165 Mo. 469 | Mo. | 1901
Plaintiff’s petition is a statement of his case.
In substance, it avers that the plaintiff, prior to February, 1881, owned practically all of the five hundred shares of the stock of the Choctaw Coal & Mining Company, said shares being of the par value of $100 each. That this company was engaged in the mining of coal in the Indian Territory and had expended large sums of money for machinery, tools, equipments, etc., in the prosecution of its operation. That the policy of the Missouri Pacific Railway Company, which then owned and operated a railroad extending from .the city of Hannibal in Missouri, through the State, crossing and connecting with its main line at the city of Sedalia, into - and through the said Indian Territory and near the coal lands of the Choctaw Coal & Mining Company at Savanna in said Territory, was to acquire control of all the coal lands and coal mines and to monopolize the coal business whenever and wherever it could do so, especially the so-called coal lands in the Indian Territory, and, to carry out its purpose, it employed co-defendant, E. J. Crandall, to look into, examine and report upon the character and extent of the coal fields in the Territory. That, in the year 1881, the said Crandall, in furtherance of the purpose of the railway company, went to the Indian Terri
In the early part of the year 1881, the Missouri Pacific Railway Company and A. A. Talmage, its general superintendent and manager, James A. Ilill, its general freight agent, and E. J. Crandall, formed a conspiracy to obtain the control and possession of the stock and mining property of the Choctaw Coal & Mining Company, and to that end proposed to plaintiff in February, 1881, that the capital stock of said mining company should be increased to $100,000, the $50,000 of new stock to be issued to the plaintiff who should sell the same, with $16,000 of the original stock, to defendants, who were either to pay him in cash therefor or expend an amount of money equal to the par value of the stock in improving the mines belonging to the Choctaw Coal & Mining Company and securing transportation facilities for their output, and that the number of directors, of which defendants were to form a majority, was to be increased from three to five. The plaintiff accepted the proposition so made and the capital stock of the Choctaw Coal & Mining Company was increased to $100,000 and the new stock of $50,000 and $16,000 of the old stock were turned over to Talmage, Hill and Crandall (who were elected directors in pursuance of the agreement), and to the railway company.
That, thereafter, Talmage, Hill and Crandall and the railway company caused to be incorporated, under the laws of Illinois, the Atoka Coal & Mining Company, one of the defendants herein, with a capital stock of $500,000, comprising five thousand shares of $100 each. That the subscribers for the Atoka stock were: J. N. Patton, C. M. Hays, A. A. Talmage, J. A. Hill, L. S. "W. Folsom and E. J. Crandall; the said Patton, Hays, Talmage, Hill and Folsom subscribing for fifty shares of stock each, and E. J. Crandall for four thousand, seven hundred and fifty shares. That no part of the subscription of 4,750 shares, the par value of which amounted to
That, from the year 1881 to the year 1887, the mines of the Choctaw company were worked at a monthly profit of $5,000, and that such profits were expended by Tahnage, Hill and Crandall, under the direction of the railway company, in the development of the mines of the Atoka company; and such of said profits as were not so expended, were wrongfully and fraudulently converted to the use of the railway company and said other parties, to the damage of plaintiff in the sum of $550,000.
That Talmage, Hill and Crandall were employees of the railway company and committed the fraudulent acts stated at its dictation and for its, as well as their own, benefit. That all of these acts and things were done by the railway company, Talmage, Hill and Crandall, without the knowledge of plaintiff, and so secretly as not to put him on notice thereof. That he was kept in ignorance as to the wrongful and fraudulent acts of the parties aforesaid until about January 4, 1890, when disclosures were made by Crandall and Hill in a certain suit instituted by said Hill against the Atoka Coal & Mining Company in the circuit court of the city of St Louis, Missouri, to recover a dividend claimed to have accrued on a number of shares of the stock of the Atoka company held by him.
