, Lanitz v. King, 93 Mo. 513, and Mohney v. Reed, 40 Mo. App. 99, as to introducing matter in reply which belongs to the petition.
VIII. There is no finding in the decree, nor is there any evidence in the record to show that possession was taken of the Handley land by defendant. Indeed, under plaintiff’s contract with Handley, he had no right to take possession of that land until payment was made therefor. Besides, plaintiff requested McDowell to quit his borings on the land, which was done. Furthermore, the boring was done under a prevalent custom, and, unless it was shown to have been done in a manner referable solely to the alleged
IX. Something has been said in plaintiff’s' brief about the action of the Missouri Pacific Eailway Company’s owning the major portion of the stock in the defendant corporation, and having it held by Edwin Grould as its trustee, and thereby influencing the affairs of the latter corporation, falling under the ban of section 7 of ’article 12 of the constitution, which declares: “No corporation shall engage in business, other than that expressly authorized in its charter or the law tinder which it may have been or hereafter may be organized, nor shall it hold any real estate for any period longer than six years, except such as may be necessary and proper for carrying on its legitimate business.” However this may be, it is certain such a matter could not be taken advantage of in a collateral way, but must be investigated by the state in its sovereign capacity. Martindale v. Railroad, 60 Mo. 508; Kinealy v. Railroad, 69 Mo. 658; Hovelman v. Railroad, 79 Mo. 632, and cases cited. And, at any rate, the fact of disobedience to constitutional commands would afford no excuse for rendering a decree .against the property of the offending company, and against that of its trustee, Edwin Grould, without bringing them before the court, or giving .them an opportunity to be heard. An ordinary regard for fundamental principles of justice requires that no one should be passed upon, either in person or estate, without such opportunity aforesaid.
X. There are numerous other errors assigned and apparent on this record. It is unnecessary to notice or discuss them, since ample grounds have been shown why the decree should not be permitted to stand., It is accordingly reversed and the cause remanded, with' directions to the lower court to enter a decree dismiss