183 Mo. App. 8 | Mo. Ct. App. | 1914
This is a suit for money advanced to the use and benefit of defendant’s predecessor, the American Bankers’ Assurance Company, incorporated under the laws of Missouri. The finding and judgment were for defendant, and plaintiff prosecutes the appeal.
Defendant, American Bankers’ Assurance Company, is a corporation- organized and existing under the laws of the State of Delaware and appears to be a mere continuation of the prior company by the. same name which was organized under the laws of Missouri and to whose benefit plaintiff advanced the money here sued for.
Plaintiff, Samuel Quinn, together with John B. Christensen, H. A. Yrooman and Ernest A. P’eters promoted and organized the American Bankers’ Assurance Company,.which was incorporated under the laws of Missouri on October 1, 1909. The object and purpose of the company was to insure depositors in banks against loss, and the home office was located in the city of' St. Louis. By the charter of the company, its capitalization was authorized at one million dollars, to be divided in as many shares of stock, of the par value of two dollars per share; one-half of which amount to constitute a surplus fund. The evidence is conclusive, and, indeed, it seems to be conceded, that the four persons named—that is, plaintiff, Quinn, Christensen, Yrooman and Peters—agreed among themselves to advance equal portions of such an amount of money as was necessary to organize and launch the company, the amounts so advanced by each to be repaid them by the company after it came into
Immediately after the incorporation, and after Christensen’s election as vice-president and general counsel, he, with the knowledge and consent of all of his associates, expended several thousand dollars in advertising" the company, getting out literature, pro
Plaintiff’s business in Oklahoma in connection with the Mid-Continent Insurance Company made such demands upon his time as to render it impossible for him to become actively identified with the American Bankers’ Assurance Company, and because of this he elected to withdraw and take compensation in money rather than in stock for the amounts so advanced. To this end, he wrote Christensen a number of letters and also visited him and urged the payment of his claim in money. Christensen wrote plaintiff several letters putting him off from time to time, but all of which acknowledged his claim as a valid one, and in one letter Christensen 'suggested that he would take stock in the company on account of plaintiff’s claim and pay plaintiff the money himself. Plaintiff answered this letter promptly, to the effect that he did not care who paid him the money, but he did not want stock in the company, and he would not give his consent to “shifting” the claim from the company to Christensen, but looked to the company for its payment. It appears that Christensen reported the mat
During the month of January, 1910; some change was made in the officers of the company, and Mr. IT. M. Ruby became its president and Mr. A. C. Landon, secretary and treasurer. These gentlemen were also members of the executive committee. Finally plaintiff insisted that he should be repaid, not only his $1000 but $14 interest accumulated thereon, as well, and thereupon, on April 22,1910; Mr. John B. Christensen, vice-president and general counsel of the company, presented this claim to the executive committee, by which it was ratified, and 507 shares of stock of the company, at two dollars per share, of the par value of $1014, were issued to John B. Christensen in payment thereof. It is said that Christensen informed the executive committee that plaintiff did not care to have stock issued in his own name, and, therefore, requested it should be issued in the name of Christensen, but in payment of plaintiff’s claim, and that Christensen would hold it in' trust for him. Both sides reveal the
Plaintiff says he knew knothing about this transaction at the time, and that he did not authorize Christensen to take the stock for him, but insisted at all times upon having the money to recompense the advances made by him to the use of the company. Christensen says that he had no authority to represent plaintiff in respect of that matter, except to insist upon the company paying him the $1014, which he claimed, and that the 507 shares of stock issued on April 22 to him were not issued for plaintiff at all. Touching the transaction by which Christensen disposed of this stock in July thereafter, Christensen says that it was sought to equalize the stock holdings in the company between himself and the other active officers—that is, Messrs. Ruby, Landon and Peters. To this end, he sold and transferred nineteen shares of this stock for $38 to A. C. Landon, 169 shares for $338 to E. A. Peters and
Prom what has been said, it is obvious the real controversy in the case pertains to the matter of Chis-' tensen’s agency, if any, for plaintiff, in settling the claim against the company, for it appears to be conceded that plaintiff in the first instance advanced the money to Christensen, his co-promoter, for the use of the corporation and that the money was so employed by Christensen. Thereafter the company recognized an obligation to compensate plaintiff for these advances made to Christensen for its benefit, and, according to all of the evidence on both sides, save that of Christensen alone, who testified as plaintiff’s witness, the company ratified Christensen’s act in inducing plaintiff to advance the money for the use of the company and adopted the transaction as creating a debt against it, on April 22, 1910, when it issued 507 shares of stock to Christensen for plaintiff in payment thereof. It is true plaintiff’s witness, Christensen, says this stock was not issued to him for plaintiff, but he also says that the officers of the company at all times recognized an obligation on its part to pay the debt, but deferred it, and that the stock issued on April 22 was issued to him personally for an independent
Though it be that $150' of the amount sued for was advanced by plaintiff to Christensen for the use of the company in the latter part of September, 1909', a few days before its actual incorporation, there can be no doubt that it was competent for the company, after its incorporation and the election of officers, to ratify Christensen’s act in procuring this advancement and using it for the benefit of the company which subsequently came into existence. Touching this advancement made before the actual incorporation, the rule is, that although the corporation can incur no liability until it has an existence—that is, until the breath of corporate life is infused into it—for that, until then, it may have no authorized agent to enter into contracts, it may nevertheless subsequently, when the organization is complete, adopt obligations created for its benefit by the promoters. In this view, it is said by Judge Thompson, in his valuable work on Corporations, Yol. 1 (2 Ed.), Sec. 96, that “When the organization is complete and its managing officers duly selected, it may then adopt the contracts made by the promoters or corporators and make such contracts its own. The rule now obtains almost universally, that when a corporation adopts or ratifies a contract made by its promoters for and on its behalf, it becomes liable thereon. This liability is held to be, both at law and in equity, not merely for the benefits received, but on the contract itself. The adoption of the contract is on the theory that the contract made by the promoters is a continuing offer on the part of the other party to the contract, unless withdrawn by him, and that it may be accepted and adopted by the corporation after its organization.” [See McLaughlin v. Concordia College, 20 Mo. App. 42, 46, 47; Hill v. Gould, 129 M,o. 106, 130 S. W. 181.]