The petition contains the following averment:
“Plaintiff further says that, under the facts and circumstances of this case, as they have come to his knowledge, since the institution and trial of the said suit of the defendant, James A. Hill, against the Atoka Coal & Mining Company,*481 in the circuit court of the city of St. Louis, State of Missouri, at its June term, 1891, he could not procure the said Choctaw Coál & Mining Company to institute this suit or to take any action whatever against the other defendants, because each and all of them were, themselves, the actors in the perpetration of the many wrongs and injuries against the plaintiff herein alleged and complained of, and any such action and proceedings would be against themselves; that plaintiff has made no request or demand of them, or the said Choctaw Coal & Mining Company, or its said stockholders or directors, to institute this suit or to take any action whatever in the premises for the said reasons, and for the further reason that the said defendants have had, and still have, the absolute control of the said Choctaw Coal & Mining Company, all. its property, business, books, papers, records and accounts, and, having wrongfully, willfully and fraudulently converted all its moneys, property and assets of every kind and character to their own uses and purposes, as before stated, it is not reasonable to expect or safe to rely upon them, or any of them, to institute, or prosecute if instituted, any suit against themselves, or to take any action looking to restoring to the said Choctaw Coal & Mining Company, or to this plaintiff, any part of the money, property or assets belonging to him.”
The answers of defendants, Crandall, the Missouri Pacific Railway Company, and the Atoka Coal & Mining Company, are general denials.
The answer of James A. Hill is as follows:
To the new matter set up in the last answer, the plaintiff bled a replication.
The cause was tried at the April term, 1897, of the circuit' court of the city of St. Louis, the bill dismissed and judgment rendered for all the defendants. Plaintiff appeals.
Out of the voluminous record which the modern system of stenographic reporting has imposed upon us, we glean the following substantive facts, and material evidence.
The plaintiff was a citizen of .Hannibal, Missouri, and a man of large business experience, particularly in operating coal -mines, in the neighborhood of Bevier in this State. In the year 1880, the Choctaw Coal & Mining Company was organized and created a corporation under the laws of Missouri, with its principal office at Hannibal, Missouri. The plaintiff, L. I. Loomis and M. L. Pierson were its original incorporators and stockholders, the plaintiff owning all of the original five hundred shares except a few shares owned by the other two. In 1880, at the cost of some fifteen hundred dollars, plaintiff became the owner of a lease of some coal lands at Savanna in the Indian Territory, upon which a slope had been opened. This lease is indiscriminately mentioned in the testimony as the Haley, Pusley & Hill claim, or as Savanna No. 1. The lease was dated January 8, 1880, for one year, with a privilege of renewal for ninety-nine years. The rental was to be paid on the basis of royalties for the coal mined. The personal property purchased with the lease consisted of a gin (a primitive device for getting coal to the surface), several miner’s cabins, some nine houses, a barn and some mining cars. The plaintiff claimed also to have at that time an optionfor a lease on certain other property known as the Eolsom & Morris claim, situated near Atoka in the Indian Territory,thirty-five miles distant from Savanna. This option was for
The Atoka Coal & Mining Company was organized on' the fourteenth of March, 1881, under the laws of Illinois, with a capital stock of $500,000, divided into 5,000 shares of the par value of $100 each. The original shareholders in this company were: J. N. Patton, 50 shares; A. A. Talmage, 50 shares; Charles N. Hays, 50 shares; James A. Hill, 50 shares; L. S. W. Eolsom, 50 shares; and E. J. Crandall, 4,750 shares. 'These shareholders, with the exception of Eolsom and Crandall, were officers and employees of the Missouri Pacific Railway Company. Of the shares of stock held by Crandall, he transferred 2,500 shares to James A. Hill on July 1, 1881,
The remainder of the trustee stock was transferred to tire Missouri "Pacific Railway Company, July 27, 1881, in payment of switches, etc., built and furnished by said company. Of the balance of the stock held by Crandall, 1,500 shares were transferred to the railway company, and upon this stock the railway company paid an assessment of $25 per share as did all the other shareholders of the stock held by them, except those who had purchased from Hill, they having paid $30 a share for their stock, and Crandall who refused to pay the assessment. So that up to June, 1882, the stockholders of the Atoka company had paid into its treasury $126,800.
