source: Caselaw Access Project

author: VALLIANT, P. J.

license: Public Domain

text:
    CHARLES O. BAIRD, Appellant, v. CHARLES E. GRANNISS.
    Division One,
    December 24, 1907.
    1. CORPORATION: President: Trustee for Stockholder. Whether or not the president and general manager of a corporation is, because he is such, in such a trust relation to a stockholder that he cannot buy the latter’s stock without first giving him all the information he has that would influence its market value, is not decided in this case, since, even if that were the law, the proof does not sustain the allegation, even if it were unmistakably pleaded.

      2. FRAUD AND DECEIT: Promise of Information as to Value of Stock: Purchaser: President of Corporation. Where plaintiff through his broker sold to defendant, president and general manager of a pine company, his corporate stock for $125 per share, which soon thereafter proved' to be worth $187, and sues for the increase in the price, alleging that defendant had promised, by conversations and in letters, to keep him informed as to anything that tended to increase the market value of the . stock, he cannot recover if there is no proof to sustain the charge of deceit and misrepresentation.
    3. -: -: -: -: Failure of Proof. Defendant was the president and general manager of a corporation that owned 28,330 acres of yellow-pine land in Louisiana, and whose place of business was Kansas City. Plaintiff lived in Philadelphia, and owned 170 shares of the company’s stock, and in his petition alleges that defendant, knowing that negotiations were on foot that were likely to lead to an advantageous sale of the corporation’s property, without communicating that fact to plaintiff, employed a broker to open negotiations with him for the purchase of his stock, which ended in a sale by plaintiff to defend- ' ant of his stock at $125 per share, plaintiff not knowing for whom the broker was acting, when in fact the stock was at the date of sale worth $187; and that defendant had, in conversations and letters, promised him to give him all information relative to the company and the value of its stock and assets, and that he relied entirely upon this promise. The evidence showed that, prior to the sale, the stock had paid an annual dividend of from eighteen to twenty-four per cent; that plaintiff had for ten months been in correspondence with brokers in regard to the sale of his stock; that on April 8th they wrote him they had a customer who wished to buy some of the stock, offering him $115; on April 10th, he replied that he would sell for $125, not less; April 16th, they wrote that “subject to filling your -order” they would take the stock at the price offered; April 19th, he telegraphed acceptance, and on the same day they wired, “Cannot give definite answer until next week.” At that time defendant was absent, and on his return they wired on April 21st, “Ship stock with draft attached as per your telegram of nineteenth;” and on April 22nd plaintiff telegraphed he had shipped stock with draft attached. On that day defendant received a letter which offered $15 per acre for the land, and at a meeting of directors on May 5th the offer was accepted, the land sold, and at that price the stock was worth $187. A short time prior to that the same parties had made an oral offer of $15 per acre, but nothing was agreed upon. The letters showed that defendant had constantly kept plaintiff informed of the business of the company, but had said nothing about the purchase of his stock. Held, that no fraud and deceit was shown, and plaintiff cannot recover the difference between the price at which he sold the stock and its worth when the sale of the land was consummated on May 5th.
    4.--; Or Cause in Equity. Whether plaintiff’s petition stated an action at law for fraud and deceit, or one in equity to charge defendant as the president and general manager of the corporation for breach of trust in not keeping him as a stockholder informed of everything that would 'affect the market value of the corporate stock, is immaterial, and unnecessary to decide, if the cause was tried by the court alone, and a demurrer was sustained to the evidence, and that ruling was correct.
    Appeal from Jackson Circuit Court. — No». A. F. Evans, Judge.
    Affirmed.

      J. J. McClintock, Jr., and Braley & Simpson for appellant.
    (1) Plaintiff, upon the issues as made by the pleadings, was entitled to a jury trial. Constitution, art. 2, sec. 28; R. S. 1899, sec. 691; Kitchen v. Railroad, 59 Mo. 514; Earl v. ITart, 89 Mo. 263; 'Briggs v. Railroad, 111 Mo. 168; Benoist v. Thomas, 121 Mo. 661. (2) Defendant, by reason of the situation of the parties, and from the fact that he was not only a stockholder and a director, but was also the president and general manager of the Pine Company, which was practically in liquidation, owed the duty of keeping the plaintiff informed of the transactions and negotiations which affected the value of the plaintiff’s stock, which he was attempting to purchase, and did purchase, and is liable for not so doing. Fisher v. Budlong, 10 R. I. 525; Commissioners of Tippecanoe v. Reynolds, 44 Ind. 509; Koshler v. Black Run Iron Co., Black 715; Graham v. Cummings, 208 Pa. 576; Milford v. Com., 144 Mass. 65. (3) Defendant was the agent of plaintiff under the circumstances of this case and could not lawfully make a secret profit on plaintiff’s stock, and is therefore liable for the difference between what he paid for the stock and what he received in dividends thereon to the extent of $10,591.00 and interest thereon. Mulvane v. 0 ’Brien, 58 Kan. 463; Mechem on Agents, secs. 1, 469, 937; Graham v. Gummi ngs, 208' Pa. 516; Hertsog v. Hertsog, 29 Pa. 465; Machine Co. v. Clark, 15 Kan. 492; Fisher v. Bell, 91 Ind. 243; Brown v. Eaton, 21 Minn. 409. (4) Defendant obtained plaintiff’s stock by fraud and deceit, and is therefore liable to plaintiff in damages. Fisher v. Budlong, 10 R. I. 525; Bigelow on Fraud, 330; Pomeroy’s Equity Jurisprudence, sec. 1090; Chatlain v. Ins. Co., 86 111. 220; Forbes v. McDonald, 54 Cal. 98; Bispham on Equity, sec. 213; Stewart v. Wyoming Cattle Ranch Co., 128 H. S. 383; Walsham v. Stainton, 1 De G., J. & S. 678; Walsh v. Golden, 130 Mich. 531. (5) While it may not have been defendant’s duty originally by virtue of his official position to have advised plaintiff of the affairs of the company affecting the value of the stock, yet after having written as he did in January, 1901, and through his agents in 1902, he then became a trustee for plantiff and owed the duty to plaintiff to promptly keep him advised of all matters pertaining to the company and affecting the value of the stock. Harrison v. Murphy, 106 Mo. App. 465; Krumbhaar v. Griffiths, 151 Pa. St. 223; Jackson v. Ludeling, 15 Wall. 616; Beach on Trusts and Trustees (Ed. 1897), secs. 214-16-28; cases heretofore cited under point 2. (6) While some authorities hold that a director need not necessarily, by reason of such directorship, advise the stockholders of the affairs of the company, yet justice can be best sub-served by holding that a president and general manager of the corporation stands in the nature of a trustee to the stockholder, and may not buy the stock of a stockholder unless he does so openly as the purchaser, and advises the stockholder of all negotiations and transactions affecting the value of the stock which he so desires to purchase. Commissioners of Tippecanoe v. Reynolds, 44 Ind. 509 (see dissenting opinion); Beach on Trusts and Trustees (Ed. 1897), sec. 228.

