State ex rel. Wurdeman v. Reynolds

204 S.W. 1093, 275 Mo. 113, 1918 Mo. LEXIS 61

• Court: Supreme Court of Missouri
• Decided: June 28, 1918
• Status: Published

Opinion

WALKER, J.

This is a proceeding in prohibition against the judges of the St. Louis Court of Appeals, the Sterns Tire & Tube Company, William L. Burgess, Otto L. Menzing, Adam M. Joerder and Arthur E. Koerner.

A bill in equity had been filed in the circuit court of St. Louis County by Sherman E. Smalley and Ephrim S, Garrett, relators herein, against the corporation and the individuals who are respondents here. These respondents sued out a writ of' prohibition in the St. Louis Court of Appeals to prevent the hearing and determination of the said bill in equity. After the issuance of the preliminary writ of prohibition by the Court of Appeals, the action at bar was instituted to prevent further interference by the Court of Appeals with the suit in equity, on the ground of a lack of jurisdiction. The respondents’ answer was in the nature of a demurrer. Upon these pleadings, after argument, the case was submitted.

The bill in equity is set out át length in the petition for prohibition filed herein. The material allegations of same having been admitted by respondents’ demurrer, constitute the facts for the determination of relators’ right to a permanent writ. Such allegations therefore, as are necessary to an understanding of the case, and are determinative of the Court of Appeals’ jurisdiction, will be embodied in the statement of facts.

Hon. Gustavus A. Wurdeman is one of the judges of the circuit court of St. Louis County. The bill in equity was filed in his division of that court. When the writ of prohibition was sued out in the Court of Appeals he was named therein as one of the respondents. Hence, his appearance as one of the relators in the case at bar. The relators, other than Judge Wurdeman, are Sherman E. Smalley and Ephrim S. Garrett-Their interest in the proceeding is as stockholders in the Sterns Tire & Tube Company, the corporation respondent. Smalley owns 28 shares of the capital stock of same, and Garrett 55 shares. Each of these shares has a par value of $100, or a total value of $8300. It was to protect their respective interests as stockholders of said corporation that the suit in equity was instituted.

Of the respondents, Burgess is the president of the said corporation; Menzing is its vice-president and sales manager; and these two, with Joerder and Koerner, are the sole directors.

The corporation was organized in the State ol Delaware, with a capital stock of one million dollars, divided into ten thousand shares of the par value of $100 each. Soon after its organization, it was authorized to do business in Missouri. It maintains its chief office or place of business in St. Louis County, where it owns and occupies in the transaction of its business about four and one-half acres of land, with buildings thereon, and machinery, goods, wares, merchandise, books and papers, of the value of $25,000.

The petition or bill in equity charges at great length and with much particularity, that Burgess, the president, who is paid, as such, a salary of $10,000 per year, directs and dominates the other directors and thereby has the complete control of the business and affairs of the corporation; that the management of same by said Burgess and the other directors is characterized by deceit, fraud and waste, in disregard of the best interests of the corporation, and to the damage and irreparable loss of all its- stockholders, except its directors; that for a number of years the statements made by these directors of the business affairs of the corporation show that it is being conducted at a great loss during each month and year covered by the term specified, up to the date of the filing of said bill, and that it has no income except that arising from the sale of its stock. This is followed by the usual formal allegations of a lack of other adequate remedy, the necessity for the protection of all of the stockholders, of the appointment of a receiver, an accounting, and for such other and further orders, etc., as may be necessary within the authority of the court.

As is evident from the character of the pleading of respondents, the issuance of the writ herein, except incidentally, is not questioned on account of the technical insufficiency of the petition or bill. It is contended, in effect, that what it does show, rather than what it does not, constitutes grounds ample for the refusal of the writ.

The returns of the respective respondents, stated briefly according to their tenor, will most aptly illusstrate their attitude. The judges of the St. Louis Court of Appeals raise a question of. law solely in that they insist that said court is ■ rightfully possessed of jurisdiction to issue its writ against the circuit court of St. Louis County, and that the presiding judge of the Court of Appeals was acting within the jurisdiction of said court when he issued the preliminary writ of prohibition, and that such court has full and complete authority to hear and determine the same.