Returning now to plaintiff and his company. In 1881, it seems that Crandall and plaintiff had a talk about his mining property in the Territory, in which Crandall told him the railway company, which at that time was operating the Missouri, Kansas & Texas railroad, which ran near Savanna, was desirous of getting coal property along its route and proposed to plaintiff that he increase the stock of the Choctaw company from $50,000 to $100,000 and transfer $50,000 of the new stock and $16,000 of that already held by plaintiff, making $66,000 in face value, to Crandall, Hill and Talmage for the Missouri Pacific Railway Company, and they would put in that amount in the way of improvements, engines, hoisting apparatus, etc., and would put in a side track. As a result of these negotiations plaintiff caused the stock of the Choctaw Coal & Mining Company to be increased to $100,000 and the number of directors increased from three to five. Pier-son resigned as a director and Crandall received ten shares of stock and was elected in place of Pierson. Thereupon plaintiff turned over to Crandall, Hill and Talmage two-thirds of the stock of the Choctaw Coal & Mining Company,
According to Crandall, the railway company was not to pay plaintiff money for the stock, but he was to be compensated by the greatly increased output of the mine. The Atoka company would build up the property and ho would get his pay by the enlarged operations of the company. And plaintiff corroborates this account of the transfer except that he says that his stock was not to share in the expense of the improvements, whereas, Crandall says the improvements were to be paid for by the Choctaw company, the stock bearing its proportionate part thereof. The only property worked by the Choctaw company was the mine known as Savanna No. 1, the Hailey-Presley-Hill claim.
It is clear that whether plaintiff had an option on the Folsom & Morris and O’Hebert claims or not, the options expired before they ripened into leases, and the Choctaw company had no interest in them when the Atoka company was chartered, and both, according to Major McDonnell’s evidence, subsequently proved to be utterly valueless as coal mines. As already said, it is too clear for argument that plaintiff had neither an option nor lease in the Davis tract.
The Savanna mine No. 1, was operated subsequently by the Atoka company, Talmage, Hill and Crandall having transferred the $66,000 stock of the Choctaw company to said Atoka company. The Savanna mine was operated until 1887, when an explosion occurred which killed sixteen miners, de
The plaintiff was the first president of the Choctaw company and up to the time of the trial in this case was the only president that company ever had. As early as June 15, 1881, he knew that the Atoka company was operating “the Choctaw company’s mines at Savanna, Indian Territory,” and that the Atoka company was operating its own mines at Atoka and Savanna. Erom the beginning of the operation by the Atoka company of the Choctaw property, the superintendent of the Choctaw company, Job L. Chapman, was the superintendent of the Atoka company, until the end of 1881, when he severed his connection with the company. Mr. D. H. White, who was a cousin of the wife of plaintiff, was in the employ of the Choctaw company from the fall of 1880 until the Atoka company took charge of the property of that company, and then he entered the employ of the Atoka company and continued in the employ of that company for some two and one-half or three years later. He kept the payrolls and kept the coal and railroad accounts. He exchanged letters with the plaintiff while he was in the Territory. In 1883, when he left the employ of the Atoka company, he went to Bevier, where he entered the employ of plaintiff. He did not return to the Territory after that. He made a statement of the condition of affairs in the Territory to Mr. Loomis about “a year after he returned to Bevier, perhaps two,” because Mr. Loomis told him he wanted to get what was his due. Crandall, upon whom Mr. Loomis seemed to rely for information, severed his
This suit was commenced October' 6, 1891, more than ten years after the alleged absorption of the Choctaw Coal & Mining Company by the Atoka Coal & Mining Company.
I. At the threshold of this case, we are met with the objection that the plaintiff can not maintain this action, as he endeavors to do, in his individual capacity. It is obvious that plaintiff is seeking to work out his alleged equities solely through his ownership of stock in the Choctaw Coal & Mining Company and the alleged wrongful and fraudulent appropriation of the assets of that corporation by the Atoka Coal & Mining Company. Whatever rights he has in the premises are predicated upon his ownership of stock in the Choctaw company. It is plain that if the Atoka company and its co-defendants were guilty of the fraudulent misappropriation and conversion of the Choctaw company’s properties, which he asserts, the injury and loss was to the Choctaw company and all of its stockholders and not to plaintiff only, and in such cases the general rule unquestionably is that the injured corporation must sue in its own name and an individual stockholder can not maintain the action. [Slattery v. Trans. Co., 91 Mo. 217; Hannerty v. Standard Theatre, 109 Mo. 305; Meyer v. Bristol Hotel Co., 163 Mo. 59; Hawes v. Oakland, 104 U. S. 450; Thompson’s Com. on Corps., secs. 4476-77.]