      ILaff & Michaels and W. M. Walker for respondent.
    (1) There is no confidential relation between ah officer of a corporation and a stockholder so far as a sale of stock between them is concerned, and an officer of a corporation may buy and sell its stock like any other individual. Crowell v. Jackson, 53 N. J. L. 656; Board of Commrs. of Tippecanoe Co. v. Reynolds, 44 Ind. 509; Carpenter v. Danforth, 52 Barb. (N. T.) 581; Gillett v. Bowen, 23 Fed. 625;'Deaderick v. Wilson, 67 Tenn. 108; Percival v. Wright, L. R. 2 Chan. (1902), 421; 71 L. J. Ch. 846; 51 W. Rep. 241; 1 Manson 17; Hooker v. Steel Company, 215 111. 444; • Haarstiek v. Fox, 9 Utah 110; Walsh v. Goulden, 130 Mich. 531; Krumbhaer v. Griffiths, 151 Pa. St. 223; Fisher v. Bud-long, 10 R. I. 525; O’Neil v. Ternes, 32 Wash. 528; Bloom v. Loan Co., 152 N. T. 114; Johnson v. Laflin, .103 U. S. 800; Mulvane v. O’Brien, 58 Kan. 463; Perry v. Pearson, 135 111. 218; Smith v. Hurd, 12 Met. 371; Spering’s Appeal, 71 Pa. St. 11; Slee v. Bloom, 20 Johns. 669; Gilbert’s Case, L. R. 5 Ch. App. 559; Grant v. Attrill, 11 Fed. 469'; Tricorn v. Winship, 43 La. Ann. 48; Converse v. United Shoe Mach. Co., 185 Mass. 422; Strong v. Gutierrez, 5 Official Gazette, 72 (Sup. Ct. Phil. Is. 1907); Cook on Corporations (.4 Ed.), secs. 320, 350; Clark on Corporations, sec. 213; Taylor on Private Corporations (5 Ed.), see. 695; Morawetz on Private Corporations, pp. 565, 537; Elliott on Private Corporations (3 Ed.), sec. 5027; 21 Am. and Eng. Eney. Law (2 Ed.), 898; 10 Cyc. 796; Halliwell on Stocks and Stockholders, sec. 184; Beach on Private Corporations, secs. 614, 646; Wilgus Corporation Cases, pp. 1706, 1707, 1791; Doyle v. Laughlin, 53 Mo. App. 542; R. S. 1899, sec. 966; Bank v. Lanier, 11 Wall. 369. (2) The evidence clearly shows that plaintiff knew all the facts known to defendant which might affect the value of his stock; that defendant was not only not guilty of fraud, deceit, misrepresentations or concealment, hut treated plaintiff with extreme fairness. (3) Since plaintiff’s evidence entitled him to no relief, it is immaterial whether the case was tried as a law or an equity case. Ward v. Quinlivin, 65 Mo. 454; Redman v. Adams, 165 Mo. 71; Carmody v. Hanick, 99 Mo. App. 357. (4) Courts will not aid those who err in business judgment. Bryan, v. Hitchcock, 43 Mo. 531.
   VALLIANT, P. J.

Defendant through a broker in Kansas City purchased of plaintiff 170 shares of stock in a corporation called the Missouri & Louisiana Yellow Pine Company for which he paid $125 a share; the plaintiff now claims that he was overreached in the transaction, that the stock was at that time really worth $187 a share and that the defendant’s relation to the plaintiff and to the corporation was such that he owed the duty to plaintiff to inform him of the facts that influenced the value; that the difference between the price paid and the real value of the stock was $10,591 for which with interest and costs the petition prays judgment.

The statements in the petition as constituting the plaintiff’s complaint leave it in some doubt as to whether this is a suit in equity to charge the defendant as an officer of the corporation for a breach of his trust or an action at law for deceit and misrepresentation. The petition states that the defendant was the president and general manager of the corporation and for that reason was the “trustee and agent” of the plaintiff in relation to his stock, yet in violation of that duty bought the stock for less than it was worth without giving plaintiff information of certain material facts that defendant as president and general manager knew. The petition also alleged that defendant had in conversation promised that he would give the plaintiff all news and information relative to the Pine Company affecting the value of the stock, that plaintiff “was relying entirely upon said promise made to him by defendant and the information which he was to receive from said defendant and which by reason of the facts aforesaid the defendant owed this plaintiff.” The plaintiff resided in Philadelphia, defendant in Kansas City where the corporation was domiciled. Whilst the terms wrongfully and fraudulently are applied to defendant’s acts, and “deceit, concealments and misrepresentations” are charged in an abstract way, yet the only allegation as of a misrepresentation of a fact is that in the first letter of the broker opening the negotiations that ended in a sale of the stock it was said the stock was “slow sale.”

The gravamen of the complaint is that defendant failed to communicate to plaintiff material facts affecting the value of the stock. The sum of the whole case made by the petition is that the defendant being the president and general manager of the corporation, well knowing that negotiations were on foot which were likely to lead to an advantageous sale of the corporation’s property, without communicating that fact to the plaintiff, employed a broker to open negotiations with him for the purchase of his stock which negotiations ended in a sale by plaintiff to defendant for $125 a share, plaintiff not then knowing for whom the broker was acting, when in fact the stock at the date of the sale was really worth $187 a share; in addition to the above is the allegation that the defendant promised the plaintiff to keep him informed of every thing affecting the value of the stock.