The other respondents, Sterns Tire & Tube Company, William L. Burgess, its president, Otto L. Men-' zing, Adam M. Joerder and Arthur E. Koerner, all of whom are directors thereof, for their return, demur to the petition, and writ of relators in that they say: first, that the matters and things therein stated are not sufficient in law or equity to entitle relators to the relief asked for in said petition or to authorize the issuance of the writ of prohibition by the Supreme Court; second, that the record in the prohibition proceeding in the St. Louis Court of Appeals, which relators here assail, does not disclose such facts as to bring the said proceeding within the jurisdiction of the Supreme Court, but that such record on its ;faee discloses that said cause is within the jurisdiction of the St. Louis Court of Appeals; third, that there is nothing before this court from or by which it is made to appear that the money value or “the amount in dispute” exceeds the statutory jurisdiction of the Court of Appeals; fourth, that, in the petition or bill in equity, filed in the circuit court of St. Louis County, which is the basis of this action, the plaintiffs therein pray that the said court require (1) defendants Burgess, Menzing, Joerder and Koerner to account to the defendant corporation for all moneys made by means of secret profits, as therein mentioned, for the benefit of the corporation and all of its stockholders; (2) that said Burgess, Menzing, Joerder, and Koerner be removed as officers and as directors of tile corporation and restrained from further conducting or interfering with its affairs, and (3) that a receiver he appointed for snch corporation. That said petition, or hill, presents no data for estimating the amount which might he derived, if any, if it were adjudged that an accounting on the part of the defendant directors he had, and there is no legal basis for estimating the value of any of the relief sought by plaintiffs in their petition. Bespondents, therefore, pray the preliminary writ of prohibition he discharged.

Jurisdiction I. - As to jurisdiction. The object here is not to obtain a money judgment. If so, the question as to the court entitled to cognizance in the determination ^is ease wollld he of easy solution, the terms of the Constitution being so plain and pertinent relative thereto, that the employment of other words in defining its meaning would be rendered unnecessary. While the Constitution confers power upon the Courts of Appeals, as well as the Supreme Court (Secs. 3 & 12, Art. 6.), to issue and determine original remedial writs, the line of demarcation between the jurisdictions of these respective courts in this regard is not defined. The general language employed in the Constitution has, therefore, rendered judicial interpretation necessary that the cognizance of these tribunals in cases of the character here under review may he rendered as nearly in harmony with ■ the court’s appellate jurisdiction as the difference in the cases may admit. The result of this interpretation, as attested by numerous cases, is that where relief is sought other than in the recovery of a money judgment, the value of the right necessarily involved, estimated-in money, will constitute the measure of jurisdiction. [Bates v. Werries, 196 S. W. 1. c. 1126; Bowles v. Troll, 262 Mo. 1. c. 382; State ex rel. E. L. & P. Co. v. Reynolds, 256 Mo. 1. c. 718.]

Buled otherwise, we would have presented the incongruous spectacle of the Courts of Appeals’ appellate jurisdiction being limited to $7500, and having no limit in applications for original writs. This was not intended by the framers of the Constitution; but, that these tribunals in the exercise of their respective jurisdictions, should be governed by the same standard in one class of cases as in others.

Here the value of the right of relators, necessarily involved, is that of $8300. The actual value of the tangible property, real and personal, of the. corporation, admitted by respondents. (State ex rel. v. Reynolds, supra), is $25,000. Leaving out of consideration the value of the capital stock other than that belonging to the relators, the definitely stated value of the right involved is far in excess of the jurisdiction of the Court of Appeals. The conclusion is therefore authorized, in harmony with the reasoning in the cases cited, and as definitely declared in State ex rel. Sale v. Nortoni et al., 201 Mo. 1, that “the Court of Appeals has no jurisdiction by original writ of prohibition to prohibit a circuit court from proceeding in a case where the appeal from a judgment in such case is to the Supreme Court.”

The result of this ruling, expressed in general terms, is, that while the Constitution gives courts of appeals co-equal authority with the Supreme Court in the issuance of original writs and in the superintending control over inferior courts, it. does not mean that the courts of appeals shall issue such writs, or have such superintending control, in cases in which the Supreme Court would have jurisdiction by appeal or writ of error.

