121 Mo. App. 451 | Mo. Ct. App. | 1906
This is an action in equity brought on behalf of a business corporation by one of its stockholders against its managing officers for an accounting and for the recovery of funds belonging to the corporation alleged to have been unlawfully diverted. A trial of the cause resulted in a decree in favor of defendants but the court sustained the motion for a new trial filed by plaintiff on the ground “that the finding and judgment was for the wrong party” and defendants appealed.
On or about July 1, 1897, plaintiff (then Miss Belle Butler) bought 331-3 shares of the capital stock of the Montgomery Grain Company of the par value of $100 per share and paid par therefor. This company had been incorporated in 1892 as a business corporation. Its capital stock was $10,000 divided into one hundred shares and the purpose for which it was created was to engage in the grain business in Kansas City as a commission dealer. When plaintiff purchased the stock mentioned the company was in the enjoyment of a large •and profitable commission business and its assets exceeded liabilities by more than $10,000 the amount of its capital stock. Its managing officers were P. H. Montgomery, president, W. N. Montgomery, secretary, and H. S. Downs, vice-president. All of the stock, except
After this plaintiff who was at the time indebted to the company on a note of about $100 presented the certificate; offered to pay the amount of her debt and requested the Montgomerys to issue a new certificate to her in her own name. This request was refused, except on condition that plaintiff discharge the debt Downs was owing to the company. Thereupon plaintiff about July 1, 1898, brought a suit in equity against the corporation and its officers, the principal object of which was to establish her status as a stockholder and to obtain proper recognition as such by the officers of the company Avithout first being compelled to pay the Downs indebtedness. Plaintiff in that case was unsuccessful in the circuit court, but on appeal we held she was entitled to a transfer of the stock on the books of the company and that no lien existed thereon for the DoAvns indebtedness and reversed and remanded the judgment. [Butler v. Montgomery Grain Co., 85 Mo. App. 50.] Judgment afterwards Avas entered in favor of plaintiff in accordance Avith the mandate and to comply therewith the defendants on August 10, 1900, caused a new certificate for the stock to be issued and delivered to plaintiff.
On September 5, 1900, the stockholders of the company held a meeting for the purpose of electing a director to fill a vacancy on the board. The two Mont
The relief sought is predicated on various wrongful acts alleged to have been perpetrated by the Montgomery brothers in the management of the business and plaintiff as a reason for bringing the suit in her own name alleges that as they “are a majority of the board of directors of said grain company and hold a majority of the stock of said grain company it would be a useless and idle ceremony to request said directors to institute this action in the name of said grain company and that plaintiff is therefore compelled to bring this suit in her own name in behalf of said corporation and to make said grain company a defendant herein.” The facts in proof sustaining this averment are undisputed. When the suit was brought the Montgomery brothers owned two-thirds of the capital stock of the corporation; they were two of the three directors, one was president and the other secretary and as they are charged with having injured the artificial creature — the corporation — by misusing its funds obviously the corporation as such was powerless to act for its own protection.
Shortly after this action was begun the court at
In October, 1897, a few months after plaintiff bought her stock a corporation called the Traders Grain Company was created and at once succeeded to the business of a concern called the Thayer Commission Company. Nominally the business of these organizations was that of 'commission dealers in grain but in reality the business conducted by them in Kansas City was what is commonly termed a “bucket shop.” P. H. Montgomery was an incorporator of the Traders Grain Company; owned one-fourth of its stock and gave its business much time and attention. From about the first of 1897 to 1900 the Montgomery Grain Company was a steady customer first of the Thayer Commission Company and then of its successor, the Traders Grain Company. Many thousand of bushels of grain were bought and sold in the numerous' transactions had but in no
The whole account between the Montgomery Grain Company and the Traders Grain Company and its predecessor is made up of gambling deals and the aggregate losses sustained by the Montgomery Company over its profits was $1,293.39. Similar losses resulting' from dealings with another concern of the same character totaled $847.20 making the entire loss from gambling transactions $2,140.59. That -the use of the funds of the corporation by the two Montgomerys for speculations of
Plaintiff complains of excessive and illegal salaries paid the Montgomerys for their services as officers of the company. When plaintiff purchased her stock P. H. Montgomery was drawing a salary of $125 per month and W. N. Montgomery $100 per month. Both were giving their entire time to the management of the business. A by-law limited the amount of salary that could be paid to an officer to $125 per month. On the first of December, 1897, the two Montgomerys held a meeting of the board of directors at which they were the only ones present and passed a resolution raising the salary of P. H. Montgomery to $175 per month and of W. N. Montgomery to $150 per month. Conceding that the directors meeting was legally called and held its act in attempting to increase the salaries of officers beyond the limit prescribed in the by-laws was ultra vires and void to the extent of such increase. The directors did not attempt to repeal or amend the by-laws and if they had their act would have been unavailing since no such authority was conferred on them either in the charter or by-laws and without it the sole power to amend the by-laws was vested in the stockholders. Acting under this resolution P. H. Montgomery was paid $50 per
Defendants argue that no recovery should be permitted on this item because the by-law was not pleaded .in the petition. It is alleged that these officers “unlawfully and illegally appropriated to and converted to their own use as salaries large sums of money belonging to said grain company,” etc. Defendants were advised that .they would be called on to meet the issue' of excessive and illegal salaries and the averment is sufficient to raise that issue without the pleading of the by-law.