The answer was a general denial.

When the cause was ready for trial there was a difference of opinion between the counsel as to whether it was an action at law or a suit in equity, the counsel for plaintiff contending that it was an action at law and demanded a jury trial, counsel for defendant that was a suit in equity. The court construed it to be a suit in equity and tried it as such. .

At the close of the plaintiff’s case the defendant demurred to the evidence, which demurrer the court sustained and rendered judgment for defendant, from which judgment the plaintiff has appealed.

I. As the plaintiff in his petition has mixed his facts on which he seems to have predicated a claim against the defendant on the theory that he was a trustee who had been unfaithful to his trust, with facts on which he seems to base a cause of action for fraud and deceit, it will be necessary for us to separate the two classes of facts and see if the plaintiff has a just cause of complaint on both or either ground. In so far as the plaintiff’s claim rests on the theory that the defendant has been unfaithful to his trust as an officer of the corporation it is upon the allegations that the defendant was the president and general manager of the corporation, that as such he knew its affairs, that he bought the stock through a broker without disclosing to the plaintiff who the purchaser was and without giving him information that negotiations were on foot which it was expected would result in an advantageous sale of the property of the corporation. Assuming those allegations to be true do they make out a case of betrayal of trust for which the defendant can be held' to account? We are leaving for the present out of view whatever there may be in the case to support the charge of fraud and deceit, and are viewing the defendant’s acts as an officer of the corporation in relation to his dealings with an individual stockholder for the purchase of his stock. If the president of a corporation is a trustee for each individual stockholder in the sense and to the extent that he is bound to keep each stockholder informed of everything in existence or in prospect that would affect the market value of his stock or influence the stockholder in negotiating a sale of his individual holding, then this petition states a cause against the defendant as an unfaithful trustee.

There is no question but what the officer of a corporation is a trustee for the corporation in the management of its affairs, and in that sense he is indirectly a trustee for the stockholders in general, but that is not the point in this case. Was the defendant because he was president and general manager in such a trust relation to the plaintiff that he could not buy the stock without first giving him all the information he had that would influence its market value? If there has been any direct decision of this question in this State it has not been brought to our notice, and in view of the research and industry shown in the briefs we are satisfied that if any such decision existed it would have been found by the counsel. That no such trust relation exists has been often declared in the courts of other states, as by reference to the list of cases cited in the brief for respondent which will be printed with this report will appear. Rut interesting as that question is we do not feel justified in deciding it in this case, because on a review of all the evidence bearing on this as well as on the question of fraud and deceit, which evidence will be summarized in the next succeeding paragraph, we are satisfied that, if the allegations of the petition aiming to charge the defendant with a breach of his duty as officer of the corporation to a stockholder are sufficient to call him to account, the proof does not sustain the allegations.

II. We come now to the charge that the defendant was guilty of fraud and deceit.

The petition alleges that the plaintiff because of his residence in Philadelphia had no personal knowledge of the pine lands owned by the corporation in Louisiana, “but being acquainted with defendant obtained all his information as to the value of the stock from time to time from the defendant. ’ ’ Then the petition states: “Plaintiff further states that as such president and general manager the defendant had always led the plaintiff to believe in his personal conversations with plaintiff, and promised that he, the defendant, would afford and give the plaintiff any and all news and information relative to said Pine C'ompanv, and the value of its stock and assets, and that this plaintiff, relying upon said promises and the previous course of the relations and negotiations which he had had with the defendant, and relying upon the fact that the defendant was both president and general manager of said company, was led to believe that when anything occurred which would likely increase the value of plaintiff’s stock or the value of the assets of the company, that he would be promptly informed of such fact by the defendant herein. And plaintiff further alleges that by reason of said promises and the previous negotiations and understandings between the plaintiff and defendant, and by reason of the aforesaid facts and said official positions which the defendant had in said company that said defendant became a trustee and agent and owed the duty of trustee and agent toward this plaintiff in relation to said stock.” Then after stating that negotiations were pending for the sale of the company’s property which ended in the sale on April 25, 1902, the petition says “all of which facts were known to the defendant, and were unknown to the plaintiff, as the plaintiff was relying entirely upon the said promise made to him by defendant and the information which he was to receive from the said defendant and which by reason of the facts aforesaid, the defendant owed this plaintiff.” The substance of these allegations is that the defendant from his position as president and general manager knew these facts and it became his duty to inform the plaintiff because he promised to do so. The petition refers in general terms to “personal conversations” and “the previous course of the relations- and negotiations, ’ ’ but specifies nothing under those heads.

The evidence for the plaintiff tended to prove as follows: The Missouri & Louisiana Yellow Pine Company was incorporated in this State in 1896 with an authorized capital stock of $160,000; the par value of the stock was $100 per share, and it was all issued except $15,000. The plaintiff was one of the original subscribers and he owned 170 shares. The property of the company consisted of 28,330 acres of yellow-pine land in Louisiana. In 1897 the corporation made a contract with the Central Coal & Coke Company by which the latter was to cut timber off this land, paying therefor $1.50 per thousand feet; that rate was to last for two years and at the end of every two years the parties were to agree on a price for the next ensuing two years and if they could not agree they were to arbitrate.