Retíttonf II. The absence of jurisdiction of the Court of Appeals having been shown, there remain only 'subordinate questions for determination. It is rather timorously urged by respondents that the bill in equity upon which this controversy is based, while lacking definiteness of averment,-is not sufficiently comprehensive to authorize the trial court, in grafting the relief sought. We dov not agree with this conclusion. While we have not set out the bill in haec verba in the statement of facts, we have carefully examined the same in the light of apposite precedents, and while it abounds in words, and, as a consequence, is unusually lengthy, it contains all of the necessary allegations to entitle the plaintiffs, upon adequate proof, to the relief prayed for. In view of this conclusion, a review in detail of the respondents’ objections in this regard, would be profitless and serve only to unduly lengthen this opinion.

of ^oreigif corporation, III. It is urged that a foreign corporation doing-business in this State is immune from the supervising-control of a court of equity. There is no mer^ this contention. This corporation not only lias its chief office and principal place of business in this State as well as all of its tangible property, but its directors and other officers reside here. Other than its creation in a foreign State, its attributes, functions and activities are the same as those of a domestic corporation. Under this state of facts, the contention is attenuated that it should not be subjected to the supervision of our courts in the same manner as are domestic corporations.

The relief sought by relators as plaintiffs below, as applied to a domestic corporation, is well within the purview of a court of equity. A cogent reason exists for the denial of such relief when asked in the supervision of a foreign corporation where the facts are such that the decree, if rendered, is impossible of enforcement. This condition existed in the case of State ex rel. Life Ins. Co. v. Denton, 229 Mo. 187. In that case, this court prohibited the circuit court from inquiring into the business of a foreign insurance corporation for the purpose of correcting certain alleged mismanagement. The bill, so far as its formal sufficiency in equity and the right of plaintiffs to relief, under an effective state of facts, was not questioned; but it appearing that except for the transitory transaction of business here, the corporation was not only created in a foreign jurisdiction, but had its locus stand-i, officers, office, and assets there, it was held that a decree tendered, in favor of the plaintiff would be futile; that while the arm of a court of equity-will reach anywhere within our borders, it -will not reach beyond, and hence the proceeding should be prohibited. The bill in that case asked for a discovery and an accounting, and Vallíant,. J., in his usual perspicuous style, in disposing of the question, said: “Such an accounting is not beyond the jurisdiction of a court of equity that may have full jurisdiction of the corporation,- but is beyond the jurisdiction of a court of equity that has only the limited or qualified jurisdiction over a foreign insurance company that is given by our laws to -our courts.” [P. 196.] This doctrine is but a special application of the general maxim that a court of equity will not do a vain and foolish thing. It finds further judicial expression in the case of State ex rel. Hartford Life Ins. Co. v. Shain, 245 Mo. 78, 149 S. W. 479, in which it is held, Woodson, J., speaking for the court, that “a court has no jurisdiction to order an accounting of a foreign corporation’s business affairs and to determine therefrom in a suit against it by a member thereof, whether he has been and is being charged excessive rates on his insurance certificate issued by it, and ■ thereupon render judgment for an excess collected, and enjoin any such collections.”

So far as this declaration may appear from its terms to be g-eneral, it might be held to support the conclusion that a foreign insurance company could not be supervised by our courts in regard to the matters therein mentioned. The ruling, however, must be interpreted in the light of the facts upon which it is based. They are, that the corporation, as in State ex rel. v. Denton, supra, in addition to its creation elsewhere than in the State, had no other local existence than to transact business here. This ruling, therefore, may be said to be in complete harmony with that in the Denton case. The rule announced in these cases does not militate against the conclusion reached here, as to the right of our courts to supervise a foreign corporation where it exists under the conditions of the respondent herein. On the contrary, tjiese cases support our conclusion. They decide, not Ghat a foreign corporation as such, is exempt from the supervision of our courts, but that it is so by reason of the place of its residence, location of its property, ana general conduct of its business. Where these three conditions are found to exist so as to render the enforcement of a judgment impossible, then supervision is held to be unauthorized.

Elsewhere, the rule is announced under like limitations, viz., that the right of supervision by the courts will not be exercised over a foreign corporation where the location of its officers, property and accounts are without the State, and the orders and decrees of the courts cannot, as a consequence, be enforced. [Sauerbrunn v. Hartford Life Ins. Co., 220 N. Y. 363, and cases cited p. 372; Eberhard v. Northwestern Mut. Life Ins. Co., 210 Fed. 520, and cases cited, pp. 522 & 523.]

The right of a court of equity to appoint a receiver for, and otherwise supervise the affairs of a foreign corporation, is elabotately discussed with the citation of many cases in the report of Low v. R. P. K. Pres. Met. Co., 91 Conn. 91, in L. R. A., 1917D, pp. 291-306. There is a contrariety of conclusions in regard to subordinate matters in these cases, but the general doctrine, in harmony with that announced herein, prevails.