Much is said by defendant about the fact that these advancements were credited in the books of the State Investment Company, of which Christensen was an officer, as if the advancements were to it, but this is wholly beside the case. It appears the State Investment Company was a corporation organized by Christensen and some other parties with a view of selling the stock of the American Bankers’ Assurance Company; but this plaintiff was neither a stockholder nor officer in that concern. It is true plaintiff originally intended to become a party to a stock-selling contract with the American Bankers’ Assurance Company, and it may be that the stock was to be sold through- the agency of the State Investment Company, but plaintiff abandoned this idea entirely and entered into no contract whatever, for the reason that his duties in connection with the Mid-Continent Life Insurance Company forbade him. However all of this may be, the evidence relating to the State Investment Company and the purpose to sell the stock of the American Bankers ’ Assurance Company through it is wholly immaterial, in view of the fact that it appears the American Bankers’ Assurance Company ratified the transactions
Touching this matter, there is no controversy in the case save that pertaining to the matter as to whether or not Christensen was authorized to receive the 507 shares of stock issued to him for plaintiff, and as to this plaintiff says he was not and so, too, says Christensen. While, on the other hand, it is insisted on the part of defendant that Christensen was the agent of plaintiff in that transaction. The court did not submit this issue of the fact to the jury in proper form but instructed at the instance of defendant as follows:
“The court instructs the jury that if they find and believe from the evidence that the sums of money alleged to have been paid by plaintiff in this case were paid to the witness John B. Christensen, to be used by him, or to reimburse him for expenditures that he had made in the organization of the American Bankers ’ Assurance Company of Missouri, and they further find that said Christensen made said expenditures in his name, and that he received from the said American Bankers’ Assurance Company of Missouri money or stock as an equivalent for said sums of money al*21 leged to have been, advanced by plaintiff then yonr verdict should be for the defendant.”
The instruction is erroneous, for there is abundance of evidence in the record tending to prove that Christensen was not the agent of plaintiff to receive the stock of the company in payment of the advances made by him. It is true plaintiff mailed his several checks to Christensen when the advances were made and it is true, too, that Christensen used this money for the benefit of the corporation, but this is not conclusive evidence to the effect that Christensen was plaintiff’s agent at all times .thereafter, so as to conclude him by an act of Christensen in accepting stock in settlement of the debt. The instruction authorizes a finding for defendant upon its appearing to the jury that plaintiff paid the money to Christensen, either to be used by him or to reimburse him for expenditures he had made in the organization of the company, provided the jury further found that Christensen made the expenditures in his name and thereafter received stock or money from the company equivalent thereto. This would seem to assert, when considered in connection with the facts of the case, that the mere fact Christensen paid out plaintiff’s money as if expending it himself—that is, by his individual check or it may be through the State Investment Company either—concludes the matter of his agency for the purpose of receiving stock from the American Bankers’ Assurance Company to reimburse plaintiff, or rendered the debt one in favor of Christensen personally. Obviously such is not the law of the case, for at' the time when the stock was issued to Christensen, plaintiff was a mere outsider and Christensen was vice-president and general counsel of the American Bankers’ Assurance Company. Moreover, all of defendant’s officers knew the money in suit, though expended for the company by Christensen, was actually advanced by plaintiff and that the indebtedness on that account
While both plaintiff and Christensen testify pointedly to the effect that Christensen was not the agent of plaintiff to collect this debt from the American Bankers’ Assurance Company or to receive stock therefor, there is much in the evidence from which the jury may infer, if it sees fit to do so, that Christensen was such agent at the time. It appears the two men were intimate friends and had been for some time and that plaintiff sent his several advances to Christensen to be used originally for the benefit of the company. Thereafter he persistently urged Christensen to cause' the company, in which he was a dominant figure, to repay him. But defendant elicited and introduced correspondence between the parties which tends with great force to show that plaintiff was not willing to trust Christensen to receive payment of his claim through an issuance of stock to Christensen for him. Indeed, when Christensen wrote suggesting that he would take stock from the company and personally assume plaintiff’s debt, plaintiff immediately replied that he would not consent to any “shifting” of the debt, but insisted on the company paying him, and all of this correspondence was had at a time when Christensen represented the company as its vice-president and general counsel. Obviously the question concerning
“The courtiinstructs the jury that your verdict will be for the defendant unless you find and believe from the evidence that plaintiff advanced the money sued for to the American Bankers’ Assurance Company of Missouri, and unless you so find, your verdict will be for the defendant, and you are instructed that the payments or advances to the witness Christensen, unless said advances were paid to the Missouri company with the knowledge of the company or its officers that they were made by plaintiff and so accepted are not and do not constitute payments to said company.”