The company paid dividends at the rate of $1.50 to $2 per share per month. Plaintiff up to the time he sold his stock had received 58 per cent dividends on it. It was after the original contract with the Coal & Coke Company that the defendant became the president and general manager; he held those positions during the time covered by this controversy. Plaintiff had been in Kansas City several times, had attended two of the stockholders ’ annual meetings, and had been acquainted with the defendant several years. Letters running over a period from November 20, 1901, to January 30, 1902, passed between plaintiff and defendant. November 20, 1901, plaintiff wrote to defendant referring to the diminulion of dividends lately, and asking why. Defendant answered November 22nd explaining the canse. January 20, 1902, plaintiff wrote suggesting that it was defendant’s duty to insist on a higher price from the Coal & Coke Company when the time came to fix the price for another two years, and asking defendant why a million feet of lumber had been given free to the Coal & Coke Company. To this defendant replied that the gift of the million feet was before defendant’s connection with the company, but that it was given as bonus to induce the Coal & Coke Company to locate its plant on the Pine Company’s property. Then as to the increased price to be demanded of the Coal & Coke Company defendant wrote: “The subject of increasing the rate of stumpage with the Central Coal & Coke Company has never been lost sight of, and if you will .read the contract carefully, of which you have a copy, you will see that in case the price of stumpage should go down, we might have, if we raise the question, to accept a reduced instead of an increased price. These conditions prevailed up to six months ago. We are now, however, negotiating for a change of price and same will, without question, be a substantial increase. In connection with the whole matter, it should be borne in mind that timber land in our vicinity which was selling at the time these contracts were madej for $5 and $6 an acre, are now worth any where from $12 to $15. The sale of this stumpage is like the sale of any other property, —real estate for instance, — and if the sale was made half a dozen years ago at $6 we could not reasonably expect, because there has been increase in values, that the purchasers would voluntarily come forward and pay twice what they agreed to. I am very anxious at all times to answer any questions you propound, and shall be glad also to act upon suggestions.”

January 291, 1902, defendant wrote to plaintiff a long letter full of detail and very encouraging as to the prospect of getting a better price from the Coal & Coke Company; he said: “I believe we will be able to secure from the Central Coal & Coke Company a substantial increase for stumpage during the next two years.” On January 30th he wrote, again, in which he said: “We will not have to wait until the June period in order to readjust the price of stumpage for the coming two years. Mr. Keith is now East but is expected to return in a week or ten days, and I fully expect on his arrival to consummate a contract which has already been commenced which will give us an increase of price; at present I cannot state just the amount but hope it will be a very considerable amount.”

Plaintiff was in correspondence with a firm of brokers in Kansas City as early as June, 1901, with reference to the sale of his stock at $125 a share. These brokers had tried to sell it at that price but had no offer.

April 8, 1902, the brokers through whom the defendant purchased, wrote to plaintiff telling him they had a customer who wished to buy some stock of this company, offering him $115 per share for his stock. April 10th, plaintiff replied that he would sell at $125-, not less. April 16th, brokers wrote that “subject to filling your order” would take the stock at price offered. April 19th plaintiff telegraphed broker: “Accept your offer of $125, for 170 shares Missouri & Louisiana Yellow Pine. Wire instructions as to shipment.” On same day brokers answered by telegraph: “Cannot give definite answer about using stock until next week. ’ ’ April 21st, broker telegraphed plaintiff: “Ship us Missouri & Louisiana Yellow Pine Company stock with draft attached as per your telegram of nineteenth.” April 22d, plaintiff telegraphed brokers that he had forwarded the stock with draft atttached. The stock arrived in Kansas City and was delivered to the brokers, who paid the drafts attached, April 25th.

All the negotiations between the defendant as president and general manager of the Missouri & Louisiana Yellow Pine Company and the president of the Coal & Coke Company up to April 22nd had been in reference to an increased stum page contract but on that day defendant received a letter from the president of the Coal & Coke Company offering to buy the land of defendant’s corporation for $15 per acre. Because of the difficulty in getting the directors together in a meet-, ing, this offer was not acted on until May 5th, when the board met and accepted it. The sale of the land at that price made the stock worth $187 a share.

There was no evidence to sustain the statement in the petition that the defendant promised that he would “give the plaintiff any and all news and information relative to said Pine Company and the value of its stock and assets,” on which promise the petition says the plaintiff' “relied entirely” in this business. Appellant in his brief says: ‘ ‘ The whole tenor of Mr. Granniss’s letters, as printed in the abstract of the record on pages 22 to 25 inclusive, is to the effect that if anything occurred to affect the company, Mr. Granniss would be only too glad to advise the plaintiff.” Those letters were written in answer to letters from the plaintiff and were straight-forward answers to his questions ; the only words in any of them that could be construed into a promise were in the closing sentence of the letter of January 23rd: “I am very anxious at all times to answer any questions you propound and shall be glad also to act upon suggestions.” That was no promise to volunteer information, but only to answer his questions.

Besides, nothing definite had occurred between the date of the last letter and April 22d, when the written proposal of the Coal & Coke Company was received. There was testimony to' the effect that in a conversation held a short time before April 22d, between the defendant, representing the Pine Company, and Mr. Keith and Mr. Perry representing the Coal Company, in which the defendant was insisting on a stnmpage price of $2.25 per thousand which the others 'would not agree to, an oral offer was made to buy the land at $15 an acre or pay $1.75 per thousand stumpage, but nothing was agreed on, no written offer was made until April 22d and that was not accepted until the meeting of the board of directors May 5th.

Defendant being called as a witness for plaintiff testified that as soon as he received the written proposal he notified the directors of its receipt, but did not notify any of the other stockholders; when asked why he did not notify the plaintiff he said plaintiff had then ceased to be a stockholder.

It is argued for plaintiff that defendant maneuvered to delay the closing of the sale of the stock until the letter of April 22d had been received. But the evidence does not bear out that argument. The plaintiff’s telegram to defendant’s brokers accepting their offer of $125 a share “subject to filling your order” was April 19, and on the same day the brokers replied by telegram, “Cannot give definite answer about using stock until next week.” In explanation of this, one of the brokers, a witness for plaintiff, testified that the 19th was Saturday, Mr. Granniss was out of the city, did not return until Monday, which was as soon as they could learn definitely whether he was willing to pay that price; as soon as they saw him they sent the telegram of April 21st which closed the trade.

We do not find any evidence that tends to show that the defendant ever misrepresented any fact or even withheld information of any material fact. The conversations he held with Mr. Keith or Mr. Perry were only proposals pro and con binding on neither until agreed to in legal form; the proposal even in the letter of April 22d could have been withdrawn at any time before it was accepted by the board of directors. Whether he was under obligation or not to give the plaintiff information he did, in answer to every letter, give information of every material thing that had occurred and had even gone farther and given his opinion that the negotiations looked very favorable to a considerable advance in the price they would get for their timber.

The contract for the sale of the stock was con-' eluded April 21st, when the brokers telegraphed the plaintiff to ship the stock with draft attached, which he promptly did. If the draft had been dishonored the brokers or the defendant, their undisclosed principal, would have been liable for a breach of the contract.