To this general rule of practice there are well-defined
It is true that plaintiff alleges that Hill, Talmage and Crandall were stockholders and directors in the Choctaw Coal & Mining Company, and controlled that company, and constituted a majority of the stockholders therein, but the proofs are that when the stockholders of the Choctaw company, on May 24, 1881, undertook to elect Hill and Talmage directors of said company they were not stockholders therein and could not be legally elected directors under the laws then existing, and in force when this suit was brought; and that they never at any time assumed to act as such, and under the evidence the plaintiff and his son, L. J. Loomis, are now and have ever been since the organization of said Choctaw company, a ma
Stripped of this allegation that Talmage, Hill and Crandall were the directors of the Choctaw company, the remainder of the petition discloses an attempt by an individual stockholder to recover from another corporation, moneys alleged to be due the corporation in which he is one of the stockholders, and that, too, when the records of the Choctaw company disclosed that plaintiff and his son constitute a májority of the board of directors, for, while the minutes of the meeting of the Choctaw company recite that Hill and Talmage were elected directors on May 24, 1881, it is conceded that they did not become stockholders in said company until June 30, 1881, and then only retained the stock long enough to transfer it, on that day or the next, to the Atoka company. There is no evidence that they were ever notified of their pretended election as directors on May 24, 1881, and it is certain that they never assumed to act as directors at any time, hence we say that the evidence shows that plaintiff and his son, at every period of the existence of the Choctaw company, constituted the majority of its board of directors and there was no obstacle in the way of their instituting this action in the name of the corporations for the alleged wrongs committed against that corporation and its stockholders. By his own averments plaintiff shows he never sought corporate action by his company; máde no attempt to call a meeting of its directory and made no request that this suit be brought and, hence, has not brought himself within the exception which he invokes.
Mr Justice Miller in Hawes v. Oakland, 104 U. S. 450, with his accustomed clearness and vigor, states the doctrine which met the approval of this court in Slatterv v. Transportation Co., in 91 Mo. 217, in these words: “But, in addition to the existence of grievances which call for this kind
Plaintiff’s allegations and proofs fall far short of the requirements of the rule thus announced and approved by this court, and his action must fail for this if no other reason.
II. But the circuit court held that plaintiff had been guilty of such laches as to prevent his recovery.
This action was commenced on the sixth of October, 1891,. and the acts which plaintiff states deprived the Choctaw company and plaintiff of the property, which that company claimed to have leased in the Indian Territory, were committed in the spring of 1881, more than ten years before the commencement of this suit. As already stated plaintiff was the president of the Choctaw company; he and his son constituted a majority of its directory; plaintiff was a man of large business experience.
On the fifteenth day of June, 1881, he received a letter from Crandall with the caption:
*491 “Atoka Coal & Mining Company,'
“Miners and Shippers of Coal.
“General Office, 100 N. Fourth Street, St. Louis.
“Operating Choctaw C. & M. Co.’s Mines at Savanna, Indian Territory; Mines at Atoka and Savanna, Indian Territory, on M., K. & T. Division of Missouri Pacific Railway.”
He says this was his first information that the Atoka company was operating the Choctaw property. In 1887 an explosion occurred in the Savanna mine which utterly destroyed it and killed sixteen of the miners, and the catastrophe was published throughout the country, and read by plaintiff.
As president of the- Choctaw company and as a member of its board of directors, the duty devolved upon the plaintiff to inform himself of the affairs of that company, and at least as often as once a year to advise the other stockholders of the condition of its affairs. This duty was imposed upon him by section 932 of the Revised Statutes of Missouri of 1879, and section 2774 of the Revised Statutes of Missouri of 1889, which provides: “The trustees or directors of the corporation shall keep correct accounts of their transactions, and have full statements of the condition of affairs of such corporation and a list of the stockholders and the number of shares held by each made out, and a copy thereof delivered or sent by mail to each of the stockholders as often as once in each year, at least ten days before the day of election.” He knew that his former superintendent, Job L. Chapman, was superintendent of the Atoka company until the end of 1881. His wife’s cousin, Mr. D. H. White, was in the employ of the Atoka company and keeping its books until 1883. He knew as early as 1884 that Crandall, his friend in the Atoka company, had severed his connection with that company in 1883. Crandall told him in 1884 that Hill and the railway company were operating the mines. He knew Hill, and was frequently in St.
The first step he took in the matter was in 1891, after he had read the testimony of Hill and Crandall in the suit of Hill against the Atoka company. To avoid the effect of this long delay in asserting his rights and the rights of the company of which he was president, plaintiff avers and testifies that he was ignorant of the fraud until 1890, when he heard the testimony of Hill and Crandall in the case of Hill against the Atoka company; that he had turned the property over to defendants as his trustees and they assured him it was being properly conducted, and he relied on them.