While independently of statute a court of equity has power to entertain a bill against a domestic and, in accord with our rulings, a foreign corporation as well, under the facts in the instant case (Cantwell v. Lead Co., 199 Mo. 1; Thompson v. Greeley, 107 Mo. 577; Greeley v. Bank, 103 Mo. 212; Cox v. Volkert, 86 Mo. 505), we are not without legislative authority.in that behalf.

Under Section 3037, Eevised Statutes 1909, foreign corporations doing business here are subjected to all of the liabilities, restrictions, and duties of corporations of like character organized under the laws of this State. Section 3038, Revised Statutes 1909, provides explicitly that receivers may be appointed to take charge of the business, property and. effects of foreign corporations, etc.; the powers granted to the receiver being similar, if not identical, to those conferred upon receivers of domestic corporations. There is, therefore, under the pleadings and facts, no question as to the power of a court of equity to take cognizance of this case.

Notice.' IY. It is contended that there was no notice of the application for temporary injunctive relief, and the appointment of a receiver. The proceeding here was not to stay a judgment within the contemplation of Sections 2517 and 2518, Revised Statutes 1909. While notice of. applications in cases of this character is usually required; where, as in this case, the need is a crying one, notice is not held to be a prerequisite (State ex rel. v. McQuillin, 256 Mo. 1. c. 707; Tuttle v. Blow, 176 Mo. 1. c. 171). Equity has never prescribed the necessity of giving notice as a condition precedent in all cases of the granting of temporarv injunctions., [State ex rel. v. Woodside, 254 Mo. 1. c. 592.]

V. Notwithstanding our conclusion as to the sufficiency of the bill as a whole, we have considered respondents’ special contentions in regard to the lack of certain averments, regardless of the fact that the complete lack of jurisdiction of the Court of Appeals may render these contentions beside the case. Respondents insist, with that technical minuteness characterized by an argument in support of a demurrer, that the bill is insufficient in failing to embrace the necessary allegations to sustain an order for an accounting. The established rule is that courts liberally construe pleadings for accountings, and when the allegations in regard thereto substantially make out a case this will suffice. [1 Enc. Pl. & Pr., p. 97, note 2.] Moreover, we have- frequently ruled that pleadings generally should b,e given such an interpretation as fairly appears to have been intended by the pleader. [Hickory Co. v. Fugate, 143 Mo. 1. c. 79; Davis v. Jacksonville So. Line, 126 Mo. 1. c. 78; Stillwell v. Hamm, 97 Mo. 579.] Furthermore, the bill must be interpreted by employing in its aid all reasonable inferences from- the facts stated and all implications and intendments which its terms will afford, in support of any relief competent for the court to grant. [Thomasson v. Mer. Town Mut. Ins. Co., 217 Mo. 485; People’s Bank v. Sealzo, 127 Mo. 164; Salmon Falls Bank v. Leyser, 116 Mo. 51.]

The charge in the bill that Burgess, a director and president of the corporation, purchased 300 shares of the stock of the company from Sterns for the use of the company, at $40 per share, and resold 100 of such shares to one Meyer, at $60 per share, at a profit to himself of $2000, for which he should account to the company, is a plain and specific charge for an accounting, even good as against, a demurrer.

In addition, there is the 'charge in the bill that Burgess and his co-defendant directors, co-operating, purchased a calendar for the company at $17,500 and then caused entries to be made on the books showing an expenditure of $22,000 on that account. This will authorize an accounting, because in the concluding paragraph of the bill, prefatory to a prayer for general relief, an accounting is called for on all of the charges of fraud and waste theretofore specifically pleaded.

This bill is in nowise similar to that considered by this court in Albers v. Moffitt, 262 Mo. 645. There were no data set out in that case on which an accounting might be based. There is in the case at bar.

But even though no accounting can be had on the bill save on the $2000 item alone, it is nevertheless sufficient, for it seeks to remove Burgess, the president, from his office as director, on an allegation that he draws an exhorbitant salary of $10,000 a year, which constitutes, as alleged, a wasteful expenditure of the funds of the company. This alone, apart from the other allegations in the bill, serves to fix the jurisdiction and supervisory control of this court.

Our conclusion is that the preliminary rule in prohibition issued by this court should be made absolute, and it is so ordered.

Bond, G. J., Graves and Woodson, JJ., concur; Faris and Williams, JJ., concur in result, and Blair, J., concurs in paragraph 1 and result.