The evidence does not sustain the plaintiff in his statement that he relied entirely on the promise of the defendant to give him information. He had been in correspondence with a firm of brokers in Kansas City with whom the defendant had no connection and had authorized them to sell this stock for him at the very price he sold it to defendant, and those brokers had been trying in vain for months to sell it. Reference is made to the statement in the broker’s letter of April 8th, in relation to the stock, ‘ ‘ There has not been much trading in it and it is rather a slow matter,” as if that was a misrepresentation, but the evidence shows it was true, there had been no recent sales and the plaintiff himself knew by his correspondence with his brokers that it was a slow matter to sell the stock.

There is nothing in the evidence to sustain the charge of deceit and misrepresentation.

III. Whether the plaintiff’s petition states a cause in equity or at law, is immaterial under the evidence adduced, because since the case was disposed of on demurrer to the plaintiff’s evidence the result is the same as if a jury had been empannelled. The evidence did not sustain the plaintiff’s case on either theory. We should not reverse a judgment unless error was committed materially affecting the merits of the action. [Sec. 865, R. S. 1899 ; Ward v. Quinlivin, 65 Mo. 453; Redman v. Adams, 165 Mo. 71.]

The judgment is affirmed.

All concur.


author: LAMM, J.

text:
    THE STATE ex inf. JAMES C. DORIAN, Prosecuting Attorney of Knox County, ex rel. JOHN H. BLACK, Appellant, v. W. S. TAYLOR et al.
    Division One,
    December 24, 1907.
    1. QUO WARRANTO: Prosecuting Attorney: Misleading Relator. Where an information in the nature of a quo warranto was filed without the signature of the prosecuting attorney, which he had refused to sign, but which, in the belief of both himself and of relator and his counsel that he had no discretion in the matter, he consented they might file, neither relator nor his counsel can be said to have been misled by the prosecuting attorney, and if respondents by their answer plead that the information was not properly authenticated or authorized by him, relator and his counsel cannot object, because if he fell into an error it was one of their own contriving.
    2. -: -: Discretion: Signing Information. The prosecuting attorney is vested with a high and discriminating discretion in the matter of instituting an inquiry in the nature of a quo warranto at the relation of a private citizen, and that discretion must be exercised, before it can be said that any such proceeding has been legally instituted. He cannot delegate that discretion or power to any other person, by consenting, for instance, that an information in his name, without his signature, may be filed. But the affirmative exercise of his discretion is to be evidenced by his signature to an information in due form and its exhibition in court. No private person has the right to use his name for the purpose of suing out the writ in quo warranto or of bringing the information.
    3. -: -: Non-Action. Where the filing of an information in quo warranto at the relation of a private person, without his signature, was the result of mere non-action on his part and in no sense the exercise of his official discretion, it cannot be entertained, and process issued in pursuit thereof is improvident. And that is the rule, whether 'the proceeding be considered quasi-criminal or civil. [Distinguishing State ex rel. v. Campbell, 129 Mo. 396.]

      Appeal from Knox Circuit Court. — Now. Charles D. Stewart, Judge.
    Affirmed.

      O. D. Jones, George A. Mahan and W. N. Doyle for appellant.

      L. F. Cottey for respondents.
    The information shows on its face that it is not signed by the prosecuting attorney, nor by any person for him. The record shows that leave to file the information was asked and obtained by the attorneys for the relator. The prosecuting attorney is on record saying that he will not lend the use of his name for the further prosecution of this suit. Can the appe'al be perfected and the suit prosecuted in this court over the protest of the prosecuting attorney? Has this court acquired jurisdiction of the cause? These questions are answered in the negative by State ex inf. v. Talty, 166 Mo. 529.
   LAMM, J.

Relator Black, by counsel, exhibited to the circuit court of Knox county, on the 5th day of June, 1905', an information in the nature of quo .warranto against Taylor and five others, directors of the school district of the town of Hurdland in said county. Thereat leave was granted, and, summons issuing and service being had, respondents answered, and in July of that year (at a trial to the court without a jury) judgment went for defendants. From that judgment relator appeals.

The information follows:

“The State of Missouri, by James C. Dorian, the prosecuting attorney of Knox county, at the relation of John H. Black, gives the court to understand and be informed: That W. S. Taylor, A. S. Davis, C. H. Cockrum, James L. Car diner, D.S. DurallandS. C.Surrey, defendants herein, all of the county and State aforesaid, without any legal authority and right whatsoever have, they and their predecessors for the space of nearly three years, and since the 8th day of April, A. D. 1902, usurped, held and exercised the office of school directors or members of the board of education of the school district of the town of Hurdland, Knox county, Missouri, when in. fact and in law there were no such offices in said county of Knox, and still do so usurp, hold, use and claim to exercise the same within this State; and since that day aforesaid have unlawfully claimed and enjoyed and. used the power in law belonging and appertaining to such offices.

"That as such they are calling elections of said school district of the town of Hurdland, submitting a proposition to vote and have submitted such a proposition to vote an issue of $5,700 in bonds of said district, and now threaten to issue and sell the same to build and furnish a school house therein; and have caused such an election to be held, and as such school directors of said school district of the town of Hurdland are now threatening to issue bonds of said district illegally and sell the same without any authority in law, to the extent of $5,700.

‘ ‘ That the relator herein owns real estate and personal property in said district subject to taxation and is interested in the legal and orderly conduct of the affairs of said school district, and sues herein in his own behalf and in behalf of about forty other resident taxpaying citizens and legal voters of said district. He asks that the defendants be notified and required to answer herein and to show by what authority in law they claim and pretend to hold and exercise the powers and duties of the offices aforesaid and use its functions and powers as aforesaid, and that failing that they be ousted from such claimed offices, and that it be ascertained, adjudged and declared that no such, offices exist, and for all legal and proper orders and judgments and costs of suit.

“State of Missouri, at the information of James .0. Dorian, Prosecuting Attorney of Knox County, at the relation of John H. Black.

“By W. N. Doyle and O. D. Jones,

“Attorneys.”