The two items considered, i. e., the losses from speculation and from the payment of illegal salaries do not account for the loss of the entire assets of the corporation but on the showing made by plaintiff they are the only ones for which a recovery should be enforced against the estates of the Montgomerys in favor of the corporation. In the management of these artificial bodies much latitude must be accorded to the owners of the majority interest. They have the right to dictate and pursue in their own way the policy of the corporation and so long as they act in good faith and their acts are intra vires courts abstain from exercising supervision over them. In an action such as this brought by a minority stockholder the onus 'is on the plaintiff to show that the corporation has been injured by the legal turpitude of its managers. Proving that injurious results have followed a merely injudicious management will not suffice to create a liability. Tested by these principles the evidence discloses no other acts of misconduct.
The other losses suffered by the corporation appear to have resulted from a combination of several causes chief among which was the publicity given the litigation waged by plaintiff. We are not intimating that plain
It is urged by defendants that- the judgment in the former suit is an adjudication of the matters involved in the present controversy. It is true plaintiff in the petition in that case alleged misconduct in the management of the business and asked that the Montgomerys be compelled to make an accounting to the corporation and to restore to its treasury the losses incurred through their mal-administration, but the only issues litigated in that case were those relating to plaintiff’s status as a stockholder. Plaintiff Avas asking that the stock she OAvned be transferred to her on the books of the company while in the cross petition the defendant corporation sought to foreclose an alleged lien on the stock for the Downs indebtedness. It apparently was conceded that until plaintiff could establish in that action her
At no stage of the proceeding ivas any issue before us in the present suit treated as an issue in that case. Defendants concede these matters were ignored and. treated as abandoned in that suit but invoke the rule as stated in Donnell v. Wright, 147 Mo. l. c. 647, that “The plea of res adjudicata applies except in special cases not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and.which the parties exercising reasonable diligence might have brought forward at the time.” The intolerance expressed by the authorities of the practice of splitting a single cause of action and making each part the subject of a separate suit is based on the maxim of the common law that no one ought to be twice vexed for the same cause and is in the interest of peace and good order. In the application of the principle courts treat all issues that properly relate to the cause of action litigated as concluded by the judgment though some of such issues in fact may not have been referred to either in the pleadings or evidence. But as the St. Louis Court of Appeals observed in the case of Barkhoefer v. Barkhoefer, 93 Mo. App. 381, “the judgment in the first case enjoys no such prerogative if the second action is for a different cause of action from that contested in the first one.”
In the present case the cause of action asserted is entirely different from that contested in the former suit. There the action belonged to plaintiff in her own right and its object was to place her in a position where she could exercise the rights of a stockholder. Here she is acting as the representative of the corporation and all of its members and is seeking to enforce a right belonging to the corporation.^ It is apparent that not only
It follows from what we have said that the estates of the two Montgomerys should be held liable for the sums lost in speculation and wrongfully disbursed in the payment of excessive salaries. Interest should be allowed, on each item from the date of conversion.
As this is a suit in equity and the issues have been thoroughly contested, no necessary nor useful purpose would be served in compelling the parties to retry the cause. The judgment is reversed and the cause remanded with directions to enter judgment in accordance with the views expressed.