This instruction inheres with error, in that it is highly misleading, for it tells the jury the finding should be for defendant unless the money was advanced by plaintiff to the American Bankers’ Assurance Company of Missouri, and that the payments to Christensen were of no avail unless they were paid to
The third instruction, which, together with those discussed, includes all given on the part of defendant, is likewise an improper one and should not have been given. It is unnecessary to discuss it.
But it is argued, though it be that the amounts mentioned were advanced for the benefit of the American Bankers’ Assurance Company, incorporated under the laws of Missouri, and that company subsequently ratified the acts of Christensen and became obligated to plaintiff on that account, no recovery may be had against the present defendant, the American Bankers’ Assurance Company of Delaware, The facts
In connection with this transaction, the officers prepared what is termed in the evidence as a declaration of trust and spread it upon the corporate records of the Delaware company, to the effect that they subscribed for and took fhe stock in the Delaware company in trust for the stockholders of the Missouri company. Thereupon all of the stockholders in the Missouri company were notified that, upon the surrender of their stock in the Missouri company, like stock in the Delaware corporation in the same amount and of the same value would be issued to them instead. About ninety per cent of the stockholders of the Missouri corporation accepted the proposal, surrendered their stock in the Missouri company, and took stock in the Delaware company in lieu of it.' About ten per cent of the stockholders in the Missouri company declined to participate in the new company and, therefore, surrendered their stock in the Missouri corporation upon receiving their pro rata portion of the assets of the company, which was paid them therefrom. All of the officers of the Missouri company
From these facts, it appears that this change of corporate entity amounted to no more than a physical moving of the Missouri corporation to the State of Delaware, if such were possible under the laws and the intangible character of corporate existence. However, it does not appear that the Missouri corporate entity was dissolved or ceased to exist, unless it be that the franchises granted to it became forfeited because of abandonment and non-user. But it is certain that the Missouri corporation was entirely denuded of its assets and that the Delaware corporation, having accumulated like franchises in that State to pursue the same calling, took them upon a mere exchange of stock with the stockholders in the prior company and upon payment of the pro rata part of the assets to the few stockholders who desired to retire. All of the defendants’ officers who spoke on the subject at all refer to the matter as a merging of the Missouri company into the Delaware company or as a continuation of the business of the Missouri company through another of the same name organized in Delaware. There is no controversy about the facts as to what was done with respect to this matter or as to how it was done, for all of the witnesses describe it alike.
It is obvious that there was no sale here in the sense of that term by one corporation of its business to another. There was no transaction between the companies as entities, and nothing^was paid or passed from the one to the other as such, though the stoekhold
Such manoeuvering, when sought to be invoked on the part of the successor to' defeat the rights of creditors of, the prior company, is regarded both in law and equity as constructively fraudulent. and are ever so declared. This is true because to permit the new company, which amounts to no more than a continuation of the old, to denude the old or debtor company by thus taking over and enjoying all of its assets without answering, for its debts and without giving any valid tangible consideration therefor, which may be looked to by the creditors of the old company, entails a fraud upon such creditors not tolerated in either jurisdiction. [See Hibernia Ins. Co. v. St. Louis, etc. Transp. Co., 13 Fed. 516; Berthold v. Holladay, etc. Co., 91 Mo. App. 233; Powell v. North Missouri R. Co., 42 Mo. 63.] The cases last cited deal with the principle in equity hut the rule obtains alike at law when it appears as it does here that the new corporation is in substance nothing more than a continuation of the old one, for in such circumstances the assets and business of the prior company are not only taken over cim onere according to the principle in equity by the new corporation, but it—that is, the new legal entity —is treated in fact and in law as the same company continuing to exist as' before. [See Coffey v. Nat’l
For the reasons above pointed out, the judgment should be reversed and the cause remanded to, try the issue pertaining to the authority of Christensen to represent plaintiff in the matter of the stock transaction of date April 22, 1910'. It is so ordered.