An aggregation of errors is asigned by relator’s counsel and discussed in their brief; but defendants make a contention lying at tbe gateway of the case, and, therefore, challenging attention at the outstart; for if they are right in that contention, the gateway will not be passed and errors beyond are afield.

For the purpose of considering this preliminary question, so much of the answer as raises other issues may be put away. The answer, after pleading other defenses, concludes as follows:

“These defendants, for other and further answer, and plea to the jurisdiction of the court, with respect to both the subject-matter of the suit and to the person of the defendant, say: That plaintiff ought not to have or maintain this suit against these defendants, because it appears on the face of said information that it was not signed by James C. Dorian, prosecuting attorney of Knox county, Missouri; and because, in truth and in fact, the said information, or pretended information in the nature of a qiw warranto, was never signed and filed by the said James 0. Dorian, as prosecuting attorney of Knox county, Missouri, and is not his information and complaint against these defendants ; because prior to the time of the filing of the said information, or pretended information, the said James ' C. Dorian was requested by the relator herein to sign said information in his official capacity as prosecuting attorney of Knox county, Missouri, which he refused to do; and thereupon, said information, or pretended information, was filed in this court without the official signature of the said James C. Dorian, prosecuting attorney of Knox county, Missouri, and without the legal signature of anyone having legal authority so to do and sign , the same.

“Defendants further state that under the Constitution and the laws of the State of Missouri, the prosecuting attorney is vested with an official discretion in determining whether or not he will file a quo warranto proceeding against any person for usurping a public office; and that James C. Dorian, prosecuting attorney of Knox county, Missouri, did exercise his discretion in this matter by refusing to sign said information or pretended information, and by refusing to institute said quo warranto proceedings to oust these defendants as directors of the school district of the town of Hurdland, in Knox county, Missouri.

“Defendants further answering say that they are informed and believe the facts to be, not only that the said James C. Dorian, as prosecuting attorney of Knox county, Missouri, refused to sign and file said information as aforesaid, but that he is not now willing to prosecute the same as such prosecuting attorney of Knox county, Missouri.

“Defendants aver that a wrongful and improper use of the process of this court has been used at the instance and procurement of plaintiff, to compel these defendants to appear and defend this suit at great cost, expense and inconvenience, and that such action is wholly ineffective to give this court jurisdiction over said matters in this proceeding or over these defendants, for the reasons aforesaid.

“Wherefore, defendants pray that this suit may be abated. And now, defendants having fully answered, ask to be discharged.”

The foregoing averments of the answer were put in issue by a general denial in the second clause of the replication.

A finding of facts and conclusions of law were requested, and among other conclusions of law the following one, directed to the issue above outlined, was filed by the court, to-wit:

“Under the evidence and pleadings in the case the court declares the law to be that this court has no jurisdiction of this cause, and the finding and judgment should be for defendants.”

The foregoing was challenged as error in the motion for a new trial, and error is assigned here on that ground.

Having entered judgment on other features of the case in favor of defendants, the judgment concludes as follows: “It is further adjudged and decreed that this court has no jurisdiction of this case, and that the information be dismissed, and that defendants have. judgment for their costs in this behalf laid out and expended, and thereof execution is awarded.”

The evidence anent the foregoing preliminary question tends to establish the following facts and develop the following condition: Belator, a taxpayer in the Hurdland school district, employed counsel learned in the law to test the right of that district to exist as a body corporate — to issue bonds for building purposes and run the village school. Thereupon they planned to exhibit an information in the nature of quo warranto, having for its object to disorganize, and end the corporate life of, the Hurdland school district. Nursing such intent, as they understood the law, they needed to borrow the “use of the name” -of the prosecuting attorney of Knox county, James C. Dorian. Accordingly, that official was asked to come to the office of Mr. Jones, one of relator’s counsel. When once there, the ball was set rolling by relator offering to retain him as counsel by paying him a fee for the “use of Ms name.” It would seem tills offer was made on the possible theory that one good turn deserves another, or in accordance with the formula: you tickle me and I’ll tickle you — witness the court’s query: “You say you were employing him because you needed him as counsel?” So questioned, relator responded: “I don’t suppose we needed him but I thought it would be all right to employ him if we were using Ms name.” The upshot 'of it was the prosecuting attorney declined the fee.

The testimony of three witnesses is preserved in the record, directed to what was said and done on the heels of the foregoing incident at Mr. Jones’s office— Black, Jones and Dorian.

Mr. Black testified it was explained to the prosecuting attorney (by Mr. Jones) that “it would have to be started in the name of James C. Dorian, prosecuting attorney. I believe you, [Jones] explained to him [Dorian] that he didn’t have to sign it, but that they would have to use his name, and he said all right.”

We shall not set out the testimony of Mr. Jones and Mr. Dorian in full. The substance will do.

Mr. Dorian testified, in effect, that the lawyers present (Mr. Jones, Judge Smallwood and himself) were of the opinion that the prosecuting attorney had no discretion in the matter whatever; i. e., that he, Dorian, was obliged to allow the use of his name.

Mr. Jones testified in part: “I turned to- the statutes of 1899, volume 1, to the form laid down there on page 50 of forms, to the form for quo warranto. I had it right before me, and I said, ‘Jim,’ I always called him Jim, I says, ‘We are talking of bringing this proceeding, and we will have to use your name. I know, I said, we cannot do it without your consent.’ I read the form over to him. ’ ’

All hands being’ of the opinion the prosecuting attorney had no discretion, and they had the rig’ht to use his name, Mr. Dorian “consented” they might “go ahead.”

After the information was drawn, it was presented to him and he refused to sign it. On this point the pith of his testimony, as we interpret it, was to the effect that his will or wish as prosecuting attorney ran counter to the proceeding. Accordingly he refused to sign the information or take any part in the proceeding beyond the cold permission to “use his name” — a permission resulting from a concensus of opinion among the relator’s lawyers and the prosecuting attorney, that the latter had no right to exercise any official discretion.

The prosecuting attorney did not exhibit the information to the court and says he was not present when it was exhibited. Mr. Jones thinks he was in the court room but took no part in exhibiting it.