Keeping in view plaintiff’s position as president of the Choctaw company, and his duty to the stockholders of that company to protect their rights, his conduct is utterly inexplicable if he considered the Choctaw company’s interest in the mining property at Savanna of any value. When he learned in June, 1881, that this property was not being operated by his own company; that the Atoka company was in charge, the law and the plainest and simplest principles of ordinary business prudence dictated that he should ascertain by what authority a rival corporation had assumed to take charge and run said mine. Crandall’s letter gave him absolute knowledge that the Atoka company was operating the Choctaw mine in June, 1881, and yet as president he took no steps to fix the royalties his company was to receive; sought no accounting as to the improvements put in by the railroad company, but supinely sat in his office at Hannibal and made
No statement of the earnings of Savanna mine No. 1, or of either of the tracts on which plaintiff claimed to have an option, was demanded, even by letter, and no visit was by plaintiff made to the mines though they could be reached from Hannibal in a day by a direct railroad line.
In 1883 he was advised that Crandall had ceased his connection with the Atoka company and was told by Crandall that Hill and the railway company were operating the mines, and in 1885, "White, his relative, made him a statement, and yet he took no steps to realize anything. And finally, when the mine was utterly destroyed and all hope of further profit ceased, he still made no claim for an accounting.
Such indifference is unaccountable in one who seriously thought that he or the company of which he was president had an interest worth protecting. In the meantime, the slightest diligence, even if he had not actual knowledge thereof, would have disclosed to him that the Atoka company was carrying on an extensive business in coal in its own name and taking no account of any supposed rights of the Choctaw company in its earnings. If such conduct does not amount to laches on his part, then it would be difficult to define in what laches consists.
Under such circumstances, a plea of ignorance of what was transpiring openly before the whole world must receive little consideration. As an officer of the Choctaw company it was his plain statutory duty to have ascertained, at least once a year, the condition of its property and the state of its affairs, and if others were openly asserting title to its mines without right, to have instituted actions to preserve its rights.
In Norris v. Haggin, 136 U. S. 386, Mr. Justice Miller,
All of which applies with full force in this case. Plaintiff knew as early as 1881, in June, that the Atoka company was operating the Savanna mine in its own name. According to. his version of the arrangement with Crandall, the railroad company was to be at the whole expense of outfitting the mine, putting in the switches, the hoisting apparatus, etc., without charging his stock with any of the costs thereof. So that whatever the output, he was entitled to one-third of the value of the coal on board the cars and he knew that he could readily ascertain the amount shipped by inquiry. The mines were worked openly, and the Atoka company was receiving the proceeds, his share as well as its own, and continued to do so until the mine was destroyed in 1887. To say now he only discovered these things in 1890 is to say he blindly and persistently shut his eyes for ten years and was guilty of a palpable violation of his duty as president of the company under the statute.
Where discovery of a fraud is such an obvious duty and
The statute of limitations bars equitable as well as legal actions in this State (sec. 6775, R. S. 1889), with this distinction: when the relief sought is based upon an equitable right, then a court of equity acts upon its own inherent rules and will refuse to interfere where there has been gross laches or long acquiescence in the operation of adverse rights, even though the action may not be barred by the statute of limitations. [Per Sherwood, J., in Kline v. Vogel, 90 Mo. 247.]
The same doctrine was again announced in Kroenung v. Goehri, 112 Mo. 1. c. 648, in which it was said: “A court of equity will refuse relief where the party has slept upon his rights for an unreasonable length of time, and this, too, without regard to the statute of limitations. In other words, a court of equity will often refuse relief because of delay in bringing the suit, although the period of delay is less than that prescribed by the statute of limitations. The object of the rule is_ to encourage diligence and to discourage delay, by refusing equitable relief when the demand is stale, leaving the complainant to his remedy at law.”
So that in any view the plaintiff’s action is barred. If he knew of the acts of which he complains as early as June, 1881, he is barred both by his laches and the statute; if he negligently and persistently failed to make any inquiry, when the slightest investigation would have disclosed all he subsequently learned and when it was his plain statutory duty to do so, even within less than five years before he commenced this suit, then his laches bars his recovery.
The judgment of tire circuit court in denying him relief on the ground of laches, is fully justified by the evidence and is affirmed on that ground, as well as on the ground that plaintiff can not maintain this suit as an individual stockholder.
Judgment affirmed.