Mr. Jones further testified in substance that the prosecuting attorney, after declining to accept the fee, put his refusal to take part in the proceeding on the ground that he had friends in the Hurdland school district who were divided, and “he didn’t want to make them mad” by taking sides; that when he presented and read the information to him Dorian said it was all right; that, as they would have to use his name, he, Jones, said “they would like for him to sign his name and he said he would rather not, but for us to go ahead and sign his name and do whatever was necessary to make it legal.”

It appeared at the trial that Mr. Dorian assumed an attitude of hostility to the continuation of the case, he there expressing himself that the proceeding was improvident and not for the public good. The clear purport of his statement to the court on this behalf was that the case got into court through a mutual misapprehension of the law relating to his discretion, which discretion never had been exercised, and he wanted to exercise it at the trial, nunc pro tunc, if he had that power, to stop the case.

The foregoing statement of facts, findings, rulings and pleadings is sufficiently full for us to pass upon the aforesaid preliminary question.

I. To our minds this record cannot be intelligently read and considered without coming to the conclusion that the prosecuting attorney of Knox county did not want to institute this proceeding; nor did he have any real or substantial part or lot in it. From end to end the plan was, first, that he should take a fee and assume the role of a hired man; second, (refusing the fee) the plan still contemplated that he should be eliminated as an official. This is so because it is plain that relator, through counsel, took part in persuading him that he did not have to sign his name or appear to do- aught as an officer. It is plain, too, that-while relator wanted his “consent,” he also wanted him to believe and helped to make him believe that he had no discretion not to consent. In other words, he was quite willing to accept a consent based on no-discretion (a droll and indefensible solecism in the realm of sense) and to have the door of the court opened, using the prosecuting attorney as a mere lifeless key to unlock the door, under a theory of the law which, good or bad, his counsel believed in and acted on. Their notion being that the officer could act colorably or nominally, and that they could act vicariously, it results that the case at bar is not a case in which the prosecuting attorney on behalf of the State of Missouri is responsible for relator’s present plight, whatever that plight be. We feel free, then, to look on the case as one unembarassed by elements of unfairness. Neither relator nor his counsel were misled by the prosecuting attorney. To the contrary, they led themselves; they chose, blazed out and took their own path. In so doing, if so he they fell into a vat of error, it contained a. pickle of their own contriving.

II. That the prosecuting attorney of a county in Missouri is charged with a high, present and discriminating duty in exhibiting an information in the nature of a quo warranto; and that (as a corollary) he has such corresponding discretion to go or not to go on as his oath of office, his learning in the law, his sense of official fitness and justice may dictate to him, results from the inherent character of the proceeding itself. Por, be it remembered, the State is the reservoir of all power (through its executive, its legislative and its judicial branches) and it is fundamental that a private citizen may not intermeddle and that the State alone may inquire into the right of any person or corporation to usurp or intrude into the powers and duties of a governmental agency, like a public office, or a body corporate for public purposes. [Black v. Early, 208 Mo. 281, and cases cited.]

“At common law quo warranto proceedings, being for the purpose of inquiring into matters which concern a public right or of redressing a public wrong, must be in the name of the sovereign. In the United States the same rule prevails where the purpose of the proceeding is to inquire into a right or to redress a wrong concerning the State.” [17 Ency. Pl. & Pr., 428.]

The same treatise announces the rule to be (p. 433): “The right of a private person to proceed in his own name without the interposition of the proper State officer depends entirely and exclusively upon statutory authority, and in the absence of such authority he has no right to proceed.”

Now, observe, our statute (R. S. 18991, sec. 4457) charges the Attorney-General of the State and the prosecuting attorneys of the respective counties with the duty of speaking in the name of this sovereign commonwealth, “in ease any person shall usurp, intrude into or unlawfully hold or execute any office or franchise.” In such case, in matters of initiative, they wield the holt forged by the law, no other hand may; they stand charged with the duty of exhibiting to the court an information in the nature of quo warranto, at the relation of any person desiring to prosecute the same. When such information has been once filed and proceedings commenced in a circuit court at the relation of such person, such prosecuting attorney or Attorney-General steps down from the exclusive stool of duty and responsibility, and, seating himself on a lower and more humble bench of power shared jointly with relator, he may not thereafter dismiss or discontinue such proceeding without his consent. [Sec. 4457, supra.] So much appears from that statute, and the case may proceed with the assumption that the power and duty of the prosecuting attorney to alone use the name of the State in quo warranto come down unimpaired, in full flower, until such time as the information is exhibited, filed and the proceeding commenced; and, with that point once reached, the relator thenceforward (but not before) shares with him the control and disposition of the litigation.

The statute uses the phrase “shall exhibit.” It was argued in this court in State ex inf. v. Talty, 166 Mo. 529, that the phrase “shall exhibit” as therein used “means that the act itself must be done;” and that the prosecuting attorney had no discretion with respect to the matter, but was bound, as of course, to exhibit the information when requested to do so by a given relator. In disposing of that argument, this court (p. 559, ei seq.) said: “That the word ‘shall,’ as generally used, is mandatory may be conceded, but it is a cardinal rule that ‘the intention of an act will prevail over the literal sense of its terms’ (Sutherland on Statutory Construction, sec. 219), otherwise it might lead to absurd consequences, which could but be the result in this case if the' statute be construed according to its strict letter. If the statute is to be interpreted in accordance with defendant’s contention, the proceeding would be at the mere will or caprice of any person in position to prosecute it, and the Attorney-General, circuit or prosecuting attorney, as the case might be, a figurehead, a mere nonentity, and we are unable to believe that any such state of affairs was ever contemplated by the Legislature. The power of determining whether or not the action shall be commenced must exist somewhere, and from the very nature of the writ, its character and purpose, it should rest with the officer who represents the people of the State with respect to such matters.”

In the Talty case, People ex rel. Peabody v. Attorney-General, 22 Barb. 114, was cited and the following quoted therefrom with approval: “Our Legislature has seen fit to invest the Attorney-General with this discretion. His office is a public trust. It is a legal presumption that he will do his duty; that he will act with1 impartiality. In this confidence he has been endowed with a large discretion, not only in cases like this, but in other matters of public concern. The exercise of such discretion is, in its nature, a judicial act from which there is no appeal, and over which courts have no control.”

We may borrow and use with profit more from the same ease. Thus: “The power merely is conferred; it is for him to determine whether a fit case is presented. As to everything but the form, the proceeding stand's now as it did at common law.” [See, in this connection, State ex rel. v. Meek, 129- Mo. l. c. 436.] “The usurpation of an office, though it frequently involves little else than private rights, is, in the eye of the law, a public offense. The only remedy is by an action in the name of the people. It is a public prosecution, instituted and conducted by tbe public prosecutor under his official obligation and responsibility. It is not tbe province of tbe court to control bis discretion, or to authorize a private prosecutor to assume his office, and in his name to wield the power of public prosecutor.”

If, now, the court itself may not authorize a private prosecutor to go on, how much less may a prosecuting attorney (as here) strip himself of his official prerogative, loan it to another and authorize that other to go on?

We come, naturally, then, to the point of inquiring how the prosecuting attorney may evidence his exercise of official discretion and prerogative in exhibiting an information in quo warranto f That the information itself need not in terms be based on his oath of office or be authenticated by a jurat is clear. But it is equally clear that back of the information and back of the discretion exercised is the sanction and solemnity of a guiding, chastening and steadying official oath. What, then, shall he do to show that he has measured up to the standard of the law? May he, so to speak, farm out the privilege of exercising so nice, so powerful an official function? May he, as it were, loan his official arms and armor to those, who “have an ax to grind” — to those who have private rights to enforce, by giving to them “the use of his name”? The answer is: He may not. The maxim, delegatus non potest delegare, blocks the way. He must consider, weigh and then act. His act is evidenced by his signature to an information in due form and its exhibition in court. He may not avert his face and' wash his hands of responsibility, play the idle role of listlessly winking at the use of his name by others as was done in the case at bar; nor may such others receive at his hand as a gift the right to use his name in a proceeding instituted on behalf of the people.

In a note, citing respectable authorities, on page 441 of 17 Ency. PL & Pr., the matter is summed up as follows: “It is the common law which authorizes the State’s attorney to file informations, both in ordinary criminal prosecutions and in those prerogative rights where he represents, as Attorney-General, the sovereignty of the State. This common law power is inherent in the office of the State’s attorney, and in its exercise he performs the functions which cannot be taken away only by the clear terms of the statute. ’ ’

If it be true that the functions of the prosecuting , attorney in quo ivarranto are functions “which cannot be taken away only by the clear terms of the statute, ’ ’ it would follow, necessarily, that what cannot be clipped off and taken away by the court ought not to be given away by the prosecuting attorney through caprice, pique, policy, distaste, inattention, design or otherwise.

In Attorney-General v. Sullivan, 163 Mass. l. c. 448, it was said: “But no private individual at common law has the right to use the name of the Attorney-General for the purpose of suing out such a writ, or of bringing such an information.” To the same effect is Commonwealth v. Lexington & Harrodsburg Turnpike Road Co., 6 B. Mon. 397.

Absent the common law right in a private person to use the prosecuting attorney’s name, it only remains to add that, as said before, no such right to institute a proceeding in quo warranto is conferred by our statute. It is from the fertile womb of the common law that the incidents of quo warranto, in the precise particulars under discussion, have birth. [State ex rel. v. Meek, supra.]

Applying to this case the foregoing reasoning and propositions of law, it is put beyond cavil or question that what was done here was in no just sense the act of the prosecuting attorney. It was not the exercise of any official discretion whatever. It was mere nom action on his part, the mere putting* aside of duty and power, a vain attempt to give to relator’s counsel official power not theirs, powers pertaining to Dorian— his to hold and keep, not to loose or give. Therefore it is that the process of the circuit court of Knox county was improvidently used, and that the proceeding (begun in a misconception of the law) had no legal birth or life and was properly dismissed.

In what has been said we have laid no stress upon the tardy wish of the prosecuting attorney, expressed at the trial, that the case be dismissed. He had lost the right to express wishes or control the litigation. Statutory opportunity had knocked at his official door unavailingly and, rebuffed, had turned away from him. It was left alone for the court to assert the dignity of the law in the control of its own process on the facts uncovered; and this the court well did.

III. We are cited to State ex rel. v. Campbell, 120 Mo. 396, as holding a contrary doctrine. So far as that case is reported, the trouble with the information does not appear. It does appear that a demurrer was filed, and that demurrant had judgment. The grounds of the demurrer are not set forth. However, in the brief of counsel it is insisted that the petition should be dismissed because not signed by the prosecuting attorney of Phelps county, but by a private citizen not under any oath of office; and the learned judge who wrote the opinion was cited to certain criminal cases as authority. In disallowing the contention, he treated the matter from the standpoint that quo loarrcmto was only quasi-eximmsd in its nature and, therefore, the rules which apply to informations of a criminal character and require them to be signed and authenticated by the prosecuting attorney, do not apply in instances like the present. There was no discussion of the philosophy of the theory of that dictum.

We find no fault with the proposition that quo warrcmto is only gwc-si-criminal in its nature. It may be said to be civil in its nature to all intents and purposes, though still borrowing and using certain forms and punishments peculiar to criminal law. We have examined the demurrer in our files in the Campbell case. No ground is set forth in that pleading relating to the authentication or signature of the prosecuting attorney to the information, even if the signature to a pleading could be struck at by a demurrer — a proposition not at all clear. In that case this court had in judgment the sole question whether the demurrer was properly sustained on the grounds mentioned in it. Evidently, what was said concerning the signature of the prosecuting attorney and the authentication of informations in quo warrcmto was mere obiter, used by the by to brush away the contention of defendant’s counsel as formulated in his brief on that behalf, and which contention, under the rules of appellate practice, had no place there. The Campbell case is, therefore, no authority for relator’s position; nor, we make bold to say, can any well reasoned out authority be found. The precedents in the books are against relator; the uniform practice, as well as the good sense of the thing, lie the same way. Common usage is not to be lightly departed from. [Donnell v. Wright, 199 Mo. l. c. 316.]

We conclude the case was well decided on the point considered. Other questions, therefore, need no attention.

Let the judgment be affirmed. It is so ordered.

All concur.